Winter fertilizer bargains could be rare Global market shows signs of stability By Bryce Knorr, grain market analyst

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1 Winter fertilizer bargains could be rare Global market shows signs of stability By Bryce Knorr, grain market analyst While fertilizer costs continued to edge mostly higher this week, the strong summer rally showed signs of cooling as fall begins. But growers still trying to book products for fall application or hoping for a pullback this winter for spring needs may see limited reductions if recent seasonal patterns prevail. Lower production of corn and wheat over the past year could support demand, even if U.S. crop prices are weak. Ammonia costs held steady this week on both wholesale and retail markets. But October settlement of contracts out of the Gulf could ratchet higher if anhydrous continues its normal tendency to follow moves in urea. With retail ammonia averaging $491 and the Gulf near, that could force dealers buying new supplies now to raise prices to $500 or more, though growers near plants on the southern Plains will pay as little as or a bit less. Wholesale prices on average don t see much of a pullback into winter, maybe 4% off fall highs, which could keep price declines muted unless the nitrogen complex pulls back on a downturn in financial markets. Urea ticked higher again this week as those trying to get supplies in position by the time the river system closes for winter stepped up buying a little. Good moisture on the Plains for winter wheat seeding is also helping to boost demand. Costs at the Gulf edged 50 cents higher to $296, while our retail average gained $2 to $384.50, with dealers on the Plains typically running $370 to. That s still below replacement cost, especially in eastern areas where prices tend to be higher. Reports that China could be selling again were the first bearish hint in a while, with the international trade also trying to figure out the impact of sanctions against Iran due to take hold in November. Swaps show generally flat to weaker prices into spring, but retail prices on average pull back only about 3% into winter. UAN was a mixed market this week. Retail prices for 28% were unchanged, as demand is limited. But costs at the Gulf for 32% were up $3.50 to $196.50, anticipating values that could rise another $15 into winter. That could take 28% sharply higher, up as much as $45 or more compared to the current price of $240. Some dealers reworking offer sheets on the Plains are already at $270, though most haven t changed much. Retail prices usually experience only modest softness into winter, pulling back on average around 4%. Phosphates also moved higher again last week, supported by increased expenses for the nitrogen component of products. Average retail expenses for DAP gained $4 to $512, still a little lower than replacement values given Gulf prices that rose $2 to $421. Those wholesale costs could jump another $5 into October before heading lower in December. Seasonal DAP costs have been fairly steady to higher over the fall into the winter the last five years, though the wholesale market saw more significant swings that could translate into buying opportunities if the market falters into Potash was steady last week, with no change noted on wholesale or retail markets. Our average retail cost of $358 still looks at little cheap compared to the Gulf value of $261, though Midwest terminals were also unchanged at $295. Seasonal trends for a 5% to 6% price break into winter are a little more promising historically for potash, but likely would require Russian and Belarussian suppliers to sell more aggressively. That may not be in the cards this year as international prices remain supported by China s recent purchases. 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 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 Gulf Urea Swaps Curve $310 $290 $280 $270 $260 $240 $230 $220 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 Farmgate UAN 28% April price $450 per ton $350 $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.

9 $220 $210 $190 $180 $170 $160 $150 $140 Gulf UAN (32%) Swaps Curve 18 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 $440 $435 $430 $425 $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 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 A-18