Urea makes new push higher Supply problems crop up just as demand for fertilizer rises By Bryce Knorr, grain market analyst

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1 Urea makes new push higher Supply problems crop up just as demand for fertilizer rises By Bryce Knorr, grain market analyst What passes for calm in the fertilizer market never seems to last long. Just as it looked like urea might be making at least a temporary top, a new round of demand and problems with suppliers ratcheted prices higher again. The rally in soybeans could also ramp up nutrient prices if it proves to have legs. Ammonia showed signs of following urea higher with prices out of the Black Sea jumping last week. The slow pace of corn harvest kept the U.S. market quiet, at least so far, though the October contract settlement price at the Gulf of $222 looks cheap now. And that price translates into an average retail cost of $430, some $55 above the current average retail value of $375, which hasn t changed much as few dealers adjusted prices recently. USDA s survey of dealers in Iowa and Illinois put the average there at $366 and $405 respectively, though dealers to the west remain lower. Urea took an abrupt turn higher last week, a move that could be confirmed soon depending on results of another Indian tender in play. Offers were due over the weekend but prices were already starting to move as other buyers wrapped up other deals, with good demand noted from Brazil. What looked like a market with plenty of sellers suddenly wasn t, due to breakdowns in the Middle East and North Africa. China has been a seller only at higher values recently, but there were also questions about how much supply it had available to move. While the spot price for urea at the Gulf was put at $233, there was talk of new exports and sales up to $250 because U.S. costs are cheap by world standards. Swaps at the Gulf for November settled Friday at $253, with winter at $255. Average retail prices were up $3.45 to $302.50, but that looks around $50 cheaper than fair value because some dealers have yet to adjust their offers higher. Those who did raise prices were typically up around $20 and they re $45 to $55 off their recent lows. UAN also moved higher last week on wholesale markets. The price of 32% at the Gulf was up $5 to $140, and more increases likely are ahead. Swaps for January at the Gulf jumped $12.75 on Friday alone, settling at $165. Retail prices for 28% continue to look undervalued at $208, but that s based on a thin market with little activity. Swaps suggest potential for the retail market to rise another $35 as dealers restock into winter. Phosphates were mixed last week in a mostly flat market that hasn t seen a whole lot of traffic of late. DAP at the Gulf lost $1 to $321 and swaps into December are down to $310. Still, those contracts translate into retail prices $40 to $50 above our current average, which was up $1 to $426. The risk for growers needing to stock up is unclear, however, because this market has been quiet for so long. More supply is coming onto the market out of North Africa and the Middle East, but China, often the swing factor, appears to be raising prices a little. Potash displayed a firm tone internationally last week but here in the U.S. the market is flat as fall demand is limited so far. Costs at the Gulf were steady and Corn Belt terminals stayed at $255. Our average retail price was little changed at $323, a level that looks around $25 too high given the wholesale market. Product is still available at some Midwest dealers below.

2 Iowa Fertilizer Prices per ton $850 $750 $650 $550 $450 $350 $250 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 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 million short tons $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 Inventory Gulf Price $750 $650 $550 $450 $350 $250 $150 Ammonia Retail Gulf

5 $900 Farmgate Ammonia April price $700 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 $270 $250 $230 $210 $190 $170 $ Oct 18 Jan 18 Apr JLY Oct 19 Jan 19 Apr 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% $365 $315 $265 $215 $165 $115 U.S. UAN Inventories vs Price 1.6 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 $165 $160 $155 $150 $145 $140 $135 $130 $125 $120 $115 Gulf UAN (32%) Swaps Curve 17 Oct 17 Nov 17 Dec 18 Jan 18 Feb 18 Mar $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 Jul/17 $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 Gulf DAP Swaps Curve $322 $320 $318 $316 $314 $312 $310 $308 $306 $ Oct 17 Nov 17 Dec 18 Jan 18 Feb 18 Mar

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 Jul/17 $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.