Fertilizer market starts to crack India nabs lower prices in latest urea tender By Bryce Knorr, grain market analyst

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1 Fertilizer market starts to crack India nabs lower prices in latest urea tender By Bryce Knorr, grain market analyst When India talks in the fertilizer market, the world listens. The large importer of urea and other products stoked the fall rally that took prices to three-year highs. But prices could be headed in the other direction following news today of lower prices and plentiful offers from suppliers in India s latest big purchase. Ammonia costs showed signs of weakness last week even before the India news broke, though a pullback in some wholesale markets seemed more about the specifics of weather than anything else. Prices at terminals on the Plains pulled by $5, as wet conditions, including snow, delayed the fall harvest and winter wheat seeding. Corn harvest is lagging behind average levels by double digits in the Dakotas, further dampening demand, with wet weather looming in the 8- to 14-day forecast across much of the U.S. Retail prices on average edged about a quarter lower to $497.25, but still look about $25 to $30 lower than replacement costs for any dealers still trying to move product into position. Urea swaps at the Gulf for December dropped $10 Tuesday ahead of the India tender results, which brought prices around $20 below the country s last big purchase in early October. That was the deal that appears to have topped out the market, coming in nearly $60 above the previous purchase in August that got prices moving again. International prices had been trying to rebound when news of the tender broke last month, but that upward momentum is over for now. While retail offers were little changed last week, keeping our average at, river terminals were already pulling back due to a combination of lower costs at the Gulf and the slow application season. Our projected replacement cost for winter make the current retail market look fairly priced, so much will depend on how much the international market retreats into winter. Lack of fall business could lead to a scramble, especially if winter affects movement of product. UAN has looked cheap all fall, at least at retail price points where few dealers updated offer sheets. That changed last week. Though not a lot of product is moving, some dealers raised offers on 28% by nearly $30 reflecting supplies that are somewhat limited right now by lack of manufacturer selling. Overall the average retail cost for 28% went up nearly $5.50, though at $246 it still looks undervalued, with $280 to more in line with replacement costs. UAN swaps eased a little yesterday on the downturn in urea, however. Phosphate costs continue to be impacted by the fluctuations in the cost of the nitrogen component of products, making the path of least resistance lower. The index for swaps at the Gulf dropped $3.50 last week to around $412.50, talking the projected replace cost to around $513 at the retail level, in line with our average price from dealers of $516. Prices could be headed lower due to bad weather for applications and expectations imports will rise. Potash held steady last week, keeping Midwest terminals at $319 and the Gulf at $291. Retail prices showed little change, keeping our average around $368, which still looks as much as $40 too cheap based on replacement costs. 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 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 S-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 S-18

7 $290 $280 $270 $260 $240 $230 $220 Gulf Urea Swaps Curve 1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov

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 $225 Gulf UAN (32%) Swaps Curve $220 $215 $210 $205 OV 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 S-18

11 $550 $500 $450 $350 Retail DAP Gulf $900 Farmgate DAP April price $800 $700 per ton $600 $ $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.

12 Gulf DAP Swaps Curve $440 $435 $430 $425 $420 $415 $410 $405 $ Nov 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 S-18