June '24 Farmer Fertilizer Focus - UAN

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.​

​​​​

Rising European Dutch TTF (natural gas) values dash hopes of nitrogen plant restarts

As of today, European nitrogen production remains cut by 25 - 35% of normal due to Dutch TTF/European natural gas values remaining high priced.

For backstory, Europe has historically been reliant on Russia for their natural gas supplies.  However, in recent years, that supply was shut off.  At first, it was the fight regarding Nordstream 2 pipeline that ultimately ended with a brazen attack in deeper ocean waters where repairs are very difficult.  Any hope that negotiations would succeed were dashed.  Hard to pump gas thru a pipe that has been destroyed...

Then, Europe learned just how reliant they were on Russia.  Values quickly skyrocketed.  Where historic norms were in the single digits, August 2022 saw futures rise to just over $103MMbtu.  Needless to say, the majority of European based nitrogen turned off.  It was simply too expensive to produce.  Every ton made would be at a loss.

Fortunately, as open markets tend to do, a new normal was found.  Other global natural gas supplies started to find their way to Europe and values started to fall.  Eventually, that production rates climbed from the low of 25 - 35% of normal to the new plateau of 75%.  Still short of normal but a huge gain.

Then, Dutch TTF values continued to fall and there was a rising hope that the remaining 25% would turn on again.  That has not been the case.

It has been some time since we have heard of an offline production plant restarting.  We can no longer use "plants are waiting for warmer temperatures" or "companies are waiting for demand to return".  Both of those arguments have been put to the past with no change.

Now, we are seeing Dutch TTF values start to rise again.  Certainly not to the previous high's, but they have breached double digits again and continue to trade around $10 - $11MMbtu, and it appears with little hope of going lower again.

To say that these plants will never come back is short sighted.  A lot of money went into the building of the facilities as well as the maintenance.  They hold a lot of jobs and support local ag industries so any decision to scrap the facilities would be met with a lot of local angst.  

Now, what does this mean for global/domestic UAN markets?  Europe represents nearly a third of all the UAN produced in the world.  So losing a quarter of that is a big hit.  In the absence of European production, we have seen N.A. manufacturers exporting UAN to Europe at a much higher rate that normal as it has provided a much better netback price than N.A. markets have.  Assuming that Russia remains cut from sending UAN to Europe, this will continue until that offline production restarts.  That means N.A. manufacturers have an "outlet valve" for any excess inventories they might produce which also gives a reason to keep price elevated.  This seems to be a story that doesn't want to die.

N.A. Midwest values see pressure as planting delays on wet conditions

The biggest story this spring has been the delayed planting.  Reports from all over have been that farmers are struggling to get planters in the fields with moisture coming thru every few days.  A delay in planting means a delay in sidedress N application.  That delay has caused Midwest values to start to creep lower.

Honestly, the story turnaround has been fascinating.

If we rewind back to late March, UAN inventories were almost non-existent.  I talked to a lot of folks who told me they couldn't purchase March ship, were struggling to find April ship and were mostly being told it wouldn't be until May that adequate product was available.  As a result, UAN values held firm as it watched urea prices tumble.

Then the rains started and the delays kicked in.

Suddenly, things started to loosen up for UAN.  There is a rational reason behind it.  A later planting meant a later sidedress demand run which gave the market the one thing it needed most:  time.

Time to produce more product.

Time to bring in more imports.

Time to move that product into place.

Time, in this instance, worked for the buyer. 

In the last month, values have dropped decently.  We will see the crop planted and as a result, sidedress demand will pop up and likely support the market short term.  But for now, we need to be somewhat thankful for the delay as it helped us to avoid a really tough period.

Should N.A. be worried about losing Russian imports?

One of the things that has really helped keep the N.A. UAN market in control has been Russian import.  While the Canadian government has blocked Russian imports, the U.S. never took that final step.  As a result, Russia has shipped a lot of product to the U.S. marketplace which has been a huge help given that U.S. manufacturers have been shipping nearly the same amount of tons to Europe.

You heard me right.  For almost every ton imported to the U.S., nearly the same number of tons are being exported.

Fertilizer Year 2024 Cumulative UAN Imports - 1.7M

Fertilizer Year 2024 Cumulative UAN Exports - 1.4M

So it makes sense that we should be very cautious and watchful for any attempt to block those imports.

...well, we may have heard the first salvo be fired.  During earnings calls, one company made a rather interesting statement in regards to buying Russian UAN is akin to supporting their war on Ukraine.  The reason this caught my attention so badly is that I think this is another attempt to block those tonnages.  

Following the approval of phosphate counter vailing duty rates against Morocco and Russia, an attempt was made to do the same on Russian UAN.  That attempt ultimately failed...but I do not think they ever let it go.  

Making a comment such as that, from my perspective, is their way of taking another attempt to stop the flow.  No doubt trying another counter vailing duty case is not likely.  They take a lot of time, effort, PR, etc. for the company calling for it.  Adding to that the fact that the case was already voted against.  So rather than run that same road, it would be better/easier to take the political route.  Try to connect Russian UAN to Russia's invasion and get D.C. to get involved.  That way, it is a political judgement and not a manufacturing company trying to block competition.

So far, we have not heard anything further but this will be high on our radar's.

NOLA/New Orleans, Louisiana 

Number 2 global importer in 2022

Number 1 global exporter in 2022

Price Comparisons

Vs 30 days ago - -15% or approximately $40 lower

Vs 90 days ago - -4% or approximately $10 lower

Vs 6 months ago - -10% or approximately $25 lower

Vs 1 year ago - -10% or approximately $25 lower

U.S. Midwest Average

Vs 30 days ago - -13% or approximately $42 lower

Vs 90 days ago - -6% or approximately $17 lower

Vs 6 months ago - -8% or approximately $23 lower

Vs 1 year ago - -11% or approximately $32 lower

Black Sea (Russia)

Number 2 global exporter in 2022

Price comparisons

Vs 30 days ago - +8% or approximately $13 higher

Vs 90 days ago - +3% or approximately $5 higher

Vs 6 months ago - -12% or approximately $24 lower

Vs 1 year ago - +10% or approximately $15 higher

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.