DTN Fertilizer Outlook

Mon. Apr 27, 2015 9:31 AM

By Ken Johnson
DTN Fertilizer Columnist


World ammonia prices drifted lower through April. Yuzhnyy export ammonia traded at $400 to $410 early and tons crossed at $400 to $405 late in the month. (All prices in this column are wholesale.) Demand continued lackluster in many regions and overall activity is slow. Asian prices kept sliding downward. Late in April, the $20 drop to $465 per metric ton (mton) in Tampa import prices put international buyers into a bearish mood and some are still trying to run prices lower. We look for world ammonia market prices to run flat to lower in the short term.

Domestic ammonia prices in the central Corn Belt had a small increase at mid-month of $15, rising from $615 per short ton (ston) fob (free on board -- the buyer pays for transportation of the goods) terminal to $630. Late in the month, the spring movement to corn preplant continued to stumble forward. Some parts of the Midwest had strong movement (northern and central Illinois, Iowa, Nebraska) and activity is winding down. In other areas (Eastern Corn Belt, Mississippi Delta), start-up of demand has been delayed by wet field conditions. There seems adequate supply around to meet present demand levels. We look for domestic ammonia prices to run flat with a soft undertone in the short term.


World urea prices were mostly flat through April. Yuzhnyy prills were sold at $254 to $256 early and crossed at $255 to $257 mton late. Late in April, STC, India, held a tender and purchased just over 500,000t from Iranian suppliers who took all the business done at $258 mton fob. Middle East producers in general chose not to participate in the Indian tender. The lack of Chinese tons getting offered at lower numbers encouraged Middle East suppliers of granular to increase and achieve slightly higher prices for tons going into South America. Netbacks for Middle East tons traded at $245 to $255 mton fob early and quotes into Brazil were at $280 cfr (cost and freight) at month's end. Several large traders think it is only a matter of time before the Brazilians agree to this price increase with no cheaper option available. Yuzhnyy and the Baltic saw little action through most of the month; there may be some improvement on the back of higher granular values, but any improvement seems likely to be marginal. There is still huge concern that Chinese exports could suddenly increase once again as home market demand wanes. For the short term, we look for world urea prices to run flat with a strong undertone.

Domestic urea barge prices sold in a wide range through April. Early, NOLA (New Orleans, La.) barge trades crossed at $275 to $278, but cash prices for granular units rose sharply at month's end, trading in the $290 to $310 range. The higher prices ($310) were paid for units loaded at upriver terminals, while loaded units at NOLA sold at the low end. The higher prices for currently available material are a reflection of near-term spring demand, which has started late and will soon be over. In addition, many buyers put off commitments until the last minute. Wet field conditions continue to delay the start of demand in some regions. A good deal of spring demand for urea has yet to be served, especially in the Mississippi Delta. Some wholesalers are expecting demand from Delta farmers, rice farmers in particular, to sustain higher urea prices into the medium term. Others warn that low crop prices for rice combined with late planting could lead to large-scale switching of rice acres to soybeans. Near-term urea prices seem likely to run steady to higher, but we believe prices could turn lower in the next few weeks.


NOLA UAN barge prices traded at around $242 early in April and slid slightly to $239/32% late. Domestic UAN prices firmed slightly at some interior terminals as product began moving to corn preplant in the Western Corn Belt and to dealer storage ahead of Corn Belt sidedress season. Product moved in good volume through the month to pasture topdress in Wheat Belt markets. Late in the month, interior terminal UAN prices rose slightly, reflecting spring demand currently active or imminent. Strong competition from low urea prices could work against a sustained UAN price move to the upside, especially in the medium term. Late in the month, CF announced an export sale which roiled the market, but in the end, demand was slow to get started and a steady stream of imported product through the month served to blunt the impact the export sale might have had on price. Producer margins remain wide, but we are still in the midst of spring preplant demand in several markets, with sidedress demand still to come. We expect domestic UAN prices to run firm but flat in the short term.


World prices for DAP and MAP moved lower through April. Tampa export tons sold in the $470 to $475 mton range early and fell to $455 to $460 late. Domestic demand in the U.S stayed soft through April, and Brazilian importers stood aside for most of the month. European and Australian markets were moving out of season, and these factors combined to tip the supply/demand balance in the favor of buyers. New business has been limited as most major importers outside India keep to the sidelines, in no urgent need of product and sensing further downward price pressure to come. Several small sales into South America crossed at numbers up from the monthly lows, but larger sales volumes into India sold at flat prices. Several traders are growing increasingly confident that Argentine and Brazilian importers now have to step in for the main import season following limited anticipation buying in recent months. Late in the month, Mosaic agreed to a 200,000t sale into India for delivery over the next few months. EuroChem and Phosagro, FSU, were asking $465 to $470 fob Baltic in late April, with both comfortable for May following recent sales. With U.S. DAP now agreed to in India and Brazilian and Argentinean importers threatening to return in greater numbers for MAP and DAP, the market would appear to be close to a price floor in the coming weeks.

NOLA DAP barge prices drifted lower through the month, trading at $415 to $420 ston early and crossing at $405 to $410 late. Several wholesalers mentioned farmer attitudes toward DAP purchases were unenthusiastic, likely from the influence of lower crop prices. Wet conditions through the spring have slowed the onset of demand in all markets and the stretch-out of demand has kept demand pressure from building on prices. Wholesalers/dealers remain reluctant to build inventory and are waiting to see farmers' money before acting. We believe the strength of demand is likely to be far from sufficient to spur prices higher either domestically or in the world market. We look for domestic DAP prices to stay under downward pressure in both the short and medium terms.


NOLA potash barge prices were flat through April at $350 ston fob. As with DAP, wholesalers are seeing a lack of enthusiasm for potash application from farmers. Supplies seem much more readily available this year than last as transport issues in Canada have improved. Despite strong demand in some markets at month's end, potash prices were steady to lower at terminals having activity. Demand so far has been insufficient to move prices higher, and we look for further deterioration in domestic potash prices in the short term.


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