Viewpoint: US urea demand supportive for spring prices
Strong US farmer demand in the spring will likely support the US urea market, which has sharply declined since October.
Urea and overall nitrogen consumption is poised to rise for the 2019-20 season because of changes to the crop mix. Demand will likely favor urea because it is a relatively cheap source of nitrogen at the moment.
Bullish farm demand
Crop fundamentals are bullish based on an estimated 3mn acre increase in corn acreage to 92mn acres, according to the US Department of Agriculture (USDA).
With typical consumption rates, one could assume an annual increase of 300,000st of nitrogen use based on USDA's projections for 2018-19 plantings.
Soybean acreage could fall by 6.6mn acres leading to a significant increase in nitrogen demand during the next two years as soybean fixes most of its nitrogen requirement, as well as lowering the nitrogen requirement for a corn-after-soybeans rotation.
In addition, fall ammonia applications were seriously hindered by weather, and market participants generally estimate that up to 1mn st less ammonia than usual was applied. Much of this will be caught up in the spring, but weather and logistical bottlenecks should mean that farmers turn to alternative sources of nitrogen to make up the difference.
There is headwind from farm economics — where the USDA describes "relatively lean times ahead". Farm income will fall by 12pc in 2018 from 2017, according to the USDA, and debt levels are expected to rise by 4pc.
Urea values at a discount
While urea prices ran up over the summer, they have pulled back and wholesale offers in the east Corn Belt for spring made in December were about 10-15pc higher than the previous year.
But for UAN and ammonia they were 39pc and 23pc higher than a year ago. On a USC/lb nitrogen basis, urea looks particularly cheap at 30¢/lb — with UAN at 41¢/lb and ammonia at 32¢/lb. Retail prices in Illinois and Iowa have UAN and urea are at parity on a $/N basis, but this is likely to change as the cheaper urea prices filter through.
Farmers do not always purchase the cheapest form of nitrogen available, but some marginal consumption is likely to be affected, further supporting the urea market.
Global trends remain a factor
Barge prices are likely to correlate with international markets and drive inland prices. Nola prices are a reliable signal for the urea balance in the US. When the market is well supplied Nola must be at a discount to nearby markets in order to discourage deliveries, while when it is short Nola prices climb to attract import volumes.
Remaining import needs are estimated at 500,000-600,000t of spot urea for spring to meet the regular peak in demand. This suggests a period where Nola trades at a premium to international markets over the next few months, after spending most of this year at a discount.
The outlook for global urea prices is mixed. On the bullish side, prices are low enough to discourage significant Chinese urea exports, and Iranian urea is far less available now that the export route through China is under scrutiny. But overall the market trends back into a global surplus by the end of the first quarter, with a corresponding effect on prices.
Related news posts
India's RCF seeks 100,000t of NPS
India's RCF seeks 100,000t of NPS
London, 29 April (Argus) — Indian fertilizer importer RCF has issued a tender to buy two 50,000t lots of 20-20-0+13S. RCF requests delivery of the first lot by 10 June and the second by 20 June. The tender is to close on 3 May, and offers must be valid until 7 May. The tender is open only to suppliers with which RCF has signed long-term agreements. RCF in February bought just over 30,000t of Saudi Arabian 20-20-0+13S from a trading firm at around $359/t cfr duty unpaid, equating to $377/t cfr duty paid/free. The Argus assessment for Indian imports of the grade has remained broadly flat since, largely because of a lack of trade. Indian importers have been buying mainly NPK grades — particularly Russian-produced 10-26-26 — while high stocks have helped to ensure little NPS activity. But the nutrient-based subsidy (NBS) for 20-20-0+13S being raised by just 11pc season on season , compared with 19pc for 10-26-26 and 20pc for 12-32-16, has also helped to nudge demand towards the latter products. By David Maher Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India's Fact issues tender to buy 15-15-15
India's Fact issues tender to buy 15-15-15
London, 29 April (Argus) — Indian fertilizer producer and importer Fact has issued a tender to buy two 20,000-30,000t lots, plus or minus 10pc, of 15-15-15 product. The tender closes on 13 May at 14:30 Indian Standard Time (IST). The first shipment should be delivered to the port of New Mangalore before 20 June, and the second to Tuticorin during 1-15 July. If suppliers cannot meet these timelines, they can offer to the nearest available date, and these submissions will be considered in the absence of offers that match Fact's desired dates. Offers can be made for either shipment or both. By David Maher Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
STB chair Oberman to leave rail agency on 10 May
STB chair Oberman to leave rail agency on 10 May
Washington, 26 April (Argus) — US Surface Transportation Board (STB) chairman Martin Oberman (D) said today that he would retire in two weeks, though a replacement has not been named. Oberman informed President Joe Biden of his decision in a letter earlier today. Oberman said in mid-November 2023 that he would exit the agency in early 2024 . His five-year term expired on 31 December but he continued to serve into his one-year holdover term. No additional details have been announced, but vice chairman Karen Hedlund (D) is expected to lead the rail regulator until a formal appointment has been made. Chairman Oberman's "commitment to exploring all sides of an issue was pivotal in helping to find solutions for stakeholders," the Freight Rail Customer Alliance said. National Grain and Feed Association chief executive Mike Seyfert said pointed to Oberman's actions in working toward significant regulatory milestones for agricultural shippers and railroads. Under Oberman's leadership, STB has moved forward on long-standing proposal to allow reciprocal switching. The switching plan would allow a shipper served by a single railroad to request that its freight be transferred to another major railroad at a designated interchange point. STB is expected to act on reciprocal switching as early as this month, after introducing a plan tied to railroad service performance in September 2023. His term was also highlighted by several major industry events, such as the Covid-19 pandemic, the merger of Canadian Pacific and Kansas City Southern and the 2022 rail service crisis. Oberman was nominated by former US president Donald Trump in July 2018. His appointment was confirmed by the US Senate in January 2019 and he was appointed chairman by President Joe Biden in January 2021. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s Mol starts operating LPG-fuelled VLGC
Japan’s Mol starts operating LPG-fuelled VLGC
Tokyo, 26 April (Argus) — Japanese shipping firm Mitsui OSK Line's (Mol) Singapore-based subsidiary Aramo Shipping started operating today a new LPG-fuelled LPG and ammonia carrier for domestic importer Gyxis. The 87,119m³ very large gas carrier (VLGC) Aquamarine Progress 2 was built by Japanese shipbuilder Namura Shipbuilding at Namura's Imari shipyard in south Japan's Saga prefecture. The vessel is equipped with a dual-fuel engine, which can burn LPG and conventional marine fuel. Mol expects use of LPG to reduce carbon dioxide (CO2) and nitrogen oxide emissions by 20pc and sulphur oxide and particulate matter emissions by 90pc compared with a heavy oil-dedicated vessel. The VLGC is also designed to be able to carry ammonia, eyeing potential demand growth for decarbonisation. Japanese shipping firms and shipbuilders have boosted construction of LPG carriers that can also ship ammonia, as demand for the cleaner fuel is expected to increase in future. Japan plans to co-fire ammonia at coal-fired power plants to reduce CO2 emissions, while aiming to use ammonia as a hydrogen carrier. Shipbuilders Kawasaki Heavy Industries and Mitsubishi Heavy Industries each delivered a VLGC, which can carry LPG and liquefied ammonia. Mol, in partnership with shipbuilders Tsuneishi Shipbuilding and Mitsui E&S Shipbuilding, completed risk assessments to design a mid-size ammonia-fuelled ammonia and LPG carrier , targeting to finish construction by 2026. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more