The N Files: Urea, UAN Level-Off; Nh3 Risk-On

March 25, 2014 06:25 AM
 

Picture2 

Urea -- The regional average price firmed $2.02 on the week to $534.80/st. That's after adding just over $3.00 last week suggesting an incremental slowdown in the price recovery. Not much is happening here at the moment, and purchases north of Kansas have been slow. The potential for a late spring planting season has buyers in standown, and supplies are largely in place, and balanced.

Looking ahead, China has said it will offer tariff reductions again this summer and that will keep pressure on retail prices through the late summer. Given the discount anhydrous holds to urea, many will see Nh3 as an attractive alternative, and if end-users pass on urea, we could easily find ourselves oversupplied. That would point to favorable prices in the fall. If we can catch a break then, we will fill at least a portion for spring 2015.Picture3

UAN solutions -- This week, 32% firmed 29 cents by the ton while 28% softened 15 cents. We are currently 80% filled here with 20% still holding out for a spring price break, but even in that event, our expectation is for spring prices above today's. This is a weather fertilizer. Many are speculating about spring application conditions and the extent to which weather difficulties will delay anhydrous applications. If that scenario plays out, UAN will get the nod, and prices will likely run up as demand for sidedress increases.

Anhydrous -- Nh3 showed a little strength this week adding $6.43 per ton. Industry watchers report wholesale ammonia tenders at a dramatically higher price, but oversupply in the Midwest will keep prices in check near- term. Also working in favor of steady prices is the consensus that dealers are all but filled by now, and thePicture1 spring price point is already baked in.

As long as these supplies hold out -- bolstered by carry product from the fall -- prices should remain relatively stable with a slight uptick for late comers. We are 100% filled on anhydrous for spring and that is where you should be. Prices may move only mildly higher, but there is tremendous upside potential when compared to the current Dec. corn bid. As expected new-crop revenue climbs, anhydrous is going to want to claim some of that cash.

Also adding upward potential are the margins which has anhydrous ridiculously underpriced compared to the rest of the nitrogen segment. Nh3 shorts urea 14 cents by the pound of N; solutions are 9 and 10 cents ahead on price. By the numbers, our 'Outstanding Spread' column should all read zero. This adds an insidious component of upside risk that should not be ignored.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (Nh3)
0
39 3/4 cents
0
0
Urea
Nh3 +5 cents
58 3/4 cents
+ 19 cents
+ 14 cents
UAN28%
Nh3 +12 cents
61 3/4 cents
+ 22 cents
+ 10 cents
UAN32%
Nh3 +10 cents
58 3/4 cents
+ 19 cents
+ 9 cents

 

This week --

  • Anhydrous $222.46 below year-ago pricing -- firmer $6.43/st this week to $659.54.
  • Urea $34.78 less than the same time last year -- up $2.02/st this week to $534.80.
  • UAN28% $34.98 below year-ago -- down 15 cents/st this week at $357.60.
  • UAN32% $56.58 below last year -- up 29 cents/st this week to $379.97.

 

N by the pound -- Anhydrous is 1/2 cent higher at 39 3/4 cents/lbN; Urea climbs 1/4 cent higher by the pound to 58 3/4 cents; UAN28% softens 1 1/4 cents to 61 3/4 cents per pound and UAN32% is unchanged at 58 3/4 cents/lbN.

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

Nitrogen pricing by pound of N -- 3/18/14

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.38
$0.59
$0.59
$0.58
Illinois
$0.41
$0.57
$0.59
$0.55
Indiana
$0.43
$0.59
$0.64
$0.64
Wisconsin
$0.40
$0.56
$0.61
$0.59
Minnesota
$0.40
$0.57
$0.58
$0.58
South Dakota
$0.41
$0.60
$0.66
$0.58
North Dakota
$0.40
$0.60
$0.68
Not reported
Nebraska
$0.34
$0.59
$0.61
$0.61
Missouri
$0.38
$0.60
$0.61
$0.58
Kansas
$0.32
$0.58
$0.59
$0.58
Ohio
$0.44
$0.60
$0.64
Not reported
Michigan
$0.46
$0.60
$0.61
$0.59
Average
$0.39 3/4
$0.58 3/4
$0.61 3/4
$0.58 3/4
Year-ago
$0.54
$0.62
$0.70
$0.67

 

Corn --

December 2014 corn opened today at $4.86 1/2 -- another 5 1/4 cents above the previous N Files. At trendline 160bu/acre and one retail short ton of anhydrous ammonia at $659.54, the ZCZ14-NH3 spread widened 1.97 points on the week to stand at -78.86. 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 modestly lower out of the Black Sea and the Middle East. NOLA added a dollar week-over and Corn Belt urea traded sideways. Tampa Ammonia stayed put at $460.00, but trade data shows some strong wholesale increases, suggesting anhydrous may be headed higher near-term.


 

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