The NFiles: UAN28% Hung Out to Dry

• Anhydrous is $154.39 below year-ago pricing -- lower 58 cents/st this week at $550.01.
• Urea is $119.98 below the same time last year -- lower 18 cents/st this week to $344.14.
• UAN28% is $52.47 below year-ago -- lower $1.51/st this week to $273.24.
• UAN32% is priced $72.38 below last year -- lower 47 cents/st this week at $285.27.

After falling $12.55 by the short ton last week, anhydrous ammonia slowed its downward trajectory and fell just 58 cents regionally this week. The greatest decline came from North Dakota but was nearly negated by a $12.10 move to the upside in Nebraska. Illinois added pressure to the regional average falling $8.24. Kansas NH3 firmed $1.89 on the week as Iowa added 17 cents per short ton. All other states were unchanged in this week’s price action.

Urea’s price performance was even more narrow than was NH3’s this week. We are down just 18 cents by the short ton. North Dakota was again our downside leader posting a $6.90 price slide. Missouri was a close second falling $3.60 as Michigan, Indiana and Iowa all posted very mild declines as well. Illinois led price gains in urea firming $5.30 as Nebraska firmed $4.06. Minnesota is up $1.74 on average statewide. Other sates were unchanged on the week.

UAN28% was the biggest mover in our nitrogen segment falling $1.51 overall. Declines in 28% were led by a $14.29 falloff in Minnesota. Kansas fell $2.69 as Indiana dropped $2.55. Other declines in 28% were less than a dollar with Missouri and South Dakota unchanged. Gains were limited to Nebraska and Iowa, each up about a dime by the short ton.

UAN32% fell 47 cents regionally led by North Dakota, down $5.67 and Kansas off $1.18. Nebraska 32% firmed $1.10 and Iowa is up a dime. All other states are unchanged on UAN32% this week.

Perspective -- It is interesting to note that as nitrogen appears to be taking a pause in its downward price path, UAN28% has been left out to dry above expected new-crop revenue per acre. NH3, urea and UAN32% are all priced below one acre of expected new-crop corn revenue. In fact, by the pound of N, all three are within a cent of each other which is a fairly tight price relationship. That margin has tipped us off to an upcoming closer reflection of corn prices in the N segment. It will be interesting to see how the four N products we survey respond with UAN28% at such a premium to the rest of the segment and to corn revenue.

It does appear that N prices are bottoming, but as I said in our Inputs Market Update earlier this week, it could be the sign of a bottom in nitrogen pricing. But it should also be argued that retailers are on the sidelines and expecting prices to fall farther between now and harvest. If we get a “V” bottom in nitrogen next week, we will pull the trigger on half of our intended needs for fall. If we continue lower or are flat, we will hold off for another week.

December 2017 corn closed at $3.72 on Friday, August 5. That places expected new-crop revenue (eNCR) per acre based on Dec ’17 futures at $583.31 with the eNCR15/NH3 spread at -33.29 with anhydrous ammonia at a discount to expected new-crop revenue. The spread widened 0.57 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.29 per bushel.

The Margins -- UAN28% is overpriced compared to anhydrous by 2 1/2 cents; UAN32% solution is 1/2 cent above NH3 on price. Urea is 1/2 cent below anhydrous by the pound of N this week.

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