The Phosphate Rocket & Lethargic Anhydrous

March 26, 2014 08:15 AM


We have received reports that wholesale ammonia for April is pegged $120.00 higher on the week at Tampa. Initially, this raises concern for anhydrous pricing and we have noted anhydrous is well overdue to recover in the footsteps of UAN and urea. There is a tremendous amount of upside risk for anhydrous. Now is the time to catch up to 100% filled on Nh3 for spring and guard against the potential for a parabolic recovery.goddard and rocket l

However, the recent April ammonia price increase negotiated by MosaicCo and YARA is not about anhydrous ammonia. Due to consolidation among producers, there are only two major phosphate fertilizer producers in North America, thanks to the sale of CF's P segment to Mosaic. The bulk -- if not the whole -- of ammonia into Tampa is intended as feedstock for phosphate.

We have theorized in the past few weeks about upside risk in phosphate and warned about a supply bottleneck around spring. Add that now to an ammonia feedstock price $120 above last week's peg and the phosphate rocket is on the launchpad.

The NOLA price holds a great deal more sway over anhydrous pricing and we take retail cues from that location, rather than Tampa. Ammonia imported at the Gulf heads to Western anhydrous production hubs while ammonia sent to Tampa is used almost exclusively for phosphate production.

The upside risk for phosphate is clear. What interests me right now is Nh3 pricing, which remains $225.00 below year-ago, urea this week is 19 cents above the pound of N price for anhydrous on an expected margin of just a nickel. UAN solutions are also out of whack to the high side compared to Nh3.

Even corn believes anhydrous is underpriced. According to expected new-crop revenue per acre, anhydrous is priced roughly $70.00 per ton below where the dictates of December corn futures would have it. Complicating matters is the carry left in the market from the fall applications that missed the boat. Most believe retail locations are silly with anhydrous and that may be a big part of what is pressuring Nh3 to stay low.

Supply features are limiting the upside for Nh3 risk at present, but we absolutely see NO downside potential. Translation? Anhydrous has a good chance of moving higher, and very little chance of moving lower. Same deal with phosphate. Dealers will likely be willing to make a deal on remaining carry stocks, but those days may already be over in some locations where early bookings have been brisk.

I am advising today to fill remaining anhydrous and phosphate to get out ahead of the upside risk. Click here to view the ALERT...

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