Early Start to Spring Hikes Fertilizer Prices


by Ken Johnson, DTN Fertilizer Columnist


In the second half of March, world ammonia market prices moved sharply higher, rising from the mid $350s to $420 to $450 at month’s end. The price recovery has been on the back of tighter supply out of the Black Sea due to extensive cutbacks by Ukrainian and Russian exporters since the end of 2011. Middle East product is in tighter supply as Asian demand picked up and a turnaround of one ammonia line in Saudi Arabia reduced supply. The price for contract ammonia deliveries into Tampa/U.S. for April for MAP/DAP phosphate fertilizer production is still in negotiation. The market was roiled in late March by a spot sale of Venezuelan tons through a Chinese company to Mosaic in the U.S. at just under $360 cfr Tampa (cost and freight — seller must pay the costs and freight to bring the goods to the port of destination). This is around $40 below the current contract price in Tampa. At press time, negotiations were still under way. We expect world ammonia market prices to run steady to slightly higher in the short term. Domestic ammonia prices moved steadily higher through the month and stood in the $640 to $650 range in central Illinois at month’s end. Spring corn pre-plant demand has had a very early start and high corn prices have made demand very heavy. Urea prices have made a strong upward move, which has increased demand for ammonia as well. Producer margins remain very high due to continuing low natural gas prices. For the short term we expect domestic ammonia prices to run steady to higher.


World urea market prices climbed dramatically in the last two weeks of the month, led by huge gains in the U.S. market. Yuzhnyy and the Baltic prilled urea traded up to $422 to $433 at month’s end, having started the month in the low $390s. There is a tender currently active in India, but Iranian tons are expected to dominate and Yuzhnyy prices today are completely unworkable against offers that have been seen of late for Iranian granular (in the $380-fob range). There is some South American demand and Brazil might start to make a move to buy n April if they think India will take the tons away from them. At month’s end granular prices were moving higher for Middle East product, moving from $430 mid-month to $480 at month’s end. We expect world urea market prices to run steady to higher in the short term. As stated above, domestic urea prices continued to move up sharply in the last half of the month, as spring demand for wheat topdress and corn pre-plant opened much earlier than normal against short supplies. NOLA (port of New Orleans, La.) granular barge prices moved from $522 early in the month to $585 late. Early in the month domestic production was reduced by the Koch plant at Enid going down and the Agrium plant in Carseland, Canada, also went down. At month’s end, however, both had returned to operation. In the short term, domestic prices could work higher. Some observers feel urea prices could continue to move sharply higher in the medium term. Several large wholesalers remain reluctant to buy in at these numbers, which could be taking the edge off forward demand. There are six to eight cargoes of imported urea coming in through April into May, which could begin to dampen the upward surge in prices. Also there has been substantial switching to UAN from urea and early, strong ammonia application in the Western Corn Belt could also diminish demand for urea in the medium term. We would keep any urea inventory held into the medium term at the lowest levels possible.


NOLA UAN barge prices firmed $5 to $10 to just over $300/32{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} per short ton at month’s end, following along in the wake of much higher urea numbers. Interior UAN prices are firming as well, as farmer/dealers look to switch from urea if they can. Short term UAN prices could keep moving up, but as in the case with urea, prices could come off sharply once corn pre-plant demand is served.


The lack of demand in the world phosphate market relative to supply has prompted producers across the globe to concede lower prices. The lack of a conclusion to long-term DAP contracts in India also was putting downward pressure on world market prices. NOLA export DAP prices dropped from $500 to $510 per metric ton early in the month to $495 to $500 mt late. There is still outstanding inquiry in central and South America, but demand in some quarters such as Europe and Australia is winding down for seasonal reasons. Importers are keenly aware producers are struggling to place their uncommitted availability for April in a market where, without India, there is insufficient new demand emerging to take up the slack at current fob values. We expect further deterioration in world DAP market prices in the short term. Domestic DAP prices firmed slightly at NOLA at month’s end, moving to the $450 to $455 per short ton range as spring seasonal demand is having a very early start. Interior terminal prices moved up slightly. Some large wholesalers said supplies seem plentiful despite reduced production and traders removing product from barges to export vessels. We expect domestic DAP prices to run firm but flat in the short term.


Late in the month NOLA potash barge prices moved down to $475 for Russian product, but wholesalers paid $490 for Canadian material. At month’s end NOLA potash barge prices for Russian material had recovered to the $485-to-$487 range. Terminal prices dropped a few dollars at month’s end to the $530-to-$540 range as wholesalers/dealers looked to clear slow-moving inventory. Large wholesalers indicated product still seems long for the most part and we look for domestic potash prices to keep grinding lower in the short and medium terms.


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Posted with DTN Permission by Haylie Shipp


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