DTN Fertilizer Outlook: World DAP Prices Fall
World ammonia market prices were flat through April, trading between $510 and $515 per metric ton fob (free on board — seller fulfills his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment) Yuzhnyy. (All prices in this column are wholesale.) At mid-month some Saudi ammonia production was down for maintenance turnaround, but slow demand for DAP in India and weak industrial demand in Southeast Asia blunted the impact of the lost output.
In the U.S., Yara settled with Mosaic for contract deliveries of ammonia into Tampa for May at $587 cfr (cost and freight — the delivery of goods to the named port of destination at the seller’s expense; buyer is responsible for the cargo insurance and other costs and risks), a $10 reduction on the April contract price. We look for world ammonia market prices to run flat with an undertone of softness in the short term.
Domestic ammonia prices decreased slightly at inland terminals through April, falling $15 to $20 to $760 per short ton. Wet, cold weather persisted on and off through the month and delayed normal spring application for corn plowdown in most markets. The slow start to the corn preplant application season is creating concern about demand volume, but weather forecasts for early May are favorable, and a great deal of application can be accomplished in a very short time. Supplies in place seem adequate to meet upcoming strong demand.
Few new market transactions are likely early on, since most product was purchased months ago. As the season winds down, there could be some bearish pressure on prices as suppliers look to sell all they can. Prices for competing forms of N are weak (see below), which could work against any effort to move ammonia prices higher.
World urea market prices were lower through the month with trades crossing at $375 metric ton for Yuzhnyy prilled early and selling at $355 to $360 late. India ran a late-month tender and covered in 500,000 metric tons at $379 mt cfr. Much of the material was from Iran. India can now step back from the market and any prolonged delay in closing the next tender could take its toll. At month’s end, Pakistan ran a tender and acquired 80,000 mt, mostly Middle Eastern material, at $374 mt cfr.
There are still spot tons available from the Middle East, and all potential destination markets of late have been under pressure. Indonesia added to this with a mid-month sale of 90,000 mt granular urea at $360 fob. These very competitive prices are also being offered into South America and Yuzhnyy will have to respond eventually to sell prills into that market. Further out, there is growing concern about supply from China. Tons are already moving to ports and as domestic prices continue to slide, port fob prices of $320 mton become more and more attractive.
We look for world urea market prices to run flat with an undertone of softness in the short term.
Domestic urea prices crumbled through the month with NOLA (New Orleans) barges trading at $390 to $398 per short ton early and crossing at $355 to $360 late. The month featured long supplies and spring demand delayed by weather. The northwest Corn Belt (Nebraska, Iowa, Dakotas, Minnesota, Wisconsin) is the principal domestic consuming region of urea and farmers/dealers had barely turned a spreader wheel at month’s end.
Prices at inland terminals were holding flat over inactivity, and it remains to be seen if newly arriving product moves inland in time to put pressure on prices. Demand is expected to be strong once movement begins but, given the weather-narrowed application window, sellers are likely to become aggressive sooner rather than later. We expect domestic urea prices at inland terminal to move sharply lower, reflecting the already recent substantial declines seen in NOLA and world urea market prices.
NOLA UAN barge prices traded flat through the month in the $327 to $333/32% area. The late-month collapse of urea prices started to affect UAN prices, despite the prospect of increased demand for UAN in the Corn Belt should ammonia demand falter due to weather delays. UAN prices at most inland terminals held steady at around $385/32% through April. The delay in the season allows increased domestic production of UAN to become available and that, along with weak urea prices, could limit upside price potential. For the short term we expect domestic UAN prices to run flat with an undertone of softness.
Prices for DAP in the world market fell steadily through April. Early month trades crossed at $512 to $513 mton, and at month’s end Tampa prices were crossing at $500 with $495 a definite prospect. There was continued lack of demand in the U.S. and absence of a significant move by Indian importers at a time when European and Australian markets moved out of season. Indian demand for 2013-14 remains clouded by the lack of an announcement on subsidy levels for phosphate fertilizers.
DAP inventories have built considerably over the past two fertilizer years and Indian buyers have time on their side before their requirement to import material becomes pressing. DAP production rates in Saudi Arabia remain on an upward curve, and Sabic and Ma’aden are content to cover the limited import demand surfacing in India at cfr values, which would net traditional suppliers to this market lower returns than they are currently prepared to accept.
Without India as an outlet and local buying lackluster, increased availability of U.S. DAP and MAP for other offshore markets is growing, adding to the increased pressure on prices. This is prompting those buyers who can afford to wait to hold back. Most Brazilian importers are on the sidelines, having bought heavily in February and March. We look for world DAP market prices to keep moving lower in the short term.
Domestic DAP prices moved lower at NOLA through April. Early month trades crossed at $465 to $470 per short ton, but there was a drop of $35 to the $425 to $430 level in the last week of the month which some attributed to liquidation of imported Moroccan product. Interior prices in the Corn Belt were flat over inactivity with slow trade crossing in the $500 to $510 area through April. We expect when Corn Belt demand does get underway, holders of product are going to be more anxious not to miss a load than to maintain prices.
Wholesalers/dealers seem content to sit on the sidelines and watch prices drop. They also remain reluctant to build inventory. We expect domestic prices to keep moving lower in the short term.
NOLA potash barge prices traded at $415 through April. New interior sales continue to be delayed due to adverse weather conditions across the Corn Belt. Wholesalers/dealers continue to buy one load at a time and are reluctant to build inventory. We expect domestic potash prices to keep moving lower.
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