A late harvest last fall and wet, cold conditions this spring disrupted fertilizer applications on 2019 crops. Delayed harvest this year along with potential for rising corn prices could make for another volatile year, especially for nitrogen. Adding further uncertainty is the weekend attack on Saudi oilfields, ratcheting freight costs and tensions higher in a region that produces much of the world’s fertilizer too.
Ammonia costs at the Gulf moved higher for settlement of September contracts, the first increase since July. But the outlook for the rest of the fall is uncertain. Farmers want to plant more corn according to Farm Futures first survey of 2020 planting intentions, but 2020 futures show corn losing more money than soybeans. In the meantime, dealers updating offers continue to reset prices lower following the huge drop in wholesale prices since spring. Spot costs continue to run $50 or so below fall prepay levels, though it’s unclear how much demand will be seen. Current costs, including $210 at the Gulf suggest a wide range of retail offers, in part because closure of the Arkansas River and a key pipeline have some ammonia trapped on the southwest Plains and bringing costs there down near $400 a ton. Midwest prices are higher, with fall prepay levels around $480 or more.
Urea is also showing signs of a bottom, something it’s been trying to prove all summer. Another large tender from India this week could show whether sellers can boost prices, which could hinge on how much China can offer. Our average retail price of $350 is $65 off early summer highs, with costs down sharply in September as dealers update sheets. Swaps show prices at the Gulf rising only modestly into winter, but the key for growers in the northern U.S. may be whether supplies can get in position before the Mississippi River closes – a problem that caused shortages for 2019 applications.
UAN costs stayed high until recently because products were the go-to source of nitrogen for farmers with serious planting delays. Prices have finally begun to reset lower as wheat growers ponder purchases in a market that’s not offering much in the way of profit. Our current retail price of $220 for 28% is right in line with fair value based on wholesale costs at the Gulf for 32%. Don’t expect that price to last, as swaps show slow but steady price hikes through winter.
Phosphate costs are slowly coming into line as dealers post updated offers, following a plunge in wholesale prices over the past 10 months since it because clear applications were hurt by fall weather. Leftover product lingered on the market through summer and there’s plenty available from around the world too, a dynamic that caused Mosaic to announce last week it was idling Louisiana operations Oct. 1 to cut production by 500,000 MMT this year. The news firmed wholesale prices, with swaps predicting another $20 higher tab for DAP. Our average cost for DAP of $457 is around $30 higher than fair value, with dealers running from $420 to $455.
Potash prices continue to edge lower on both wholesale and retail markets, with some Midwest dealers below $350. Midwest terminals slipped to $289, and growers can expect to pay $500 to $100 more than that on average.
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Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.