Weather targets fertilizer market too Heavy rains stall shipments, delay fall applications By Bryce Knorr, grain market analyst

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1 Weather targets fertilizer market too Heavy rains stall shipments, delay fall applications By Bryce Knorr, grain market analyst The Midwest is finally starting to dry out from heavy rains in the first half of October that have farmers worried about damage to crops still standing in the field. But the deluge also disrupted the fertilizer industry, feeding more gains in prices this week as the rally in nutrient costs continues despite a hiccup or two. Ammonia applications slowed as farmers face fields either too wet to work or still covered with 2018 crops needing harvest. While less immediate demand kept dealers from raising prices in some areas, costs still increased last week as suppliers either restocked, paying more for inventory, or held off on purchases because they didn t know what farmers might buy this fall. Average retail prices now top $495 a short ton, and farmers buying from dealers getting new supplies likely will pay more. Our average replacement cost estimate is $526. Even on the southwest Plains, where expenses are typically lower, new offer sheets moved to the $505 to $515 range. Even if farmers apply less ammonia this fall due to weather or low corn profitability, costs could stay strong if supplies are diverted to make other products like urea. Urea swaps did something last week they hadn t done in a while. November contracts at the Gulf dropped $10 a ton mid-week during a melt-down in the stock market that triggered selling in just about everything. But prices for the week actually firmed a buck on the spot market for barges, with prices out of the Black Sea also stronger. River terminal prices surged past $350 a ton because high water stalled movement from Muscatine, Iowa to just north of St. Louis. While waters are receding, it may still be difficult to get some product to northern stretches before the system closes. That in turn could threaten spring deliveries if any other disruptions to the supply chain occur. India was forced to pay up for its latest tender because it could not guarantee payment to Iran due to U.S. sanctions. The only encouraging sign was selling from China, which has been mostly out of the export market the last year, helping trigger the $150 increase in prices. Our retail average cost topped a ton last week, which is still $20 to $30 below replacement cost. Dealers raising prices the past two weeks are running between $405 to $440. UAN was the quiet segment of the nitrogen complex last week due to seasonally slow demand from farmers this time of year. That kept our average retail cost for 28% unchanged at $240. But anyone looking seriously for supply likely will pay more a lot more, if the dealer has to locate new inventory. Replacement costs are running around $295 to, and don t look like they ll come down until spring according to offers in the swaps market. Higher international values provide incentive for plants to export what they can, rather than selling it into a market that may not want it right now. Phosphates could be the softest part of the complex right now, though that doesn t translate into bargains. Our average retail cost for DAP actually rose about $1 to $514 last week, with dealers hiking prices in the $520 to $530 range. That s in line with replacement cost based on values at the Gulf, which remain supported by higher charges for nitrogen and sulfur. Swaps show slightly lower prices in December, perhaps knocking $10 to $20 off costs. Potash ratcheted higher again last week. Average retail costs were up $5 to $367, though dealers raising prices so far in October are in the $370 to $385 range. Our projected replacement cost is even higher, near $395, thanks to another bump on wholesale markets last week. Costs at the Gulf rose $7 to $277, with Midwest terminals up $3 to $303. 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 $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 $800 $600 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16 Sep 18 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

4 $750 $650 $550 $450 $350 $250 $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 $250 $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 $250 $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

7 $340 Gulf Urea Swaps Curve $320 $280 $260 $240 $220 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 $250 $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 $225 Gulf UAN (32%) Swaps Curve $220 $215 $210 $ Oct 18 Nov 18 Dec 19 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun $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

11 $550 $500 $450 $350 $250 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 $440 $435 $430 $425 $420 $415 $410 $405 $ 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 Farmgate Potash April price $900 $800 $700 $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.

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