The N Files: The Monkey-See-Monkey-Do Balloon

February 26, 2014 07:34 AM
 

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Urea -- Urea currently holds a strong premium to anhydrous ammonia and has been the price recovery leader this winter. The table below outlines expected margins between the four flavors of nitrogen our survey covers. The Dakotas each added $30.00 to the per ton price over the week, but half of the twelve states in our survey moved higher by the pound and the remaining six states nudged 50 cents to a few dollars higher.

The regional average price firmed $12.38 on the week to $516.00/st and prices have been headed higher since establishing a low in the first week of December. But today's price is still $50.00 below last year's price at this time suggesting more upside risk ahead. We are currently 80% filled on spring and summer urea and will leave the remaining 20% of spring coverage to gambling stocks near-term.

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UAN solutions -- Spring demand here will be tied closely to weather. The first question is for soil temperatures. Much of the Midwest has been bitterly cold this winter and it could take awhile for soils to thaw and then dry out enough to work in the eastern belt. Meanwhile, the western belt is still struggling with drought.

If flooding, soil or rainfall prohibit early -- or even 'on time' -- anhydrous applications, UAN solutions will make up the difference at sidedress. That could inject some fresh demand late in the spring and excite prices for summer. So far, the National Weather Service is predicting a cool, wet spring which is music to UAN's ears. If anhydrous applications are somehow cut short, expect UAN prices to respond higher. We are currently 80% filled here as well with 20% still holding out for a spring price break, but even in that event, prices are expected above today's.

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Anhydrous -- This week we spell upside risk N-H-3. Technically, anhydrous has been coiling amid a nitrogen recovery. Urea and UAN are priced well outside expected nitrogen price margins compared to anhydrous and if there is any air in the Monkey-see-Monkey-do balloon, anhydrous will move dramatically higher in the next few weeks.

Adding to upside risk is strength in December corn which is up nearly a full dime from last week's report. The margin between one acre of expected new-crop revenue and one ton of anhydrous ammonia widened to nearly -60.00 this week and if you ever believed anhydrous pricing is tied to corn returns, there's your sign of a pending recovery.

We are 60% covered on spring and summer anhydrous and will look to fill the remainder on confirmed price strength, but Nh3 bulls may find this is the week to pull the trigger as increases in anhydrous pricing could be swift and severe as Nh3 looks to capitalize on increases in urea and UAN.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (Nh3)
0
39 1/4 cents
0
0
Urea
Nh3 +5 cents
56 3/4 cents
+ 17 1/2 cents
+ 12 1/2 cents
UAN28%
Nh3 +12 cents
62 cents
+ 22 3/4 cents
+ 10 3/4 cents
UAN32%
Nh3 +10 cents
56 1/2 cents
+ 17 1/4 cents
+ 7 1/4 cents

2006 12 09 chipanzees d bruyere l

This week --

  • Anhydrous $234.74 below year-ago -- softer $1.18/st this week to $647.34.
  • Urea $49.33 less than the same time last year -- up $12.38/st this week to $516.00.
  • UAN28% $31.49 below year-ago -- up $8.09/st this week at $350.51.
  • UAN32% $60.99 below last year -- up $1.25/st this week to $369.46.

 

N by the pound -- Anhydrous down 1/4 cent to 39 1/4 cents/lbN; Urea climbs 1 1/4 cent higher by the pound to 56 3/4 cents; UAN28% up 2 cents this week to 62 cents per pound and UAN32% unchanged at 56 1/2 cents/lbN.

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

Nitrogen pricing by pound of N -- 2/26/14

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.38
$0.56
$0.59
$0.53
Illinois
$0.40
$0.52
$0.55
$0.52
Indiana
$0.42
$0.57
$0.63
$0.61
Wisconsin
$0.40
$0.52
$0.57
$0.59
Minnesota
$0.38
$0.57
$0.70
$0.56
South Dakota
$0.43
$0.60
$0.68
$0.58
North Dakota
$0.40
$0.60
$0.75
Not reported
Nebraska
$0.34
$0.56
$0.55
$0.53
Missouri
$0.37
$0.58
$0.64
$0.56
Kansas
$0.34
$0.56
$0.57
$0.56
Ohio
$0.43
$0.59
$0.63
Not reported
Michigan
$0.42
$0.58
$0.59
$0.59
Average
$0.39 1/4
$0.56 3/4
$0.62
$0.56 1/2
Year-ago
$0.54
$0.62
$0.68
$0.67

zcz14

Corn --

December 2014 corn opened today at $4.67 -- 9 1/2 cents above the previous N Files. At trendline 160bu/acre and one retail short ton of anhydrous ammonia at $647.34, the ZCZ14-NH3 spread widened 16.38 points on the week to stand at -59.86. A negative number here indicates one short ton of anhydrous is priced below expected new-crop revenue per acre based on December '14 corn futures.

Wholesale --

MosaicCo. reports wholesale urea moved slightly lower out of the Black Sea again, and higher in the U.S. Corn Belt, Middle East and at NOLA. Tampa Ammonia is strongly higher this week, at $435.00 -- $20.00 above the previous week.


 Photo credit: Delphine Bruyere / Foter / CC BY-SA

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