Retailers slash ammonia prices but urea shoots higher Weekly Fertilizer Review for February 22, 2016

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1 Retailers slash ammonia prices but urea shoots higher Weekly Fertilizer Review for February 22, 216 A fairly quiet start to retail fertilizer trade in 216 came to very abrupt halt this week, with big changes seen for some products. While ammonia costs dropped at some, but not all locations, dealers began raising urea offers in response to a surge in wholesale prices. There were signs of life in the phosphate market too as spring buying kicks in, though none of the changes appear to indicate any long-term rebound in costs. Ammonia dropped more than $2 this week, with the retail average price at $485. Dealers on the Plains are routinely lower than that cost, with some down to $425 and most in the $45 to $48 range. USDA reported the average cost in Illinois and Iowa last week at $562-$563 with $55 not an unusual offer these days for prompt payment. While spring buying could keep dealers firm in the Corn Belt, the $282 Gulf index price suggests an average retail cost of $48. Urea offers were trending modestly lower in the first six weeks of 216 as dealers reset offer sheets in line with the big break on the international market. That wholesale break ended a couple of weeks ago and now retailers are raising prices too. The average dealer charge went up $9 to around $355, though that reflects a wide range from $32 to $45. Retailers raising offers on the Plains appear to be in the to $37 range, so it pays to shop around. USDA reported Illinois in the middle of that range at $361, though some dealers are still $4 less, while Iowa was all the way up to $399. Our fair value price based on wholesale expense was $383, $15 higher than the Midwest wholesale price, and should be higher next month. Swaps for March at the Gulf are more than $2 higher than February with barges already at $254. Contracts for spring and summer show steadily falling prices, suggesting this move higher may not last long. Spring demand from the southern Plains has jacked up U.S. prices well above the world market, stimulating new export sales from other producing countries that should boost supplies. UAN continues to show signs of rising prices. Swaps at the Gulf were up another $6 last week to $157.5 for 32%, with March and April $15 or more above that. The Gulf price translates into a fair value retail cost of $241 for 28%, so dealers resetting offer sheets may already be factoring that in. Dealers resetting prices on the Plains are the $23 to $265 range, with USDA putting the price in Illinois and Iowa last week at $266-$271. The average was at $25, down $1 this week. Phosphates are still trending lower on retail markets as dealers update offer sheets to reflect lower wholesale costs. The average retail cost for DAP was down $4.5 to $464, and MAP and LAP also eased. Retail prices still appear above fair value, but costs may not head lower quickly. Current wholesale costs for DAP continue in the other direction, up another $11 this week at the Gulf to $33, which translates to a fair value dealer cost averaging $457. Swaps contracts show steady values through April, but fall to $35 by May. U.S. phosphate inventories ended 215 at their highest level since 29. Potash prices are still resetting lower at the retail level as dealers come into line with the hardhit global market. Our average fell $5 to $ The Midwest terminal price is at $257, so retail prices seem fairly valued on average right now.

2 Retail Fertilizer Prices DAP Potash Urea Ammonia $65 $55 $45 $9 Iowa Fertilizer Prices per ton Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Source: USDA Ammonia Urea MAP Potash $1,2 Illinois Fertilizer Prices Ammonia DAP Potash Urea $1, per ton Sep 8 Sep 9 Sep 1 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Source: USDA

3 $65 $55 $45 Tampa Ammonia metric tonne $65 $55 $45 $25 Black Sea Ammonia metric tonne

4 per short ton $9 Ammonia vs Corn Gulf Ammonia Nearby Corn $9. $8. $7. $6. $5. $4. $3. $2. $1. $ $ per bushel 35, 3, 25, 2, 15, 1, 5, U.S. Ammonia Stocks year end, metric tons N Source: USGS

5 million short tons U.S. Ammonia Inventories vs Price Inventory Gulf Price Apr/4 Oct/4 Apr/5 Oct/5 Apr/6 Oct/6 Apr/7 Oct/7 Apr/8 Oct/8 Apr/9 Oct/9 Apr/1 Oct/1 Apr/11 Oct/11 Apr/12 Oct/12 Apr/13 Oct/13 Apr/14 Oct/14 Apr/15 Oct/15 $9 $ Ammonia Retail Gulf $724 $674 $624 $574 $524 $474 $424 $374 $324 $274

6 $9 Farmgate Ammonia April price per ton $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Midwest/S. Plains are based off supply and demand factors.

7 $575 $525 $475 $425 $375 $325 $275 $225 $175 Urea Retail Gulf million short tons U.S. Urea Inventories vs Price Inventory Gulf Price Jan/2 Oct/2 Jul/3 Apr/4 Jan/5 Oct/5 Jul/6 Apr/7 Jan/8 Oct/8 Jul/9 Apr/1 Jan/11 Oct/11 Jul/12 Apr/13 Jan/14 Oct/14 Jul/15 $ Gulf Urea Swaps Curve $25 $15 $5 $ Feb Mar Apr May June July Aug

8 per metric ton Black Sea Urea Ave. $38 $36 $34 $32 $28 $26 $24 $22 $18 Jan Mar May Jul Sep Nov Average Farmgate Urea April price per ton $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.

9 UAN Retail 28% Gulf 32% $25 $15 U.S. UAN Inventories vs Price Inventory Gulf Price 1.6 million short tons $ Apr/4 Dec/4 Aug/5 Apr/6 Dec/6 Aug/7 Apr/8 Dec/8 Aug/9 Apr/1 Dec/1 Aug/11 Apr/12 Dec/12 Aug/13 Apr/14 Dec/14 Aug/15 Gulf UAN (32%) Swaps Curve $18 $16 $14 $12 $8 $6 $4 $2 $ Feb Mar Apr May June July Aug

10 UAN Gulf $29 $27 $25 $23 $21 $19 $17 $15 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Farmgate UAN 28% April price $45 per ton $25 $ $5 $- Source: Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.

11 $55 $45 DAP Retail Gulf U.S. MAP/DAP Inventories vs Price Inventory Gulf DAP Price million metric tons Apr/5 Oct/5 Apr/6 Oct/6 Apr/7 Oct/7 Apr/8 Oct/8 Apr/9 Oct/9 Apr/1 Oct/1 Apr/11 Oct/11 Apr/12 Oct/12 Apr/13 Oct/13 Apr/14 Oct/14 Apr/15 Oct/15 $1,2 $1, $ 45,, 4,, 35,, 3,, 25,, 2,, 15,, 1,, 5,, U.S. Phosphate Rock Consumption metric tons

12 Gulf DAP Swaps Curve $335 $33 $325 $32 $315 $31 $35 $295 $29 Feb Mar Apr May June July Tampa DAP metric ton Ave $55 $45

13 per ton $9 $- Farmgate DAP April price Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.

14 $55 $45 $25 Retail Potash Midwest Terminal North American Potash Inventories vs Price Inventory Midwest Price million metric tons Jan/ Oct/ Jul/1 Apr/2 Jan/3 Oct/3 Jul/4 Apr/5 Jan/6 Oct/6 Jul/7 Apr/8 Jan/9 Oct/9 Jul/1 Apr/11 Jan/12 Oct/12 Jul/13 Apr/14 Jan/15 Oct/15 $1, $ 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, U.S. Potash Consumption metric tons

15 Midwest Potash $/st Average $ $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Farmgate Potash April price $9 per ton $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.