TheNFiles: Urea Stabilizes as NH3 Firms

• Anhydrous is $49.14 below year-ago pricing -- higher $1.20/st this week at $516.36.
• Urea is $5.04 below the same time last year -- lower $1.17/st this week to $362.21.
• UAN28% is $30.24 below year-ago -- higher $1.16/st this week to $249.74.
• UAN32% is priced $22.77 below last year -- lower 24 cents/st this week at $280.83.

Kansas led anhydrous ammonia higher in this week’s price action firming $19.56 per short ton as Iowa firmed $1.80. Missouri led to the downside falling $6.25 and Illinois softened $1.51.

UAN28% was higher on strength in South Dakota to the tune of $12.85 as Iowa, Illinois and Nebraska all firmed about $1.20 per short ton. Minnesota softened $2.99 and Kansas dropped 99 cents.

UAN32% was lower this week led by a $23.30 decline in Indiana. Nebraska was our only other decliner, falling just 2 cents by the short ton. Missouri firmed $8.12 and Illinois added $4.68.

Urea was also lower this week led by Missouri which softened $11.50 and Kansas which fell $5.23 per short ton. Gains were led by Michigan which added $4.46 and Iowa which firmed $2.29.

We wrote earlier this week about urea’s failure to break above the year-ago price peg over the past few weeks. It may be that a return of colder weather in central and northern areas of the Corn Belt slowed demand for urea, but it seems like that should have shown up as price softness elsewhere -- in that context, this week’s strength in DAP/MAP is conspicuous. Urea is our highest-priced form of nitrogen currently on an indexed basis but is still priced well below DAP and MAP. Our hope was that phosphate would hold steady and wait for nitrogen to trundle higher narrow the N/P spread. We have to remember not to make too much of a single week’s price action, but volatility will continue to rise as spring fieldwork edges closer. Having said that, urea’s price support has faded over the past three weeks, and wholesale values out of the Black Sea, the Middle East and into NOLA opened the week pointed lower which may indicate urea has topped.

If urea has topped and stays in place, and NH3 and UAN work toward parity with urea, anhydrous will add another $30 while UAN would add about another $10-$15 per short ton. This is where our margin analysis (see below) comes into play. The margins have tended to shrink during periods of high demand. Other nitrogen price analysis has shown that with urea at a premium to NH3, anhydrous ammonia will follow higher, and as go urea and NH3, so goes UAN. Our forecast for higher nitrogen prices through the next several weeks is unchanged. Urea looks like it wants to top here, which would be a limiting factor for upside anhydrous and UAN price action, but that limit would not be reached until UAN and anhydrous have firmed appropriately.

The bottom line? We filled our nitrogen needs for spring quite awhile ago and are glad we did. If you have not, get current to 100% filled on spring/summer nitrogen.

December 2017 corn closed at $3.89 on Friday, March 17. That places expected new-crop revenue (eNCR) per acre based on Dec ’17 futures at $616.61 with the eNCR17/NH3 spread at -100.25 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 3.88 points on the week.

The Margins -- UAN32% is at a 2 1/2 cent premium to NH3. Urea is 4 3/4 cents above anhydrous ammonia; UAN28% solution is priced 1 1/2 cent above NH3.