It s time to book 2018 fertilizer Focus on nitrogen first, using right tool for each market By Bryce Knorr, grain market analyst

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1 It s time to book 2018 fertilizer Focus on nitrogen first, using right tool for each market By Bryce Knorr, grain market analyst A slump in nitrogen costs this summer gives growers a chance to lock in products they ll need for 2018 across the fertilizer complex. But different tools and urgency will be needed to secure the best deals. Ammonia prices continue to move lower as reductions at the Gulf move up the supply chain. The big question is whether a weak international market will push costs even lower in July after a big break in June. Some dealers in the southwest Plains cut their offers below already, Our average is down to $475, which is around $25 too high according historical projections of fair value. So growers who book needs now should be pressing for good deals. Urea is normally the first part of the nitrogen market to make price moves, both up and down. After tumbling to 14-year lows, the Gulf cost ticked a few dollars higher last week and the swaps market shows that trend continuing into fall. Even so, upside looks limited. Production in the U.S. is on the rise and seasonal demand around the world likely won t last. U.S. prices rose on demand from overseas buyers taking advantage of the lowest costs in the world; farmers should use that endorsement to wrap up supplies they ll need for the coming crop year. Our average retail cost is $305.50, which seems fair given the current tone of the market. Dealers on the Plains are even lower, with recently updated offers there running $265 to $295. UAN on the spot market edged lower again last week, with the Gulf 32% benchmark losing $2 to $139. But the real market to watch is for swaps. August contracts are at $121.50, and that s up a little from the previous week. Growers should be working hard now to lock in supplies for late summer-early fall. While the retail average for 28% is at $226.75, fair value for deferreds is around, which would be the best price this decade. Phosphates were mixed last week in a market that has a flat tone due to buyers perception that production is rising around the world. That dampened the price for U.S. DAP exports, but domestic costs actually firmed a little. Contracts in the swaps market are flat at the Gulf into September around $308.50, a price that translates into around $445 at retail, With our dealer average $20 below that, growers should be looking to lock in supplies if they can get a good price. The market doesn t appear to have a lot of upside, but it may not have much downside potential for bargains either. Potash prices continue to show little movement. Costs at the Gulf moved a little higher on immediate demand, but summer contracts were a little lower. That s keeping retail prices stuck around $325, with most growers on the sidelines. Given the current tone farmers should be trying to book needs around, given the Corn Belt terminal cost of $253.

2 Iowa Fertilizer Prices per ton $850 $750 $650 $550 $450 $350 $250 Jan 11 Jan 13 Jan 15 Jan 17 Source: USDA Ammonia Urea MAP Potash $1,200 Illinois Fertilizer Prices Ammonia DAP Potash Urea $1,000 per ton Sep 08 Sep 10 Sep 12 Sep 14 Sep 16 Source: USDA

3 per short ton $900 $700 Ammonia vs Corn Gulf Ammonia Nearby Corn $ $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 per bushel 500,000 U.S. Ammonia Stocks year end, metric tons N 400, , , ,000 0 Source: USGS

4 U.S. Ammonia Inventories vs Price $900 $700 $0 Apr/04 Nov/04 Jun/05 Jan/06 Aug/06 Mar/07 Oct/07 May/08 Dec/08 Jul/09 Feb/10 Sep/10 Apr/11 Nov/11 Jun/12 Jan/13 Aug/13 Mar/14 Oct/14 May/15 Dec/15 Jul/16 Feb/17 million short tons Inventory Gulf Price $775 $675 $575 $475 $375 $275 $175 Ammonia Retail Gulf

5 $900 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.

6 $550 $450 $350 $250 $150 Urea Retail Gulf million short tons U.S. Urea Inventories vs Price Inventory Gulf Price Jan/02 Nov/02 Sep/03 Jul/04 May/05 Mar/06 Jan/07 Nov/07 Sep/08 Jul/09 May/10 Mar/11 Jan/12 Nov/12 Sep/13 Jul/14 May/15 Mar/16 Jan/17 $700 $0

7 Gulf Urea Swaps Curve $240 $230 $220 $210 $190 $180 $170 $160 $ Jun 17 Aug 17 Oct 17 Dec 18 Feb 18 Apr 18 Jun 18 Aug per metric ton Black Sea Urea Ave. $350 $330 $310 $290 $270 $250 $230 $210 $190 $170 $150 Jan Mar May Jul Sep Nov Average

8 $700 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% $375 $325 $275 $225 $175 $125 U.S. UAN Inventories vs Price Inventory Gulf Price $0 Apr/04 Jan/05 Oct/05 Jul/06 Apr/07 Jan/08 Oct/08 Jul/09 Apr/10 Jan/11 Oct/11 Jul/12 Apr/13 Jan/14 Oct/14 Jul/15 Apr/16 Jan/17 million short tons

10 $150 Gulf UAN (32%) Swaps Curve $145 $140 $135 $130 $125 $120 $ Jun JLY Aug 17 Sep 17 Oct 17 Nov 17 Dec $280 $260 $240 $220 $180 $160 $140 $120 UAN Gulf Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

11 Farmgate UAN 28% April price per ton $450 $350 $250 $150 $50 $ 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.

12 $550 $450 $350 $250 DAP Retail Gulf million metric tons U.S. MAP/DAP Inventories vs Price Inventory Gulf DAP Price Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09 Dec/09 Jul/10 Feb/11 Sep/11 Apr/12 Nov/12 Jun/13 Jan/14 Aug/14 Mar/15 Oct/15 May/16 Dec/16 $1,200 $1,000 $0

13 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 U.S. Phosphate Rock Consumption metric tons $316 Gulf DAP Swaps Curve $314 $312 $310 $308 $306 $ Jun JLY Aug 17 Sep 17 Oct 17 Nov 17 Dec

14 Tampa DAP metric ton Ave $480 $460 $440 $420 $380 $360 $340 $320 per ton $900 $700 $- 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.

15 $560 $510 $460 $410 $360 $310 $260 $210 Retail Potash Midwest Terminal million metric tons North American Potash Inventories vs Price Inventory Midwest Price Jan/00 Nov/00 Sep/01 Jul/02 May/03 Mar/04 Jan/05 Nov/05 Sep/06 Jul/07 May/08 Mar/09 Jan/10 Nov/10 Sep/11 Jul/12 May/13 Mar/14 Jan/15 Nov/15 Sep/16 $1,000 $0

16 U.S. Potash Consumption metric tons 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Midwest Potash $/st Average $ $ $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

17 per ton $900 $700 $- Farmgate Potash 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.