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The N Files: Urea Punches Higher, Nh3 Looks to Follow

13:38PM Feb 19, 2014

Picture2

Urea -- All states moved higher on the week except Michigan at $500.29 and Missouri at $517.73, both unchanged. That led to a regional increase of $16.39 by the ton to an average of $503.62. Positioning across the Corn Belt is underway and resupply prices are above previous prices. Demand in wheat country has been strong thus far and any supplies left in the market from the prior year have been all but exhausted from demand there.

That means fresh supplies at fresh -- higher -- prices and if distribution to northern areas is held up by weather, we look for a spike in the Dakotas to result from the shortfall.

Picture4UAN solutions -- Both 28% and 32% note four states moving higher with the rest unchanged by the pound. However, values continue to edge higher by the ton and the downside is now limited by time. It will not look like it for the next few days, but spring is on its way. If the weather is rainy early like last year and nitrogen from anhydrous is lost, once again, growers will lean on foliar and sidedress applications of UAN solutions to fill the N gap. That is limiting downside potential for solutions, and we expect the upward trajectory of the last few weeks to continue through spring.

 

Picture3Anhydrous -- Only three states moved with Kansas lower on the week to $557.68 and Minnesota and South Dakota higher to $632.60 and $690.52 respectively. All others unchanged. We note our first upward movement in anhydrous pricing by the pound of N and while Nh3 holds the least amount of upside risk for us presently, anhydrous looks like it wants to follow the rest of nutrient higher incrementally, first testing the upside and then moving strongly higher in following weeks.

We have seen incremental, accelerating increases in potash in the last three weeks, and anhydrous looks like the last holdout at the low end of nutrient pricing. Limiting Nh3 pricing by spring are strong supplies from Canadian production, robust carry from a short fall 2013 application season and stable wholesale ammonia production in Trinidad. However, the marginal spreads -- see below -- indicate Nh3 has some catching up to do with its N cohort, and that will help to inflate anhydrous pricing, if only slightly near-term.

 

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (Nh3)
0
39 1/2 cents
0
0
Urea
Nh3 +5 cents
55 1/2 cents
+ 16 cents
+ 11 cents
UAN28%
Nh3 +12 cents
60 cents
+ 20 1/2 cents
+ 8 1/2 cents
UAN32%
Nh3 +10 cents
56 1/2 cents
+ 17 cents
+ 7 cents

 

This week --

  • Anhydrous $233.56 below year-ago pricing -- firmer $1.63/st this week to $648.52.
  • Urea $61.71 less than the same time last year -- up $16.39/st this week to $503.62.
  • UAN28% $39.58 below year-ago -- up $4.26/st this week at $342.42.
  • UAN32% $62.24 below last year -- up $3.26/st this week to $368.09.

 

N by the pound -- Anhydrous up 1/4 cent at 39 1/2 cents/lbN; Urea leaps 2 1/4 cents higher by the pound to 55 1/2 cents; UAN28% up 1/2 cent again this week to 60 cents per pound and UAN32% up 1/4 cent to 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 -- 2/11/14

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.38
$0.56
$0.57
$0.53
Illinois
$0.40
$0.52
$0.55
$0.52
Indiana
$0.42
$0.57
$0.64
$0.64
Wisconsin
$0.40
$0.49
$0.55
$0.56
Minnesota
$0.38
$0.56
$0.68
$0.56
South Dakota
$0.42
$0.57
$0.63
$0.58
North Dakota
$0.40
$0.57
$0.66
Not reported
Nebraska
$0.34
$0.56
$0.55
$0.55
Missouri
$0.37
$0.57
$0.66
$0.56
Kansas
$0.34
$0.56
$0.55
$0.56
Ohio
$0.43
$0.59
$0.61
Not reported
Michigan
$0.45
$0.56
$0.57
Not reported
Average
$0.39 1/2
$0.55 1/2
$0.60
$0.56 1/2
Year-ago
$0.53
$0.62
$0.68
$0.66

 

Corn --

December 2014 corn opened today at $4.57 1/2 -- 9 cents below the previous N Files. At trendline 160bu/acre and one retail short ton of anhydrous ammonia at $648.52, the ZCZ14-NH3 spread thinned 1.63 points on the week to stand at -43.48. 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.

This is the first thinning we have seen in a few weeks and is attributed to a mild increase in anhydrous pricing and a dip in corn futures pricing. A wide spread suggests upside price risk for NH3 as anhydrous will look to couple with expected new-crop revenue. Given the strong upside moves in urea this week, and another solid week of strength in UAN solutions, we expect anhydrous to look to join nitrogen bulls and move higher near-term.

Wholesale --

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


 

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