The N Files: Demand, Weather or Dead Cats

February 11, 2014 10:08 AM
 

Picture1 

The big news today is out of MosaicCo. who reported strong sendouts, earnings well below expectations and an outlook that includes near-term price recovery. Nitrogen has already started higher and as P&K shakes loose and finds some demand, price strength should bleed through to encourage further increases in N.

The most risk lies in UAN32% and urea. In comments following the release of Mosaic's Q4 results, CEO Jim Propanko noted they are having no better luck moving product than are propane suppliers. If a delivery crisis prevents fertilizer from moving from manufacturer to supplier, spot shortages could emerge, forcing prices higher.

Northern parts of the United States are still short on supplies for spring. This time of year, that has not been an issue for the last few years. But heavy snow, icy conditions and biting cold are an ever present adversary this winter, and if deliveries to the northern Belt are delayed, a price response is likely.Picture2

This, as the downward path of fertilizer pricing is interrupted by price discovery and seasonal resupply. Last year's supplies were booked in a climate of uncertainty. Supplies now in play are booked in a climate with an eye toward recapturing price strength. Is it a demand led rally? Is it a weather rally for fertilizer? Perhaps a good 'ol fashioned dead cat bounce?

As always, a combination of these and other factors are working together to fuel a price recovery for fertilizer and the real point of the message is that most -- including executives at MosaicCo. -- believe the tables have turned. Pockets of fertilizer priced at November 2013 prices may still be out there -- probably anhydrous -- but resupply at yours and other retailers nationwide will soon be underway and prices are running higher to capture spring demand amid bad weather -- watch out for those dead cats.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Spread
Anhydrous Ammonia (Nh3)
0
39 1/4 cents
0
0
Urea
Nh3 +5 cents
53 1/4 cents
+ 14 cents
+ 9 cents
UAN28%
Nh3 +12 cents
59 1/2 cents
+ 20 1/4 cents
+ 8 1/4 cents
UAN32%
Nh3 +10 cents
56 cents
+ 17 3/4 cents
+ 7 3/4 cents

 

This week --Picture3

  • Anhydrous $232.67 below year-ago pricing -- firmer 40 cents/st this week to $646.89.
  • Urea $78.29 less than the same time last year -- up $1.77/st this week to $487.23.
  • UAN28% $42.00 below year-ago -- up $2.91/st this week at $338.16.
  • UAN32% $59.20 below last year -- up $1.66/st this week to $364.83.

N by the pound -- Anhydrous unchanged for the fourth week at 39 1/4 cents/lbN; Urea up 1/4 cent by the pound at 53 1/4 cents; UAN28% up 1/2 cent to 59 1/2 cents per pound and UAN32% up 2 cents to 56 cents/lbN.

The following is an updated table of nitrogen pricing by state by the pound of N.

 

Nitrogen pricing by pound of N -- 2/11/14

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.38
$0.54
$0.57
$0.53
Illinois
$0.40
$0.51
$0.54
$0.55
Indiana
$0.42
$0.54
$0.63
$0.64
Wisconsin
$0.40
$0.49
$0.55
$0.55
Minnesota
$0.38
$0.53
$0.66
$0.56
South Dakota
$0.41
$0.52
$0.58
$0.58
North Dakota
$0.40
$0.52
$0.66
Not reported
Nebraska
$0.34
$0.54
$0.55
$0.53
Missouri
$0.37
$0.57
$0.66
$0.56
Kansas
$0.34
$0.54
$0.55
$0.55
Ohio
$0.43
$0.54
$0.61
Not reported
Michigan
$0.45
$0.56
$0.57
Not reported
Average
$0.39 1/4
$0.53 1/4
$0.59 1/2
$0.56
Year-ago
$0.53
$0.62
$0.68
$0.66

 

Corn --

December 2014 corn opened today at $4.57 1/2 -- 5 cents above the previous N Files. At trendline 160bu/acre and one retail short ton of anhydrous ammonia at $646.89, the ZCZ14-NH3 spread widened another 7.60 points on the week to stand at -45.11. A negative number here indicates anhydrous is priced below expected new-crop revenue per acre based on December '14 corn futures.

A wide spread suggests upside price risk for NH3 as anhydrous will look to couple with expected new-crop revenue.

Wholesale --

MosaicCo. reports wholesale urea moved slightly lower out of the Black Sea, sideways in the U.S. Cornbelt and higher in the Middle East and NOLA. Tampa Ammonia is unchanged this week, at $415.00.


 

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