US UAN demand looks set to rebound in 2017 but rising output and falling corn plantings will keep prices under pressure.
An oversupplied market in 2017 remains the focus of domestic buyers and suppliers as a result of expanded production from CF Industries and OCI. Attractive soybean prices will likely cause US farmers to reduce corn acreage for the 2017-18 crop, according to the US Department of Agriculture (USDA).
OCI Iowa Fertilizer is scheduled to start UAN and urea production at its Wever, Iowa, facility during the first quarter of 2017, adding an estimated 1.7mn st/yr of UAN production. The Wever plant follows leading producer CF's own expansions that finished in 2016 to push its capacity to 8.3mn st/yr. The new domestic capacity is anticipated to weigh on prices through 2017.
CF began new production at its Donaldsonville, Louisiana, complex in March, which contributed to a 25pc fall in Nola prices to $152.50/st fob between March and December. Prices bottomed out in October at $132.50/st fob.
In 2017, Wever could have a similar effect on the market, depending on when the plant can maintain consistent UAN production and generate marketable volumes.
US UAN demand in 2017 could be limited by an expected decline in corn planted area. The USDA estimates 2017 corn acreage at 90mn acres, down by 4.5mn acres from 2016 as farmers are poised to plant more soybeans. A switch from corn acres to soybean would reduce overall nitrogen fertilizer demand in 2017.
It is unclear whether urea prices can maintain a rally that began in November as well as increased purchasing power for US farmers. Corn farmers' net cash income is expected to rebound in 2016 as a result of declining farm expenditures, such as fertilizers, and record yields, according to the USDA. With stronger purchasing power and fertilizer prices lower year-over-year, substantial farmer demand could emerge during the spring, potentially supporting higher prices.
CF's emergence as a consistent exporter from New Orleans has helped keep US supply balanced and boosted prices. Exports from the New Orleans port have helped maintain US supplies during the fourth quarter, leading to a slight increase in prices as a result of tight inventories between October and mid-December. US exports between January and October jumped by 120pc year-over-year to 943,313t as a result of increased exports from Donaldsonville, according to customs data. At the same time US year-to-date imports decreased from 2015 by 10pc to 2.42mn t. The US was a net exporter in October as imports fell by 22pc year-over-year to 125,051t, compared with the 182,231t shipped from the US.
