The NFiles: UAN28% Captures Segment Low

• Anhydrous is $116.33 below year-ago pricing -- lower 79 cents/st this week at $471.36.
• Urea is $97.84 below the same time last year -- higher $4.36/st this week to $339.20.
• UAN28% is $57.06 below year-ago -- lower $5.00/st this week to $220.32.
• UAN32% is priced $59.12 below last year -- higher 60 cents/st this week at $253.80.

UAN28% was our nitrogen segment downside leader falling $5.00 by the short ton. This week’s price action makes UAN28% the cheapest fertilizer in our entire survey. Declines were led by Wisconsin which fell $37.15 by the short ton as Missouri fell $24.60 and North Dakota dropped $9.33.South Dakota and Nebraska were unchanged as Illinois firmed $6.00, Indiana firmed $4.96 and Ohio gained $2.34.

Anhydrous ammonia was lower on the week but price action was fairly mild. Illinois led declines falling $5.74 along with a $2.54 cut in Nebraska and a $2.05 decline in Missouri. Three states were unchanged as Indiana firmed $3.59 and Minnesota added 71 cents per short ton.

UAN32% firmed on the week led by Indiana which firmed $26.70. Other states firmed $1.59 or less. Six of the twelve states we survey were unchanged, and Missouri was our only decliner, falling an impressive $24.60 by the short ton.

Urea continued to firm, adding $4.36 regionally. Only Ohio was unchanged, and no state posted a lower urea price on the week. Indiana firmed $10.43 to lead gains as Missouri and Illinois each firmed about 6 and a half bucks.

The technical posture of our nitrogen segment is beginning to suggest urea does not speak for anhydrous or UAN. With one state unchanged and eleven states higher, urea looks extremely bullish. Meanwhile, NH3 and UAN favored a more mixed tone from state to state. That suggests mild near-term price action for anhydrous and UAN, but the fact that UAN28% is now the lowest priced nutrient we survey may put it at risk of correcting higher. So far, the corn price/NH3 spread has remained very favorable, especially when compared to the spread last year at this time.

Most analysts expect sideways price action in the corn market, and with December 17 futures at a premium to March futures, corn acreage should appear attractive and profitable for spring planting. That becomes especially clear when

we consider the discount new-crop soybean prices hold to front-month futures. November 17 futures are priced roughly 40 cents below March futures which may force some to reconsider relying too heavily on soybean plantings within their acreage mix.

Many look to the corn/soybean price ratio for guidance. According to March futures, the corn/bean spread lies at 2.94. Using the new-crop contracts however, the ratio slips to 2.64.

I am of the opinion that fertilizer prices will take its role in acreage mix decisions. If anhydrous and UAN firm sharply between now and spring, corn’s profitability will melt away without some significant, sustained corn market strength. Increasing urea

prices will likely push some acres away from wheat. Where those acres go is unknown, but the futures spreads and input prices currently favor planting corn in 2017.

December 2017 corn closed at $3.86 on Friday, January 13. That places expected new-crop revenue (eNCR) per acre based on Dec ’17 futures at $617.31 with the eNCR17/NH3 spread at -145.95 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 8.25 points on the week.

The Margins -- UAN32% is at a 1/4 cent premium to NH3. Urea is 4 cents above anhydrous ammonia; UAN28% solution is priced 2 cents below NH3.

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