The view from upstream has turned sharply against nitrogen as plants shutdown across Ukraine and concerns continue for the fate of North Africa and the Middle East. Potash has leveled off despite the FSU's claim that a price war will push prices to long time lows, and phosphate maintains its downward trajectory into the present.
Nitrogen -- Ukraine had been producing ammonia and urea at 85% of production capacity up until an August explosion at the Stirol plant -- which killed five and sent several others to the hospital. That event and other maintenance activities are limiting sendouts from that region. Trinidad and Tobago are still conducting routine maintenance, but last year, routine September projects lasted well into the new year.
Wholesale urea moved higher at ports including Yuzhny, the Middle East and at NOLA with only wholesale Cornbelt prices bucking the trend by moving sideways during the report week. Retail prices shed another 20 dollars last week in both urea and anhydrous, but these declines were averages that included a few large slides amid timid upward movement, suggesting nitrogen is looking to bottom.
Ammonia moved sideways last week, but the near total shutdown of Ukraine's nitrogen production will likely catch up with ammonia, now that urea has taken notice.
Phosphate -- Ninety percent of the phosphate applied in the U.S. is home grown. U.S. phosphate is, to some degree, insulated from global pricing by domestic production, but increases in ammonia will thin margins for DAP/MAP producers. Favorable crop economics encouraged growers to bank P&K over the previous few years and may limit Phosphate demand. However, if nitrogen bookings are accomplished at a decent price, growers may look to take advantage of low P prices and bank some phosphate as a hedge against future price spikes.
Wholesale DAP moved sideways at Tampa, Florida and fell modestly at Morocco, Central Florida and NOLA with MAP just one dollar higher in Brazil. Retail prices reported to your Inputs Monitor fell for both DAP and MAP with a few states falling nearly $100/ton during the report week.
Potash -- Belarus and Russia are still at odds concerning the capture of Russia's Uralkali CEO Baumgertner. Vladimir Putin has been in the news lately for his Syrian solution and has put on a diplomatic face. But Putin's ire must surely be up over Baumgertner's detention, dousing hopes that the potash joint venture, BPC, will rise again. Canadian production declined 12% to the lowest monthly production clip since July 2012. Potash inventories are still 31% above the five year average, however, and strong inventories will continue to limit potash pricing near-term.
Retail potash looks suspect to me today, adding 89 cents according to Inputs Monitor data. North American potash executives have made it clear they will not slash prices in response to the FSU breakup. That, coupled with sideways movement in tenders to Brazil and Southeast Asia, suggest a floor is near.
Perspective -- Upstream producers have found a United States on the sidelines and buyers are still sitting on their hands, waiting to see where and when nutrient will fully bottom. As the Mississippi River is set to close for the winter season, demand will heat up in a hurry and may excite pricing.
There are those who would gamble and hold out for free nitrogen fertilizer in the same way that some corn growers hold bushels too long, waiting for an $8.00 bid. The market will look to make up for declines by taxing late buyers with demand-based higher prices. Go-time is now for nitrogen and a portion -- a solid portion -- of fall K. We can wait on phosphate for now, but the day is fast approaching.
As always, check your local prices and your appetite for risk. But do not get caught whistling 'The Gambler', hoping prices will fall another 75%. Kenny Rogers knows you have to come to the table to play the game, but he also advises to check your timing. Do not overstay your welcome in this down market as the declines that seemed so certain to the industry just a few weeks ago are turning into a bet not worth shaking on.
Photo credit: A.Currell / Foter / CC BY-NC