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Fertilizer Outlook - What’s fertilizer cost? It depends

Large price gulf appears in nutrient costs.

Adages from the worlds of finance and real estate are the best way to describe a fertilizer market with wide price disparities: “Time is money” and “Location, location, location.” Where you farm and when you plan to buy products could mean a differential of hundreds of dollars a ton in a market that could see key developments internationally this week.

Ammonia is the poster child for the fertilizer price gap. Wholesale costs at the Gulf and at plants on the southern Plains continue to edge lower, responding to the fall decline in urea values. Anhydrous contracts for January settlement at the Gulf fell to $258.50 a short ton, $63.50 off the fall high. Plants on the southern Plains aren’t down that much but still saw a significant decline. These wholesale costs suggest average retail prices around $463. But Midwest terminal prices edged $20 higher last week to $505, and our average retail price came in at $561. Some of those costs are spring prices posted by dealers, which are averaging around $600, in a range from $575 to $637.50, anticipating a rush of demand that could strain the supply chain after a slow fall application season. Even dealers on the southwest Plains closer to plants were running $515 to $520.

Urea could be at a turning point, after large importer India put out a tender due this week. India’s last big purchase in 2018 tipped the market lower after sales resumed from China, which had mostly been out of the export market after a crackdown on pollution cut production there. Gulf prices were up some $10 to $271 with March swaps up to $280. Those costs suggest retail markets are fairly valued right now because prices didn’t follow the wholesale market higher due to weak demand from the slow applications this fall. Our average slipped $1 to $391.50 with a few dealers cutting costs slightly in trade tightly bunched in the range of $380 to $407.

UAN was also a market of contrasts. Our average retail value rose to $271 for 28% even as the Gulf cost for 32% dropped to $197.50 after a big manufacturer cut its Midwest terminal price $20 to $220 for 32%. Most farmers aren’t interested in buying UAN in the fall, so dealers posted few new offers while the wholesale market took off. That means our average retail value of $271 is actually around $10 to $15 below replacement cost.

Phosphate have seen a steady rise higher for farmers over the past two years, due in part to the rally in the nitrogen component of products. Slow farmer demand this fall and the drop in nitrogen softened wholesale markets at the end of 2018. Those retail values are starting to stabilize, but retail prices still have a way to go to catch up to the downside. The current retail average for DAP of $515 seems about $35 overvalued as a result, with $480 a better price for new purchases.

Potash prices remain firm on world markets, a reality that may not change quickly in 2019. But while the big Canadian producers announced a $10 a ton price increase last week, costs further down the supply chain headed in the other direction. Costs at the Gulf were down $2 to $288, and our average retail value slipped nearly $3 to $276. While some dealers are posting offers at $400 or more, close to our replacement cost, most dealers are still in the $370 to $395 range.

For more information about national and international fertilizer markets, go to Fertecon.com.


More from Farm Futures:
Corn Outlook
Soybean Outlook
Wheat Outlook

Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.

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.

 

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