DTN Fertilizer Outlook

By Ken Johnson
DTN Fertilizer Columnist

AMMONIA

World ammonia prices were flat through August with Yuzhnyy quoted at $380 to $395 per metric ton fob (free on board — the buyer pays for transportation of the goods). (All prices in this column are wholesale.) In mid- and late-August, a number of plant turnarounds were announced in both FSU and Middle East facilities. FSU producers, who normally supply Yuzhnyy and Baltic exports, are having scheduled turnarounds which will keep supplies very thin. Turnarounds at several Saudi Arabian plants are scheduled as well, and two North African (Algerian) plants are going down. While Indian demand remained active through the month, industrial demand from Southeast Asian importers was limited. We look for world ammonia prices to run flat with an undertone of strength in the short term.

Domestic ammonia prices also were flat through August with tons at central Illinois terminals offered at $550 per short ton. Low natural gas prices look to continue for the foreseeable future, keeping ammonia producer margins very wide. Prices for urea seem likely to keep floundering around present levels, providing some semblance of competitive pressure on ammonia. We look for domestic ammonia prices to run flat in the short term.

UREA

The world urea market was soft through most of August. Yuzhnyy prills traded at $265 to $267 early and rose to $270 to $275 late. However, granular prices for Middle East material went from $273 to $279 early to $266 to $277 late. Chinese movements in financial markets created much uncertainty at mid-month as to supply, which may have sent buyers over to Russian product. China devalued the yuan by about 3% and at the same time imposed a 13% value added tax (VAT) on exports. It seems VAT changes could be outweighed by the devaluation and an increasing need to move tons going forward could push prices lower. There is still much uncertainty about how the tax will be applied. If Middle East producers sense any oversupply situation looming, they can cut prices to make life uncomfortable for many Chinese producers. In addition, importers in markets such as Turkey and Brazil are suffering from devaluation of their currencies. Brazil has other financial and crop price related issues, and buyers are keeping to the sidelines. Late in the month, prices were falling for granular urea sales into Brazil, where sales were done both at $289 and $290 cfr (cost and freight), with an abundance of offers of product from both the FSU and Middle East coming in. Middle East benchmark prices are expected to come down in the coming weeks in absence of other spot sales. An Indian tender is expected to be announced shortly and this would prove a real test of Chinese producer resolve to hold prices or whether all considerations about an additional VAT cost go out of the window in pursuit of export sales. We look for world urea market prices to run flat to lower in the short term.

In the domestic market granular urea prices at NOLA traded at $280 to $282 early, had a small rally in the second week which peaked around $290 and then fell off to the $275 to $280 level late. Demand remains seasonally slow, although some wholesalers have begun to move product into place for the fall wheat pre-plant run. There is at least some downward pressure on world urea market prices and there is a steady stream of import arrivals (505,000 tons from all origins scheduled to ship in August) coming on the horizon. Wheat Belt farmers are starting to inquire, but low crop prices are discouraging immediate activity. Interior wholesalers remain reluctant to order in the face of current slow demand. The approach of river close could bring in some upriver buyers, but there seems plenty of imported product available to cover. We look for domestic urea prices to run flat with an undertone of softness in the short term.

UAN

NOLA UAN barge prices traded at +/- $210 both early and late. We have noted very little interest in making new UAN purchases by wholesalers/dealers through the month. Prices for competing forms of N are running flat (ammonia) to weaker (urea). We expect domestic UAN prices to run flat with undertone of softness account weak urea pricing

DAP

World phosphate prices were flat for most of August before dropping slightly at month’s end. Tampa export DAP sold at $465 mt fob early and sales crossed at $463 very late. Competitive offers for DAP in India eased late in the month to $474 cfr while MAP prices in Brazil slid to $475 to $480 cfr; suppliers were seeing offers as low as $460 at month’s end. The volume of demand in the U.S. through to the end of the year will be crucial in determining the strength and direction of world DAP DAP demand fail to materialize in the U.S., there will be added pressure to reduce prices as additional tons are forced into the international market. Competition in deep-sea markets in late 3Q and into 4Q from North African and FSU producers is likely to add to the downward pressure on prices. Europe is unlikely to absorb large quantities of North African and FSU DAP/MAP until late in 4Q, with buyers eying lower prices between now and then for spring 2016 application. North African and FSU exporters seem likely to cut prices to sell October-November tonnage to deep-sea markets, where there will be reduced opportunity to sell DAP and MAP. South American and Asian demand normally diminishes at this time of year and African and Australian demand could be served by additional supply from China, with the export duty on DAP and MAP constant year round this year. We look for world DAP/MAP prices to keep working lower in the short term.

NOLA DAP barge prices fell from the $438 to $440 per short ton early to around $428 to $430 late. Domestic DAP prices at interior terminals are flat over inactivity. Low crop prices are negatively affecting farmer attitudes toward spending money for fertilizer early on. Should domestic DAP prices manage a strong rally, the rally would surely attract import supplies in volume. Anecdotal reports suggest pipeline stocks are comparatively low and tight logistics may encourage some in the distribution chain to buy reasonable volumes in the coming months to ensure security of supply for fall. One Corn Belt wholesaler indicated the spread between DAP and potash prices could encourage potash application at the expense of DAP. For the short term, we look for domestic DAP/MAP prices to run flat to lower.

POTASH

NOLA potash barge prices crossed at $305 to $310 early in the month and softened $5 to $300 to $305 at month’s end. Low crop prices seem to be discouraging new farmer/dealer interest in potash as well as in phosphates. The presence of large volumes of potash placed on consignment with wholesalers continues to keep prices at interior terminals soft. With the product in the bin, wholesalers/dealers have no need to worry about logistics and only need to buy as needed. Given the present low levels of demand, they don’t need to buy much. We look for domestic potash prices to run flat with an undertone of softness.

(CZ/AG)