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.
| NOLA UAN | |
| November | $258 |
| December | $258 |
| January | $260 |
| February | $260 |
| March | $260 |
Palestine attack on Israel indirectly affects UAN
As mentioned in the urea section, I with this was a topic that wasn't a topic right now as that would mean it didn't happen in the first place. Regardless your politics (I'll keep mine to myself), it is hard to ignore the loss of thousands of lives and countless more that have been affected.
When I discuss this event, I am not ignoring the pain of people on both sides. This is a fertilizer newsletter so I will try to keep looking at it from a fertilizer perspective.
Directly, there was nothing that changed the global UAN marketplace. Neither country do much with it.
However, almost immediately after the attack by Palestine, global energy markets were on edge and quickly built in war premiums out of fear it would spread. This included the European natural gas market, Dutch TTF. We had been watching winter month values fall as lower demand and higher inventory levels weighed on price ideas. Just before the attacks, values were seen in the $13MMbtu range and hopes were rising that further European nitrogen production facility restart announcements would be heard. With roughly a third of global production of UAN coming from that region, it was going to be a game changer.
Unfortunately, values quickly rose and then steadied in the $16 - $18MMbtu range. Not high enough that we became fearful of production turning off, but certainly high enough to dash hopes of any further announcements of restarts.
Today, the world has a close eye on what is happening. An escalation/expansion of the war would seem to rally natural gas prices further and possibly start taking UAN values with it. As is always the case, things halfway around the world can and probably will impact you at home. Keep your eyes open.
North American inventories remain tight
It seems the further north you are in North America, the more up to date on this subject you are as they have born the brunt of the situation.
Coming out of last spring, UAN inventories ended up lower than we expected. UAN was a huge premium to urea and we fully expected demand to flow to urea which would mean high inventory leftovers for UAN. That happened, to an extent. Urea did end up seeing inventories wiped out. However, a poor spring NH3 run and bigger corn acreage than anticipated meant that farmers were forced to use up a lot of UAN that was out there. We started this fertilizer year (July 1) lower on inventories than forecasted originally.
Then, production issues started to mount. Without going into all the details of each situation, produced tons went down. We expected some of them. Nitrogen plants across North America have been seeing huge profit margins which meant running plants as hard as possible. The result is that repairs have to be made...or the plant will break and create a longer downtime period. However, not only have some expected facility downtime gone longer, other facilities have unexpectedly gone down. It is hard to gauge the exact number of lost produced tons as companies largely do not share that information, but some have speculated it could be 500 - 1M tons.
Lastly, the import/export flows have not helped. July/August cumulative imports were reported by the U.S. at around 475KMT. That was a big boost vs last year and the 3-year average. However, exports were also strong at 370KMT. The "gain" is only around 100KMT...and it needed to be bigger for some nearby demand.
I believe we will see production issues solved sooner than later. With the margins at stake, companies will be sparing no expense to get them going again. I also believe that fortunately imports will continue to flow but unfortunately exports will as well.
This does not even take into account the river flow issues that is hampering shipping lanes.
There is still a lot of time between now and spring application season so no need to fret. Merely need to keep this in the back of our minds as we move forward.
NOLA/New Orleans, Louisiana
Number 2 global importer in 2022
Number 1 global exporter in 2022
Price Comparisons
Vs 30 days ago - -2% or approximately $5 lower
Vs 90 days ago - +13% or approximately $30 higher
Vs 6 months ago - -4% or approximately $10 lower
Vs 1 year ago - -53% or approximately $290 lower
U.S. Midwest Average
Vs 30 days ago - unchanged from last month
Vs 90 days ago - +9% or approximately $24 higher
Vs 6 months ago - -7% or approximately $22 lower
Vs 1 year ago - -50% or approximately $291 lower
Black Sea (Russia)
Number 2 global exporter in 2022
Price comparisons
Vs 30 days ago - +2% or approximately $3 higher
Vs 90 days ago - +10% or approximately $16 higher
Vs 6 months ago - +7% or approximately $12 higher
Vs 1 year ago - -68% or approximately $372 lower
- European production remains lower than normal – approximately 1 out of every 3 tons of UAN produced in the world comes from the European region. While current production rates of 75 - 80% of normal is not a big dip, for UAN it results in a lot of missing tonnage. As long as European production is suffering, global supplies will remain tighter than normal.
- Israel/Palestine keeping global energy markets on edge/higher – the current war means the world is fearful of fighting expanding beyond those borders. As long as that fear remains in place, premiums in the energy markets remain in place. As long as energy/natural gas values remain elevated, it raises the cost of production for the global swing producer region (Europe). As their costs go up, so to does the global price point.
- North American production issues have grown – this has been a story that has ran under the radar. Going into summer, we expected production downtime as repairs have to be made. That in itself is not a shock. However, there have been longer repair periods and other plants have struggled with production. We do not know the number of UAN produced tons lost, but the number feels much bigger than originally expected. If correct, the S&D gets even tighter and manufacturers keep control of the price conversation...and they really like higher prices.
- High interest rates/river issues/struggling grain prices could hold demand at bay – it has been a while since the fertilizer market has had to factor in interest costs. However, every buyer in the supply chain must consider it. $2 - $3/month does not seem big until you consider that there is still 5 - 6 months before UAN application begins. That becomes a very real cost and could keep buyers on the sidelines for a while.
- Warm European winter could collapse natural gas values – today, the Dutch TTF is focused on the Israel/Palestine conflict. However, if we see another repeat of last winter where temps remained elevated and caused natural gas demand to crater, we could see more downward price pressure which would help raise production rates of UAN.
- Urea values start to fall – with the conclusion of the India urea purchase tender, I am wondering who (if anyone) will be stepping up to buy in the coming weeks. If it gets quiet, we could see urea prices start to fall as carry costs build as well as warehouse inventories. If urea starts to fall, we could see UAN follow. May not be a huge fall, but bearish none the less.
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 WILL 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.
- Continued lack of destination options for Russian produced UAN - the U.S. remains one of the last remaining large UAN demand destinations available to Russia. That means they have to remain low priced to remain competitive. However, if we see changes to Canadian/Australian/European approaches to Russian produced UAN (i.e. reducing or deleting duties), the global market will change immediately after.
- Israel/Palestine's conflict inflicting pain on Dutch TTF - if the war escalates and starts to see outside nations start taking part, expect to see global energy values rise significantly as a result. This will be just as true for Europe/Dutch TTF. If the price rises enough, it could result in European UAN production being reduced which will further tighten global supplies. While it is an indirect situation, the results would the same.
All data was sourced from StoneX unless otherwise noted.
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