DTN Fertilizer Outlook

Tight Supplies Boost Urea Prices in June

Short-term urea prices could remain high, but, as demand winds down through July, the arrival of numerous import cargoes could begin to put downward pressure on domestic urea prices. (Chart by Ken Johnson)

AMMONIA

In early June, Yuzhnyy ammonia prices traded around $470 per metric ton (mton) fob (free on board -- the buyer pays for transportation of the goods) and by late month had slipped to $460. (All prices in this column are wholesale.) World ammonia market prices continued soft despite numerous short-term outages (North Africa) and plant closures (Ukraine). Late in the month, there was a $20 fall in the Tampa July import contract price to $520. Indian demand for DAP production remains strong, but demand from Far East industrial users is still in the doldrums. We look for world ammonia market prices to run flat to lower in the short term.

Domestic ammonia prices moved much lower. At central Illinois terminals, ammonia prices dropped from the $660 to $670 range to the $555 to $575 area for summer fill tons. Producer margins continue very strong as natural gas prices remain low. For the short term, we look for ammonia prices at interior terminals to move down.

UREA

Yuzhnyy prilled urea traded at $295 to $300 mton in early June and rose to $310 late. The price rise was more a reflection of tight supplies than demand. The major news of the month was the STC, India, tender. There were several offers of prilled Chinese and Iranian urea in the $266 mton cfr (cost and freight) range. There were over 3 million mtons offered into the tender. STC was unable to secure more than 320,000t at $266 cfr with many potential suppliers heeding the warning from the Chinese Fertilizer Manufacturers Association that they should not support such low levels. While the availability of huge volumes ex-China is not questioned, the $266 price would require a fob price of $250 or lower and, if not covered, traders may struggle to find that price. There are conflicting opinions about the possible outcome of India's purchasing. India is expected to tender again in a few weeks. Some feel it will then agree to the higher price indicated by other suppliers in the low- to mid-$270s cfr. Others, however, feel pressure will build on the Chinese to sell as they look to move stocks at the ports. There is no other buyer for such volume of prills and, if India chooses to sit out of the market for a month, pressure could build. The poor start of the monsoon is of growing concern in India and the effect it will have on fertilizer consumption levels and consequently urea imports. We look for world urea market prices to run flat with an undertone of softness in the short term.

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Domestic urea prices at NOLA (New Orleans, La.) surged higher. In early June, cash NOLA granular barges traded at $360 to $370 and at month's end crossed at $390 to $400. The volume traded at the very high numbers was very thin, however. Through the last two weeks of the month, rice market buyers had to enter a very thinly supplied market and bid prices up to obtain product. Once rice market demand goes away, however, there is only a seasonally slow market ahead for sellers for the next 30-60 days. There are currently around 835,000t of imported urea scheduled into the U.S. to ship in July and arrive at the end of July to early August. Short-term prices could remain high, but, as demand winds down through July, the arrival of numerous import cargoes could begin to put downward pressure on domestic urea prices.

UAN

NOLA UAN barge prices traded at around $281/32% early and fell to $235 to $245 late. UAN prices at interior terminals dropped over $1.00/unit N ($10.50 to $9.37) despite continuing good demand for corn sidedress in many markets. Even though corn sidedress usage has been strong, supplies seem sufficient to meet demand. Prices for competing forms of N are variable, with short-term urea prices up sharply, but looking to move lower, and summer and fall fill ammonia prices at much lower levels this year than last. For the short term we look for domestic UAN prices to run firm but flat

DAP

Suppliers of U.S., Russian and Moroccan DAP and MAP continued to reap the rewards of steady South American buying through June. Tampa export DAP tons traded at $445mton early and moved to $475 to $480 late. DAP/MAP prices from some other origins have also increased, with Russian MAP reported in the $470s fob Baltic for July ship, up from $460 in late May, and Lithuanian DAP reported at $490 to $500 fob for June ship in small lots to N.W. Europe, up on the $445 netback reported on the sale of a larger volume for late May. DAP markets in the Far East have also paid higher delivered prices for DAP, but values there have risen at a more modest rate on steady supply from China, Saudi Arabia and Jordan. At month's end, the level of Indian demand became lackluster, which may bring prices under renewed pressure. This is unlikely to occur during the majority of July and perhaps not until August/September. Most producers' supply positions are relatively tight for the next 30 days, if not beyond, and there remains a considerable volume of demand which still needs to be met during the traditional peak 3Q shipping season in markets such as Brazil, Argentina, Turkey, Pakistan, Russia, China and, indeed, India. We look for world DAP market prices to run firm but flat in the short term.

NOLA DAP barge prices moved higher through the month, crossing at $423 early and finishing the month at around $442, off slightly from the mid-month peak of $447. Domestic DAP prices were mostly steady at inland terminals as many wholesalers continue to layer in product. Slow rail service has reduced supply against normal strong spring demand, and wholesalers have begun buying earlier than normal in hopes supply will be available when needed. Late in the month, domestic DAP prices fell slightly at NOLA as domestic buyers looked at the 600,000t of imported product scheduled to arrive in the next 30-60 days and decided to stand aside for a while. Many interior buyers are also looking at the development of a very large corn crop, which could pressure corn prices below $4. Some believe corn prices that low could reduce P application rates in the fall. For the short term we expect domestic DAP/MAP prices to move slightly lower.

POTASH

NOLA potash barge prices moved up during the month, trading at $345 to $350 and rising to $360 late. Supplies of potash remain tight due to the hangover from slow rail deliveries through the spring. Some wholesalers mentioned more product was getting delivered (finally), but for the most part supply continues short. As in the case with DAP, many large wholesalers continue to layer in potash to protect themselves against slow deliveries despite the price risk. We look for domestic potash prices to run steady to slightly higher in the short term.

(CZ/AG)

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