12/12/2024 Morning Fertilizer Market Update
International
- Global urea markets continue to heat up as distributors work on their India offers
- Egyptian producers have now sold $380 January ship, destined for Europe
- A Middle East producer is understood to have sold upper $350’s, destined for Australia
- January Middle East urea paper has traded at $364 this morning (vs $359 settlement yesterday)
- January Egypt urea paper has traded at $383 this morning (vs $382.50 settlement yesterday)
- Now, none of these values are screaming higher (as in double digits or more)
- However, the trend has been moving higher
- I am still sticking to the tight supply situation due to EU and China supply problems
- Still nothing indicating that Chinese exports are resuming…though I know that can always change
- EU gas values are still high and the political climate has not changed
- Just hard for me to see the short fall in available inventory from both locations and think that this rally wasn’t coming
North America
- This morning has already seen physical price ranges moving a bit higher with global values
- December has been $326//$330
- January is still wide at $325//$334
- February is sitting at $330/$338
- March is bid at $335 but no sellers arriving at this time
- Those price ranges, vs where global price ideas today, are still “cheap”
- With vessel freight rates where they are, one can assume that the FOB Middle East price is effectively the same fob loaded NOLA urea price
- With January Middle East paper at $364, that is around $364 loaded NOLA
- Even if we think March is near last done ($340 on Tuesday traded), that is still a $25 discount
- That is not going to call on spot tonnages needed to reach our import forecast
- NOLA still has more work to do in relation to the globe
- Now, let’s back this up and keep one thing in mind, and that is our import urea needs for FY 2025
- Some folks are going to look at our imports, compare it the average, and say we are behind
- That is an absolute true statement, but it misses a point
- Thru October, we have imported 857K vs the 3-year average of 1.1M
- Not a huge differential…but it is behind
- However, the 3-year cumulative total import average is 5.7M
- WE ARE NOT FORECASTING NEEDING 5.7M TONS OF IMPORTS
- Our forecast continues to sit in the 5.1 – 5.2M ton range for the fertilizer year
- That assumes 92M acres of corn and all other crops falling in behind
- That assumes a little carryover from last year
- It assumes some production hiccups, though we are considering whether production was impacted more than we expected
- All that is to say that we are where we need to be today (October)…but we have A LOT of work to do
- That is where that Middle East / NOLA comparison comes into play
- Every month will see imports regardless the price differential
- Every month has contractual tonnages that come to the U.S. regardless of price
- However, there are “spot” tonnages that are needed to reach our needs
- That is where you see NOLA move to even money or a premium vs the world to get those tons purchased
- Some years see those flows come even with NOLA a discount because inventories are long and they need to go somewhere
- However, with the China/EU situation, it just doesn’t “feel” like that will be the case this year
- This year feels like we will need to “buy” the tons…and why would a manufacturer sell a tight market at a discount?
- Now, all of this can change as it always can
- Chinese exports can resume with a decision by the government
- Grain prices could fall hard and change the acreage outlook
- There are always risks in the marketplace but based on what I see today, it is hard to see a lot of downside potential out there
- This is the POV that we have been riding for a while now
- Now…watch the market prove me an idiot!!!!!!
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