While retail fertilizer prices remain expensive as the pace of planting picks up, more signs are accumulating that costs should subside, perhaps significantly, this summer. Still, low crop prices and adverse currency exchange rates overseas haven't hurt global demand tremendously, at least not yet.
Ammonia costs have fallen significantly the wholesale market while staying costly upstream for farmers. That alone would suggest potential for lower prices this summer. Supply and demand fundamentals can change quickly in the ammonia market due to turbulence overseas, but the U.S. is a little less dependent on imports thanks to low-cost natural gas. The index used to settle swaps at the Gulf will be around $175 lower in May that it was last fall. Retail prices on average are off less than $20 over the same time frame. Fundamentals suggest a price range this summer between $565 and $650. The question for growers is whether to buy then, or wait for global demand to take the market even lower.
Urea prices shot almost $15 higher at the Gulf last week, as a pickup in demand appeared underway after the rush of fieldwork. Yet even at the $289.50 Gulf price, urea should be lower than it is at many retail locations, at least according to traditional pricing models, which show costs sliding into summer to an average of around $412. Fundamental suggest costs should be even cheaper. That projection is down to $387. Whether the market tumbles that much depends on what happens overseas. Egypt's gas supplies appear to be stabilizing, and product should also be moving out of the Black Sea unless the Ukraine-Russia conflict heats up again. The swing factor remains China, where sellers have so far resisted lowering prices.
UAN prices continue to bleed lower at the wholesale level, both here in the U.S. and overseas. The cost of 32{f2533179b7c7e7cbdbc11018732de14c82f3d44c9f1e829e9a046cc47141a2e6} at the Gulf dropped another $2.50 a ton to $240, reflecting a slow drip that has prices $27.50 off winter highs. The swaps market has prices plunging below $200 for August/September. That would take the projected retail price for 28{f2533179b7c7e7cbdbc11018732de14c82f3d44c9f1e829e9a046cc47141a2e6} down to around $270, $50 below current average levels.
Phosphates were firm at the Gulf last week, though export prices were lower despite signs of increasing demand globally. Government subsidies and seasonal buying from the southern hemisphere could boost prices despite struggling crop markets. With current average retail prices for DAP running around $555, the market has stayed firm despite a pullback at the wholesale level. Swaps are showing a small price decline into summer that puts fair value around $525, but fundamentals continue to point towards much cheaper prices, perhaps down to $470 if buyers balk.
Potash prices were steady last week on the wholesale market, with Midwest terminals still at $385. That translates to fair value of $477, not far from average retail prices. Fundamentals suggest a break of maybe $30 into summer, but international demand seems to be good.
Download the complete retail fertillizer report using the link below.
Download file: WFertR042715.pdf
Click here to download this file.
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.
Source: Farm Futures
