The intention of the below graphs are not to use to say "my price should be X based on this graph". These prices are derived from an FOB price point average. The intent is to show major global price movement trends. Your values will likely have significant basis difference (similar to your local grain price being different than the traded market price).
This graph is labeled as MT in USD currency.
North American values jump on tight inventories
This was discussed in the outlook piece above, but there have been several reasons that inventories are already tight for North America, and spring has barely begun:
- Started the fertilizer year low on inventories - last spring, we went into application season thinking corn acres would be 92M. That number eventually jumped a couple million and helped to drain the UAN market. We started fertilizer year 2024 (FY 24) very empty. There were a lot of tanks to fill...
- Imports/exports didn't gain us much - for the most part, every ton that was imported ended up being exported. Normally, we could gain inventories from imports outpacing the export flow but not this year...
- Production issues were bigger than we thought - unfortunately, this is part of the process. There were plants that went down due to normal production issues (expected). There were plants that stayed down longer than expected due to complications (unexpected). Some producers reported wider outages due to the arctic blast this winter (really not expected). We were going to be tight on inventories anyways...unfortunately, this only compounded the issues.
The result is that we have barely begun spring application season for UAN...and we are already hearing inventory issues. If it is this tight already, please have conversations with your retailer sooner than later. Hopefully they have product already ready for you but if they do not, they will have more time to start sourcing.
Baltimore bridge collapse impacts UAN the most
Sure didn't have this Black Swan event on my bingo card...
I'm guessing you have heard about the container vessel that lost power and crashed into the bridge in Baltimore. The impact was so severe that the entire bridge collapsed. Unfortunately, some lives were lost. Fortunately, mayday calls and emergency measures were enough to remove most of the traffic before the collapse. The loss of lives was obviously at the front of everyone's minds, but there is a significant economic impact to the collapse that includes fertilizer...specifically UAN.
The timing of this crash could not have come at a worse time. Baltimore is a major import location for UAN that gets pushed into the northeastern corridor of the U.S. The main imports are urea and UAN. Do keep in mind that the below graph information is only January for 2024 (U.S. import data is delayed 60 days...) but it does show that a lot of product needs to flow into and eventually out of Baltimore.
Now, the market must figure out how the government will approach clean up. Hopefully, we will see them recognize the economic impact and do everything possible to streamline and quicken the clean up of the shipping lanes. While I am no expert in bridge salvage operations, hopefully this is something that can be done in several weeks rather than months. If they decide to slow the clean up process (it's the government, you can never say they wouldn't...), this region will have to look for secondary supply routes. This close to spring, that is would be a tough shift.
There is a lot of story left here that needs to be tracked if you are in this region. Have those conversations much sooner than later. Hope is never a strategy, but I hope they get this cleaned up and vessels can start to arrive again.
NOLA/New Orleans, Louisiana
Number 2 global importer in 2022
Number 1 global exporter in 2022
Price Comparisons
Vs 30 days ago - +8% or approximately $20 higher
Vs 90 days ago - +19% or approximately $45 higher
Vs 6 months ago - +8% or approximately $20 higher
Vs 1 year ago - +6% or approximately $15 higher
U.S. Midwest Average
Vs 30 days ago - +5% or approximately $13 higher
Vs 90 days ago - +7% or approximately $21 higher
Vs 6 months ago - +5% or approximately $14 higher
Vs 1 year ago - -5% or approximately $17 lower
Black Sea (Russia)
Number 2 global exporter in 2022
Price comparisons
Vs 30 days ago - +4% or approximately $7 higher
Vs 90 days ago - +2% or approximately $4 higher
Vs 6 months ago - +7% or approximately $13 higher
Vs 1 year ago - +5% or approximately $8 higher
- Tight N.A. inventories – things are already snug in parts of the U.S./N.A. in terms of UAN supplies...and spring has barely begun. Hopefully we will see the market get ahead of demand from a supply POV, but that is VERY hard to do at this point on the calendar. If inventories remain tight, you know what manufacturers/suppliers will do...
- Local areas to Baltimore in regards to bridge collapse – if you are dependent on Baltimore for your UAN inventories, your spring got significantly more difficult. Hopefully the shipping lanes will get cleaned up quickly and allow traffic but until it does, the outlook remains uncertain and bullish.
- Urea prices are falling – while UAN should be a premium priced N, especially with the inventories issues at hand, the market will not want to get too out of sync with urea or risk losing last minute demand. If urea continues to fall, UAN could move with it.
- Corn acre estimates have dropped – last week's acreage report was a surprise, with corn acres falling to 90M (we had been using 92.1M and then 91.5M recently). That is a large chunk of N demand that just dissipated...if it is truly gone. Farmers always have the last say but for now, we have to assume a solid chunk of demand went away.
We believe that only looking at the flat price of either grains or fertilizer can be misleading:
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Only selling grain can hurt you if fertilizer prices rise substantially
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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:
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Spend 100 bushels to pay for 1 ton of UAN
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Spend 60 bushels to pay for 1 ton of UAN
When we compare the current ratio value against recent years, we start to see if we are high or low.
YOUR VALUES MAY LOOK DIFFERENT
This graph looks at the NOLA UAN 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.
- Tight inventories vs corn acreage - spring is already starting tight on UAN inventories which has been supporting price ideas. However, last week's acreage report showing corn acres at only 90M should send a shiver down the spine of long positions. We went into last spring thinking 92M and ultimately finished at 94M. The numbers can change. Farmers have proven that.
- Local inventories vs global trends - we are moving into that part of the calendar where global trends do not matter as much as the local S&D. We need to make sure that we are considering both sides as well as timing.
StoneX Ratio Calculation
The ratio calculation is derived from Bloomberg historical grains values as well as fertilizer values from StoneX, NPKFAS, and Argus.
The calculation is simply dividing the fertilizer price by each grain price.
All data was sourced from StoneX unless otherwise noted.
