Ammonia should be in the cross hairs of growers, but as they said on Bunker Hill: Don’t fire until you see the whites of their eyes. The index used to settle swaps for October at the Gulf dropped again as expected, falling to its lowest point since 2005. At $190.50 that wholesale benchmark translates into a projected fair value of only $385 on the retail level. Some dealers on the Plains are that low, but those in the heart of the Corn Belt are still in retreat towards it. Getting the best price likely will take finding a dealer able to get fresh product from manufacturers selling now to avoid further price declines. Still, farmers should avoid the temptation to sit back and wait for the market to go lower still. The supply chain for ammonia remains as vulnerable as ever. – witness the closing of the Mississippi River this week due to flooding. Part of the current weakness stems from a restart to production in Ukraine, which secures natural gas from Russia and is way behind on payments. Passing up a good deal means also betting that peace will break out from North Africa through the Middle East, with gas supplies staying good in the Caribbean. It could happen. Then again, maybe not.
Urea costs at the Gulf rose nearly $30 a ton in September, reflecting seasonal demand around the world and the refusal of Chinese suppliers to maintain production and dump inventory on the market. Terminal prices in the U.S. rose a little, but never matched gains at the Gulf, and slid back again last week, suggesting the price bump may be running out of buyers as last orders get filled on the river system for the upper Midwest. The Gulf index was up another $2.50 last week to $185.50, but swaps into spring show little upward pressure and international prices were mixed. Retail averages in the U.S. continue to drift lower as dealers update price sheets with fall offers, taking the average price down to $303. That’s actually $25 to $30 below replacement cost based on current swaps, so growers able to get the lower price, say $280 to $300, should
consider locking it in.
UAN costs eased a little last week at both ends of the market, with only modest increases forecast in the swaps trade when seasonal demand picks up next spring and early summer. The cost of 32% at the Gulf was down 50 cents to $132, which translates into a fair value for retail 28% averaging $215. That’s just $2 below the average retail cost this week, which slipped slightly to just over $217. The lower Gulf price represented the lowest weekly close since 2009 in that segment of the battered nitrogen market, where more domestic capacity keeps coming online due to low natural gas prices created by the fracking boom.
Phosphates were steady to a little weaker. While swaps at the Gulf for DAP continue to slowly give back most of their September bounce, retail prices made new lows, slipping 15 cents to around $423.50. That cost reflects product purchased before wholesale prices firmed on better demand. Locking in supplies in the $380 to $400 range still looks prudent for patient buyers.
Potash prices are following their seasonal trend higher, with both terminal retail prices up $1 or so last week. Costs at the Gulf slipped, suggesting this bounce may have run its course. Continue to target $280 to $300 as a buying target.
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