Farmer Fertilizer Focus - Ammonia

By: Josh Linville, Vice President- Fertilizer

Sat, 29 Jan 2022, 21:53

Add us as preferred source on Google

NH3/Anhydrous Ammonia

Josh Linville

Director - Fertilizer

josh.linville@stonex.com

What everyone wants to know first, what do we think will happen going forward

I would not expect much to change over the next 30 days. After that, it all depends on weather.

As I discuss below, there is a stalemate between NH3 demand and supply with neither side showing much need to budge. Buyers are dragging their feet in hopes of prices falling and out of fear of carrying these values into the summer. Producers are dragging their feet as they see much more limited supply than normal and a lack of ability to refill everything before application begins.

That means things "should" stay quiet for the next 30 days. We do need to watch for things like production hiccups (i.e. last years artic blast) because we cannot afford to lose any production thru spring. We also need to watch the grain markets because if they fall sizably, there are a lot of acres straddling the profit/loss line that would quickly go to the loss column and ultimately away from N demand. Remember 2021. Anything can happen.

What has happened in the last 30 days?

NH3 price is begging farmers to switch to urea

If you have heard me speak/present, you have probably heard me say "every price is trying to tell you a story if you know how to interpret it". For those that are new to this newsletter, the below graphs look at the NOLA (New Orleans, Louisiana) urea price vs the western and eastern cornbelt NH3 price with both broken down to a price per pound of actual N (what you actually care about). It then looks at the difference. When the price is toward the top, NH3 is a discount vs urea. When it is below, NH3 is a premium vs urea.

When looking at the green lines around September/October, a story emerged. The market was telling us that NH3 needed demand because it was so cheap in comparison. We started to say that you should really consider locking up NH3 before it rallies. It was around this time that I told my dad that once they started applying, he better not let the tractor seat go cold. He needed to get everything applied as quickly as possible so an early winter did not kick him out of the fields.

Today, the red line is well below average. What that is telling us is that NH3 doesn't want your demand. It is telling you that if possible, it would rather you switch your demand to urea. This is due to the massive fall run emptying inventories and the systems inability to get refilled by spring.

This does not take into account the benefits/costs of using urea over NH3. In fact, this does not take into account a lot of different factors. This is just one thing out of a thousand that you need to consider.

Otherwise, NH3 is a stalemate

The NH3 market has done nothing in the last 30 days due to the stalemate between demand and supply.

On the demand side, the market is unwilling to step forward with prices where they are. Better to wait until the last minute in hopes that prices fall. Even better to wait until the last minute to make sure you need the product and do not get stuck with today's values thru to fall.

On the supply side, producers are well aware of how tightly supplied the market will be to start spring. They see their storage numbers...or lack of. They know their replacement system better than we ever could (I've seen it and they are not lying). Their approach is that if they wait long enough, demand will be forced to move first.

There really isn't much reason for either side to move from their position in the next month. Do not be surprised if this section is really short for March.

Where are current values in relation to the past

For NH3, we use Midwest Wholesale Average as our base point as it is the easiest spot to track.

Vs 30 days ago - unchanged
Vs 90 days ago - +23% or approximately $256 higher
Vs 6 months ago - +110% or approximately $712 higher
Vs 1 year ago - +215% or approximately $926 higher

Bull/Bear Factors

Because no market is ever guaranteed to go higher/lower, we try to consider the factors that can sway values so that we are able to act when they occur rather than react.

Bullish Factors

Big fall run means struggle to refill – we will be starting the spring season in North America with much fewer tons in storage than normal after a HUGE fall run. Put yourself in the shoes of a producer. They know their system will not be full by spring. They know typical demand to expect with the market calling for 91 - 93M acres of corn. They know that demand is bigger than supply. That spells steady to higher prices when demand hits.
International/industrial demand remains high – what many do not know is that there is a big market for industrial demand around the world and right now, that demand continues to run into tight supplies. If farmers push back and say no thank you this spring, they can take those tons and go to the industrial sector. Today, producers have options.
Any winter production issues – supplies are already tight which means really high prices hold. Imagine what would happen if we repeat February 2021with another artic blast. We cannot afford to lose ANY production between now and spring. The inventories are just too tight. If there is any major hiccup, that could rally prices further across N products.

Bearish Factors

Urea and UAN markets crashing – for a while, urea was falling and the market was watching NH3 very closely for any signs of prices dropping. The thing that helped NH3 is that UAN stayed high priced as well. Basically, UAN and NH3 kept each other company while urea did its thing. That said, if something were to happen where both urea and UAN start falling significantly, NH3 would struggle to keep prices where they are.
Spring stays wet/cold until planting begins – every single factor for the NH3 market could be pointing higher but if farmers are not able to get into the fields with toolbars, none of it matters. If we end up with a really poor spring application weather window, producers will be begging people to buy their product. It can change that fast.
Fear of summer resets - fertilizer is a weird market. Most markets are driven by fundamentals but fertilizer is one that sometimes emotion dictates the price. If producers start to become more fearful of not selling everything before summer price resets, we could see them become aggressive early. When others see that, they could do the same. In this market, sometimes the smallest spark can start a forest fire.

Where are the current nh3/grain ratio values today?

We believe that only looking at the flat price of either grains or fertilizer can be misleading:

Only selling grain can hurt you if fertilizer prices rise substantially
Only buying fertilizer can hurt you if grain prices fall

We look at the ratio "value" to get a better indication of where we are or how many bushels of X does it take to pay for 1 ton of fertilizer.

Would you rather:

Spend 100 bushels to pay for 1 ton of NH3
Spend 200 bushels to pay for 1 ton of NH3

When we compare the current ratio value against recent years, we start to see if we are high or low.

YOUR VALUES WILL LOOK DIFFERENT

This graph looks at the Midwest Wholesale Average price vs the flat grain price. There are no logistics on either product. Your location will look different due to fertilizer logistical costs, grain basis, etc.

Josh Linville’s Thoughts

Know that weather is the first, second and third most important factor in the failure/success of NH3 agriculture demand. Every single thing I have written in my time in the fertilizer sector discussing NH3 ended with the same statement..."weather permitting". If I offered you free NH3 to apply in your fields and it stayed cold/wet thru all of spring, it would do you no good. This can make a bullish market bearish and a bearish market questioning its existence.
I mentioned this last month but it needs to be repeated in case it helps even one person. Know what you did or did not get done last fall. Please do not make the mistake of over purchasing for the spring. Did you get more done in the fall? Does that mean you need less than normal in the spring? I realize I do not need to bring this up but I do in case it helps that one person. Prices are high around the world. Eventually they will correct and correct hard.
Barring a horrible weather cycle thru February, March, April, preplant NH3 prices look to hold. If you need tons for preplant, you should be talking to your supplier even if you are unwilling to purchase today's values. Give them a chance to put their name in the hat for tons when season starts. If the spring starts earlier than normal and it starts hard across North America, we will drain storage quickly and be dependent on long haul trucks, daily flows thru the eastern pipeline, railcars, etc.
Make rational decisions. I get that a lot of the Midwest is still looking at NH3 values in the $1,400 - $1,500 and higher. Those are sickening values and I cannot even fathom writing a check of that size. All that said, try to make the best unemotional decision that you can. At the end of the day, it is a numbers game. If the price supports the crop, then roll with it.

Fertilizers

This material should be construed as the solicitation of an account, order, and/or services and represents the opinions and viewpoints of the individual authors or presenters. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers.

The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.

References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.

StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. StoneX Financial (Canada) Inc. (SFCI) is registered in Canada and is a member of CIRO and CIPF. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.

R.J. O’Brien & Associates, LLC (RJO) is registered with the CFTC as a Futures Commission Merchant and is a member of NFA.

StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorized and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorized to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorized and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorized by the FCA.

This communication is issued in the European Economic Area by StoneX Financial Europe GmbH (SFEG). StoneX is the trade name used by STONEX GROUP INC. and all its associated entities and subsidiaries. StoneX Financial Europe GmbH (“SFEG”) is a securities trading firm registered in Germany under Company No. HRB 80844.

StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licence holder (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for domestic and cross-border money transfer services).

SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.

StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism.

StoneX Financial (HK) Limited (CE No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.

StoneX Financial Pty Ltd (ACN 141 774 727) holds an Australian Financial Service License (AFSL: 345646) for Dealing in Securities, Exchange-Traded Derivatives Contracts, OTC Derivatives Contracts and Foreign Exchange Contracts, and is regulated by the Australian Securities and Investments Commission.

StoneX Securities Co., Ltd. (“SSJ”) (Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Satellite view of Earth at night showing illuminated cities across Asia and the Middle East

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.

Explore subscriptions

Fertilizer's Spring Reckoning Now Runs Through the Strait of Hormuz

A cluster of positives has finally tilted the fertilizer market toward buyers, from China's return to normal urea exports to fresh Moroccan phosphate cargoes bound for the U.S. Yet the whole picture still hinges on one waterway, and a prolonged standoff around the Strait of Hormuz could unwind those gains before spring.

Editorial TeamTue, 04 Aug 2026, 18:36

Fertilizers

Fertilizer’s Hidden Chokepoints Stretch from Hormuz to the Nord Stream

Fertilizer supply now depends on a handful of contested shipping lanes and pipelines stretching from the Middle East to Northern Europe. Here is how the Strait of Hormuz, the Red Sea, Russia’s shadow fleet and the Nord Stream pipeline are reshaping where nitrogen, phosphate and potash actually move.

Editorial TeamThu, 30 Jul 2026, 05:47

Fertilizers

The PM Commstock Report

Afternoon Market Review Includes - The cattle industry enters a critical year, with markets facing seasonal pressures, climate impacts, and the echoes of historical trends.

Commstock InvestmentsFri, 24 Jul 2026, 19:38

Grains & Oilseeds
Energy
Renewable Fuels
Cocoa
Coffee
Cotton
Fertilizers
Meats & Livestock
Currencies

StoneX: We open markets

Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.

Reach

With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bilateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.

Transparency

As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve, our financials and track record are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.

Expertise

From our proprietary Market Intelligence platform to “boots-on-the-ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.