Headlines continue to be made on almost a daily basis in the fertilizer market, with big changes coming down this week already in urea and potash. Tight supplies out of the Black Sea and Mediterranean caused urea to surge $20 a ton over the past week, with a series of price hikes dashing hopes for a seasonal slowdown. The news in potash reflected the opposite direction for prices of K. Potash Corp announced it would lay off 18% of its workforce, with cuts affecting the company's nitrogen and phosphate business as well.
Ammonia dropped at the Gulf to start December, with the index at the Gulf around $408. Corn Belt ammonia continues to grind lower on slow demand as the river system shuts down and the fall application season ends. Wholesale costs in the west are down to $532.50, with eastern terminals $20 higher. Current prices suggest an average fair value retail price around $655, with offers on the Plains running around $615 and the low end of the market in the central Midwest $630 to $660. Current fundamentals suggest a range of $560 to $630, prices that are already being seen in some locations. USDA put the low end of the market this week in Iowa at $630, for example.
Urea prices saw a series of increases in the past week, jumping $16.25 at the Gulf on Monday and adding another $3.75 Tuesday. That left the price at $330. Prices out of the Black Sea rose $11, with costs out of the Middle East up $27. Tight supplies triggered by problems shipping out exports across the Mediterranean appear to be at the heart of the increases, because demand remains tepid seasonally. Terminal costs on the river system were less in most cases, with fresh offer sheets steady. Current prices at the retail level are averaging around $425 a ton, which is actually below the fair value price of the international market and its fundamentals right now.
UAN was steady at the wholesale level this week, but prices continue to pull back at the retail level as applications wane. USDA said the top end of the market for 28% in Iowa this week fell $15, with the cheapest costs at $301. Updated offers on the Plains fell as low as $285, the cheapest there we've seen so far. Swaps indicate prices that could be $10 to $15 higher into spring, but nothing explosive so far. Current fundamentals put the cost for UAN at $275 to $300, suggesting the market is starting to be fairly valued. The index at the Gulf remains at $232.50 for 32%.
Phosphates moved in different directions this week. Wholesale markets were higher, but retail offers were lower, as dealers restocked at lower price levels. Several small daily increases sent overall prices for DAP at the Gulf up $12.50 by Tuesday to $330, with terminals on the river also higher. However, new offer sheets showed lower retail prices, with the lowest price we've seen on the Plains dropping to $440, while USDA put the cost of MAP in Iowa as low as $480. Fair value for DAP is around $445, with fundamentals pointing down to around $422, suggesting the market is slowly moving toward where it should be trading. Potash Corp's move to close one of its two chemical plants in Florida comes on the heels of CF Industries recent sale of its phosphate business to Mosaic.
Potash prices were steady at Midwest terminals at $372.50, with more retailers offering in the $450 area that's close to both fair value and fundamental indications. But Tuesday's news from Potash Corp suggests adjustments to big supplies and weak demand may take time to heal. The company still has big inventories on hand, and the trade will be watching news wires into 2014 for word on buying by China, which could provide direction for the market into spring.
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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 Advisor. He conducts Farm Futures exclusive surveys on acreage, production and farm 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 farm crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
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