Viewpoint: Nearby tightness to support Nola urea
The wide differential between global replacement costs and spot trade at Nola should support US urea prices into the first quarter as domestic distributors vie to attract limited imports.
Competing demand from India, Europe and Brazil early during the first quarter amid limited offshore availability should support Nola prices, but the US is unlikely to begin attracting the estimated 1.9mn-2.4mn metric tonnes of remaining urea imports for spring until the gap between domestic and global values closes.
Nola urea prices since late October have traded at more than a $100/short ton discount to replacement costs from the Middle East — which supplied more than half of offshore imports in the past three seasons — after volatile second and third quarters during which US prices ebbed and flowed from a nearly $33/st premium to a $92/st discount to replacement costs.
Various extended domestic plant turnarounds during the third quarter and a heavily favored UAN product mix brought forward import demand during the fourth quarter, a seasonally illiquid period, and left Nola exposed to global price swings during the first half of the 2021-22 season. Offshore imports during the quarter are estimated at 1.32mn t, compared with the 629,500-1.15mn t imported during the same period from 2018-20, according to Census Bureau data.
That exposure to global prices, and subsequent firmness, is expected to persist into February after India soaks up the bulk of January availability globally, leaving the US to largely compete with Europe and Brazil during the quarter.
But global price depreciation is expected in the first quarter after India withdraws from the spot market and hand-to-mouth buying weighs on key supply origins, enabling US consumers to return in earnest and attract imports.
US farmers are primed to increase corn production in 2022, according to the US Department of Agriculture (USDA), supporting bullish annual nitrogen consumption sentiment.
Careening fertilizer affordability this season should spare spring nitrogen consumption. Retailers are instead expected to purchase on a hand-to-mouth basis and potentially cause an in-season logistical bottleneck to further buoy spring prompt values.
Retailers and wholesalers ended the 2021 season with minimal carryover inventory and faced thin domestic supplies amid production outages, prolonged further by Hurricane Ida bringing major production facilities off line for nearly two weeks in late August and early September.
Upriver distributors in key urea consuming areas struggled to position product after Ida crippled the Mississippi river distribution system for one month, driving regional prices to an unseasonable differential to the Nola barge market during the fourth quarter and likely sustaining the wide spread into April.
Twin Cities warehouse values soared in October to average a $72.5/st premium to Nola, about $30/st higher than the typical spread during the same period in 2018 and 2019. Prices stair-stepped higher through mid-December, dragging the spread to Nola more than $50-70/st above the prior two seasons to average $119/st — a trend that is expected to persist until river open in late March or early April.
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Sinking crop values weigh on US farmer profits in 2024
Sinking crop values weigh on US farmer profits in 2024
Houston, 16 May (Argus) — The cycle of above-average profits that has defined the US agricultural economy in recent seasons is fraying this year as crop prices slacken against elevated expenses. The domestic agricultural sector is forecast to endure a 24pc drop in net cash income this season — the sharpest year-over-year decline in the last decade — underpinned by a 6pc slump in crop sales revenue and modest growth in projected expenses, according to the US Department of Agriculture's (USDA) latest industry income statement. This retraction, which kicked off in 2023, forced many growers in key agricultural districts this season to augment non-real estate loans, slow debt repayment and restructure existing loans to meet liquidity requirements thanks in part to sliding global grain and oilseed prices. Lenders within the seventh and 10th Federal Reserve districts, which represent farmers across major growing regions, reported stronger loan demand and tightened working capital during the first quarter — signaling deteriorating farm finances. Working capital is measured as the difference between the value of assets that can be easily converted to cash and debt due within the next 12 months. Lower working capital valuation signals the ability to pay down debt could be challenged. Domestic agricultural working capital this year is estimated 17pc lower from 2023 and 6pc lower than the five-year average, according to USDA data. "Conditions in the US farm economy have tightened alongside lower prices for many key products and higher financing costs," the Federal Reserve Bank of Kansas City reported in its quarterly Ag Credit Survey . "Many lenders highlighted growing concerns about deterioration in working capital as a result of low prices, particularly for crop producers." US row-crop growers are expected to endure another season of price deterioration as global markets adjust to supply shocks stemming from the ongoing war in Ukraine that rattled wheat values and key input prices for corn and soybeans. Domestic corn, soybean and wheat farm cash prices are projected to slump for a second consecutive season by 5pc, 11pc and 15pc, respectively, according to the latest projections from the USDA's World Agricultural Supply and Demand (WASDE) report. Corn growers, specifically, face losses this season amid a 4.6mn-acre cut in planted area from last season in tandem with sinking crop values. Margins are estimated -$65.75/acre, based on the latest new-crop contract close and early-season production volume estimates, after benefiting from peak earnings at $242.33/acre in 2022. Corn is a fertilizer-intensive crop, and changes in farmer profitability can erode input prices. Urea, the most widely traded fertilizer globally, is strongly tied to front-month corn futures and domestic barge prices have sunk to levels last seen in January 2021, tracking lower front-month corn futures since the start of the 2023-24 fertilizer season. Fertilizer expenses account for nearly 40pc of annual operating costs for domestic corn growers on a per-acre basis, with seed costs comprising an average 25pc, according to Argus analysis of USDA data. Plant nutrition expenses, though, surged in 2022 and remained above average in 2023 — reflecting historically elevated fertilizer prices during the same period. The USDA forecasts a 15pc dip in fertilizer costs in 2024 for corn growers, providing some reprieve compared with the last two years despite higher seed and various overhead expenses. "Factors like the rising costs of seeds, fertilizers and other inputs as well as more strict environmental regulations, specifically on water usage, have added to the financial and administrative burden for farmers," said Donnie Taylor, Agricultural Retailers Association senior vice-president of membership and corporate relations. By Connor Hyde Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s Mol orders dual-fuel LPG, ammonia VLGCs
Japan’s Mol orders dual-fuel LPG, ammonia VLGCs
Tokyo, 16 May (Argus) — Japanese shipping firm Mitsui OSK Lines (Mol) has ordered two dual-fuel very large gas carriers (VLGCs) to deliver LPG and ammonia, with commissioning expected in 2026. Mol has reached a deal with TotalEnergies' shipping arm CSSA Chartering and Shipping Services to charter two 88,000m³ VLGCs to deliver LPG and ammonia, although the specific time period is undisclosed. The vessel will be built by South Korean shipbuilder Hyundai Samho Heavy Industries, which has developed an engine that can use LPG and fuel oil. Japan's LPG consumption totalled 11.8mn t in the 2023-24 fiscal year ending 31 March, down by 3.2pc from a year earlier, according to the Japan LP Gas Association. Japan's trade and industry ministry expects the downwards trend will be driven further by technology innovation of high efficiency equipment. But its expects ammonia demand as a fuel to increase to 3mn t/yr by 2030 and to 30mn t/yr by 2050. Japan has set a goal of a 20pc ammonia co-firing at domestic coal-fired power plants by 2030 and above 50pc by 2050 to achieve the country's 2050 decarbonisation goal. By Reina Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s IPL fertiliser sale process 'advanced'
Australia’s IPL fertiliser sale process 'advanced'
Singapore, 16 May (Argus) — Australian chemicals and fertilizer producer Incitec Pivot (IPL) said the sale of its fertilizer business, first proposed last year, is now in "advanced negotiations". The potential sale of Incitec Pivot Fertilizers (IPF) to Indonesian producer Pupuk Kalimantan Timur (PKT) is subject to agreeing and executing final binding transaction documents, although there is no certainty that any deal will be reached or that any sale will occur, IPL said its financial report for its October 2023-March 2024 half year on 16 May. While IPL considering the sale of its fertilizer unit first emerged in July 2023, it was unclear who the interested buyers were. PKT is a subsidiary of state-owned fertilizer group Pupuk Indonesia Holdings and has production capacity of 2.74mn t/yr of ammonia, 3.43mn t/yr of urea and 300,000 t/yr of NPKs. Should the deal eventuate, the Indonesian producer intends to continue supplying fertilizers to Australia, support the retention of IPF's workforce and grow IPF's business in Australia, PKT confirmed to IPL. IPL reported a 77pc year-on-year fall in its first-half earnings before interest and tax (ebit) to A$10mn ($6.7mn). This was mainly attributed to the closure of Gibson Island that was producing ammonia, urea, granular ammonium sulphate and diesel exhaust fluid AdBlue, as well as reduced manufacturing performance at Phosphate Hill in Queensland with a capacity of 1mn t/yr of DAP, MAP and specialty products. But its distribution business was supported by firm demand and a well-managed fertilizer supply chain with its first-half ebit more than doubling from a year earlier to A$27mn, which partially offset a weaker manufacturing performance. By Huijun Yao Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
More Egyptian urea sold at $286/t fob for June loading
More Egyptian urea sold at $286/t fob for June loading
Amsterdam, 14 May (Argus) — Egyptian fertilizer producer Mopco has sold a further 25,000t of granular urea at $286/t fob for loading next month to a European market. The producer is now targeting $290/t fob. The deal follows business which emerged at a similar level today, with Mopco selling a total of 20,000t at $286/t fob to two trading firms, while fellow producer Alexfert sold 5,000t of granular urea at $287/t fob for June loading. Trading firms covering short sales across mainland Europe and Turkey have been driving these latest deals out of Egypt, with purchases taking place earlier in the week in the lower $280s/t fob. By Harry Minihan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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