Farmer Fertilizer Focus - Urea

By: Josh Linville, Vice President- Fertilizer

Fri, 02 Jul 2021, 17:48

Urea

Josh Linville

Director - Fertilizer

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

At least for the next few months, it appears that urea values are going to continue to climb. I wish I could tell you differently but I refuse to blatantly lie!!!!

While there are paths forward which lead to lowering prices, they are far and few between and take several things coming together to make it happen. There are a lot more roads that seem to lead to higher prices.

Ultimately, for the world, supplies are low and demand is high. Nitrogen production plant repairs, delayed by Covid, must be done now or the plant will force them to be repaired. Trust me when I say no producer around the globe wants to go down right now. Not at these price levels. This are some of the best margins seen in years.

From a North American POV, current prices are ridiculously low. If global urea appears firm and NOLA is a huge discount to replacement, what does that mean? Plenty of price upside with limited downside risk.

What has happened in the last 30 days?

Domestic (North American) supply availability is tight and could keep getting tighter

Following a relatively good spring season, inventories appear to be on the low side at both the producer and downstream levels. The loss of approximately 500,000 tons of N.A. production in February and early March as a result of the artic blast/spike natural gas prices also contributed to the tight supply situation.

A lack of imports is also expected to continue to contribute to the tight supply availability. While U.S. capacity expanded dramatically a few years ago, the U.S. is still a major urea importer with total imports this year current running at $70+ discount to offshore delivered values, spot cargoes have pretty much dried up with only contract tons currently arriving at the Gulf. This is not likely to turnaround any time soon unless the spread narrows significantly and U.S. buyers step back into the market.

Urea remains tight around the world

as has been the situation for a while now, global urea inventories are extremely low vs "normal". Higher than typical demand from regions such as China and Brazil have helped to dwindle supplies. The lack of Chinese export participation (worlds largest producer) has caused supplies to be lower than normal. Either of those 2 factors would normally be enough to support urea values but put them together and throw in that we will be losing production due to production plants going down to make repairs (backlogs have been building due to Covid delays) and you end up with a market that seems to go higher by thee day.

India tender came and went

India is a very important piece of the glob al demand structure. This is not due only to the size of their demand (it is big). It is more due to the fact that the way they purchase is very transparent and is a great gauge of how the world is sitting. World urea participants do everything they can to sway the market during slow periods but when India steps up to buy, the time for talk is over. Their purchase tender shows the world how many tons are available, what prices are traders/producers actually willing to sell, etc. Since the last newsletter, India announced a purchase tender and it was bullish. They needed over 1M tons, they were only able to secure less than 800KI and prices jumped big once again. It is very likely that they will call for another tender by late July/early August which, without Chinese participation, is likely to continue the bullish trend.

Chinese rumors of export tax

It is always important to remember that China is the worlds largest producer of urea. When they are exporting heavily, inventories are high and prices see downwards pressure. When they slow/stop exporting (like they are now), the world starts to feel really tight on supplies. Many have hoped that ever increasing urea prices would cause exports to rise but the opposite has been true. There is more and more speculation that the Chinese government will impose an export tax on urea to keep more tons home for Chinese farmers. If this happens, the world is going to struggle to see prices softer....

Where are current values in relation to the past

For Urea, we use NOLA/New Orleans Louisiana as our base point as it is the easiest spot to track.

Vs 30 days ago - +5% or approximately $20 higher
Vs 90 days ago - +13% or approximately $50 higher
Vs 6 months ago - +72% or approximately $180 higher
Vs 1 year ago - +120% or approximately $237 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

India announces a new purchase tender sooner than expected – the current market expects a bit of a lull between now and late July. If India announces a tender sooner than that, it likely means their demand is higher than anticipated and traders/producers will see it as a reason to push prices higher.
Export tax announced in China – this is a distinct possibility. As the worlds largest producer, if they take steps such as an export tax to reduec the number of tons leaving the country, it leaves the rest of the world tightly supplied and producers/traders will see it as a sign that values can move even higher.
NOLA decides that $75 - $100 discount vs the world is a bit too cheap – if the price gap between NOLA and the rest of the world gets too wide, NOLA will become a competitor for world demand. While it would be tough to see NOLA product flow to a place like India, there is no reason we couldn't see it compete in Latin America/South America.

Bearish Factors

Operating rates in China pick up significantly – I continue to see this as the single largest fear point for urea today. Right now, the world remains tight from a supply standpoint. If China rapidly ramps up production, the global S&D could start to shift to balanced/slightly oversupplied and values would start to see prices depreciate.
Grain prices deteriorate – current grain/urea values are already on the higher side of recent years. If we see grain prices fall further, that ratio value gets even worse and could cause demand to clamp down. Slower demand could cause inventories to grow which would weigh on prices.
We are overestimating production losses due to plant repairs/turn arounds – a big part of the global market remaining tight on supplies is production plants being down for extended amounts of time. If these estimates are overdone, supplies will have been underestimated and excess supply never helps prices go up.

ARE WE BETTER OR WORSE OFF today THAN WHERE WE WERE?

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 85 bushels to pay for 1 ton of Urea
Spend 45 bushels to pay for 1 ton of Urea

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

Pay more attention to the horizontal dotted line as it compares the current urea price against new crop values.

Very quickly, we start to see if we are high/level/low vs previous years.

YOUR VALUES WILL LOOK DIFFERENT

This graph looks at the NOLA UREA price vs the new crop 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

Right now, especially in North America, urea prices are cheap vs where they look to go in the coming months. It is hard to pull the trigger on purchasing this far ahead of application season. I fully get that. However, it could pay to step in earlier than normal this year.
If you buy your urea, PLEASE consider selling your grain at the same time. I've said repeatedly that I think urea prices will go up. However, one of the bear factors is that grain drops. While current grain/urea ratios are high, it could be significantly worse if you buy your fertilizer, wait on selling your grain and that prices tanks. That ratio will go from high to crazy high in a very short amount of time.
If you haven't been tracking fertilizer price movements since this winter or last spring, take it easy on your supplier when discussing prices. Those values are going to be tremendously higher. We were in an extremely low priced environment last year that wasn't sustainable. Your supplier is probably no more thrilled with offering you current pricing as you are hearing it!
As much bullishness as you have read above, please remember how quickly it can all change. Go back to August '20. If someone had told you that urea would be double and corn Dec '22 would be $5+, you would have laughed. Just as quickly as it went up, it can go back down. If I knew what was going to happen with certainty, I wouldn't drive a Ford Focus to work and back!!!

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 bi-lateral 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 record of accomplishment 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.