Fall fertilizer costs pinch budgets Three-year high in urea leads market gains By Bryce Knorr, grain market analyst

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1 Fall fertilizer costs pinch budgets Three-year high in urea leads market gains By Bryce Knorr, grain market analyst Fertilizer costs start September at their highest levels in a couple years, putting further pressure on margins for growers trying to book fall application supplies. With winter wheat and corn seedings on the rise for 2019 according to Farm Futures survey of planting intentions, U.S. demand could keep prices firm into October when they typically peak. Ammonia usually follows urea, so it was no surprise when September contracts at the Gulf settled $18 higher last week at just under a ton. That value translates to an average retail expense of $500 or more. Our average retail benchmark, based on prices before the September cost increase, actually dropped around $1 to $487. Costs vary widely, with most locations updating offer sheets for fall running between $460 and $505. That s in with the usual $50 to $100 markup from the Midwest terminal price of $410, though those near plants in the Southwest were as low as $395. Urea hit a three-year high on wholesale markets around the world thanks to high wheat prices overseas that are keeping demand strong. With China no longer a factor in the export market and supplies out of Iran uncertain due to U.S. sanctions, nitrogen is a sellers market that could get a further boost from another tender from leading importer India in early September. With hard red winter wheat acres expected to be up nearly 4% this fall, prices on the southwest Plains are robust, with new price lists running $350 to $415, putting our average for the week at $375, up nearly $10. Still, retail values may be playing catch-up to a wholesale market that finally showed signs of slowing its pace of increases a little. Values at the Gulf last week were up only $1 to $292, and swaps through winter don t show much difference. Current costs translate into a potential retail expense around $405. Terminal costs upriver jumped sharply last week, with most around $320 as dealers try to get product in position in time. UAN was quiet last week, but more price increases are likely in September when manufacturers get serious about selling. The cost of 32% at the Gulf rose $1.50 to $174, with October swaps at $198, which translates into a retail price for 28% around $275. That s considerably above the current retail average of $247, though some new offer sheets are already up to $270. Phosphates moved higher again last week, with the market affected by the rising expense for the nitrogen component of products and good demand. The cost of DAP at the Gulf jumped $5.50 to $416.50, its highest level in nearly three years. Retail values followed suit, rising nearly $4 to $ Updated offer sheets are running around $480 to $535. Swaps for the rest of fall don t show any increases yet, so the market may be due to catch its breath as dealers scurry to get shipments in position in time for fall application. Potash looks like a fairly stable market right now, though average retail prices increased $3 last week to $356 as more locations posted fall offers. The Midwest terminal price was steady at $291, which could ultimately boost some prices to $380 this fall. So far, however, retail costs appear to be holding at $370 or less. For more information about national and international fertilizer markets, go to Fertecon.com.

2 Iowa Fertilizer Prices $850 $750 per ton $650 $550 $450 $350 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 $800 $600 Sep-08 Sep-10 Sep-12 Sep-14 Sep-16 Source: USDA

3 per short ton $900 $800 $700 $600 $500 $100 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 AMMONIA IMPORTS/EXPORTS metric tons 600, ,000 Exports Imports 400, , , ,000 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 A-18

4 $750 $650 $550 $450 $350 $150 Ammonia Retail Gulf per ton $900 $800 $700 $600 $500 $100 $- Farmgate Ammonia 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.

5 $550 $500 $450 $350 $150 Urea Retail Gulf $700 Farmgate Urea April price $600 $ per ton $100 $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

6 per metric ton Black Sea Urea Ave. $350 $330 $310 $290 $270 $230 $210 $190 $170 $150 Jan Mar May Jul Sep Nov Average UREA IMPORTS/EXPORTS metric tons 1,400,000 1,200,000 1,000, , , , ,000 Exports Imports 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 A-18

7 $290 $280 $270 $260 $240 $230 $220 Gulf Urea Swaps Curve 1-Sep 1-Oct 1-Nov 1-Dec 1-Jan 1-Feb 1-Mar 1-Apr 1-May

8 UAN $365 Retail 28% Gulf 32% $315 $265 $215 $165 $115 per ton $450 $350 $150 $100 $50 $- Farmgate UAN 28% April price Source: Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

9 $210 Gulf UAN (32%) Swaps Curve $190 $180 $170 $160 $150 $ Sep 18-Nov 19-Jan 19-Mar 19-May $280 $260 $240 $220 $180 $160 $140 $120 UAN Gulf Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10 metric tons 450, , , , , , , ,000 50,000 0 UAN IMPORTS/EXPORTS Exports Imports F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 A-18

11 $550 $500 $450 $350 Retail DAP Gulf per ton $900 $800 $700 $600 $500 $100 $- 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.

12 Gulf DAP Swaps Curve $420 $415 $410 $405 $ Sep 18-Oct 18-Dec Tampa DAP metric ton $460 $440 $420 $380 $360 $340 $ Ave

13 Potash $560 $510 $460 $410 $360 $310 $260 $210 Retail Midwest Terminal per ton $900 $800 $700 $600 $500 $100 $- 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.

14 Midwest Potash $/st $350 Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec POTASH IMPORTS/EXPORTS metric tons 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 Exports Imports 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 A-18