DTN Fertilizer Outlook

AMMONIA

Issues on the supply side increased world ammonia prices through September. Yuzhnyy ammonia prices traded at $500-$510 per metric ton early and rose to $590 late. Production issues in Trinidad, Egypt, Libya, Australia, Indonesia, Ukraine and Russia are leading to limited supply. The issues are short gas supplies (Trinidad, Egypt), plant turnarounds (Russia, Australia), and political unrest (Russia, Libya, Ukraine). At month's end, producers were trying to raise prices even further, but buyers in the Far East were becoming reluctant to pay much higher prices, especially in light of softer demand in the near term. Some ammonia buyers in the downstream caprolactam and acrylonitrile industries have recently cut operating rates, leading to requests for lower contract deliveries for ammonia, at least in the near term. For the short term, we look for world ammonia prices to keep moving higher.

Domestic ammonia prices were up slightly through the month, trading at $640-$650 in central Illinois early to $650-$670 late. There was very little cash market demand, normal for the season. Asking prices are rising due to strong world market pricing. A good deal of uncertainty surrounds the world supply/demand balance, with not only production and gas supply problems to consider, but also, in the political arena, the possibility of economic sanctions being imposed by the U.S. and E.U. against Russia, which could affect export sales of ammonia into the world market. We look for domestic ammonia prices to run steady to higher in the short term.

UREA

World granular urea prices moved lower through the month with Yuzhnyy prills trading at $336-$338 mt early and easing to $325-$330 late. At month's end, India ran a tender from which they purchased 1.8 million mt prilled urea at $302-$308 delivered, mostly of Chinese origin. This cleared most Chinese export inventory at ports, but it also may have signaled the end of Indian demand for a while. The prilled price in China might have found a floor ($288), but granular prices are still under pressure. Offers are plentiful and buyers are scarce it seems, and at month's end prices have drifted to $310 and below in pursuit of sales. Buyers in South America have stepped back from the market, and this is pressuring prices. The U.S. is showing no real interest in more Chinese granular. We look for world urea prices to move lower in the short term.

Domestic urea prices moved lower both at NOLA and at interior terminals through the month. NOLA granular barge prices traded at $360-$365 per short ton early and dropped to $320-$330 late. Prices at many interior terminals came down through the month, but this was more a reflection of new business getting priced rather than a significant supply/demand imbalance. NOLA prices are still under pressure from continuing import arrivals. The collapse in corn prices is making interior buyers wary and reluctant to commit. River close is imminent, and now some buyers who bought forward contracts at lower numbers could be looking at high-dollar barge demurrage for a good while. We look for domestic urea prices to continue under downward pressure in the short term.

UAN

Domestic UAN prices traded flat through the month with NOLA barge prices trading at $242/32% both early and late. Farmers' attentions are focused mostly on harvest activities, but wholesaler/dealers are additionally concerned that low crop prices could be adding to farmer malaise in asking about UAN prices. Price indications for competing forms of N are mixed (ammonia higher, urea lower). Should ammonia prices move sharply higher, a good deal of demand for N could switch to UAN and firm UAN prices higher. For the present, however, we look for UAN prices to run firm but flat.

DAP

World DAP/MAP market prices have drifted lower through the month. NOLA DAP barge prices crossed at $490-$500 mt early and barges were selling at $460-$470 late. India continued to purchase DAP from China, buying in at the low/mid $490s cfr. Europe has lent some support to the market, purchasing 90,000 to 100,000 tons of DAP/MAP for September shipment from OCP, Morocco. However, OCP had to accept $525-$528 fob to secure a 35,000t sale at month's end, which was several dollars lower than a mid- month OCP sale into Turkey. At month's end, Mosaic was obliged to accept a lower return on a large export sale than the return achievable on small lots to South American markets. A new sale into India crossed at about $460 fob U.S. Gulf based on panamax freight. Prices for MAP out of the FSU have eased to a low of $475 fob against a backdrop of subdued demand in South America where MAP offers have also been reduced to a low of $475 cfr, which would reflect $450 fob Baltic. With little prospect of significant demand emerging in South American import markets in the near term, U.S. producers will be heavily reliant on domestic buyers entering the market in stronger numbers to avoid more tons being forced into the export market. However, this will not necessarily mean that U.S. fob values will come under significant downward pressure, as Mosaic can run tons through its system in India, provided India is prepared to continue purchasing DAP at current levels. We look for world DAP/MAP prices to run flat with undertones of softness in the short term.

Domestic DAP/MAP prices both at NOLA (New Orleans, La.) and at interior terminals worked slightly lower through the month. NOLA DAP barge prices crossed at $440-$445 ston early and were priced at $425-$430 late. Trade volume was very thin through the month. Wholesalers/dealers are getting no farmer interest in fertilizer while all three look at much lower corn prices brought on by prospects of a record-breaking corn crop. We look for domestic DAP/MAP prices to run flat to lower in the short term.

POTASH

NOLA potash barge prices traded flat through the month at $378-$380. Supplies of potash remain thin over continuing slow rail deliveries. Even light demand was thus able to keep interior terminal prices firming through the month. Interior terminal prices moved up from $390 early to $405-$410 late. Prices at interior terminals could continue to strengthen as supplies remain tight due to slow rail service. As in the case with DAP, however, dealers remain reluctant to build potash inventory to any great extent due to low corn prices. We expect potash prices to run flat to slightly higher in the short term.

(AG/CZ)

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