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Price fertilizer now, analyst says

01/09/2013 @ 1:50pm

U.S. farmers wondering whether to price their fertilizer now or later in the spring might find the lowest prices over the next few weeks, says fertilizer analyst David Asbridge.

With the exception of ammonia, Midwest wholesale prices for nitrogen, phosphate, and potash are solidly lower than a year ago, but Asbridge thinks fertilizer producers may use the spring application season to see if some nominal price increases might stick.

He says such a price push could start as early as mid-February. "I don't foresee a big spike in prices, but the producers might try to add $20 to $25 to a ton of potash," says Asbridge, president of NPK Fertilizer Advisory Services.

Wholesale potash prices in the Midwest are currently around $470 per short ton, down from about $560 a year ago, says Asbridge, who tracks them in his weekly newsletter. Last summer, prices dipped to about $490, but drifted up to around $505 during the fall application period. He thinks another uptick could come during the spring application season.

Another price example, phosphate (as DAP), rose to about $570 per ton last autumn, up from $510 last spring. It's currently around $540, says Asbridge.

Among nitrogen sources, liquid UAN fertilizer is currently around $350 per short ton (Midwest wholesale), down from $450 last spring, but it could move up to about $370 this spring, says Asbridge, who is based in St. Louis.

Dry urea nitrogen, around $440 a ton, is down sharply from about $750 last spring, but he sees $480 as possible this spring.

Meanwhile, the liquid ammonia market is slightly different because current prices are seeing support from supply tightness. But ammonia plants are running "flat out," says Asbridge, to rebuild inventories ahead of the spring. So he's not looking for prices to move much higher from here. Liquid ammonia is currently priced around $755 per short ton, up from $700 last spring, but still down from about $800 last fall.

That's the supply side. On the demand side for fertilizer, Asbridge thinks that this month's early farmer bookings for spring might be leaning toward the light side for tax reasons. With strong prices for 2012 crops, Asbridge thinks many farmers paid for their 2013 fertilizer before December 31, in order to book an expense against 2012 income. That would leave a dip in demand this month, only to pick up closer to spring application.

This year, the big fertilizer story seems to be potash, which is seeing a four-year slide in prices after a corresponding rise in production. The fertilizer industry expanded potash capacity after the 2008 record price and is now seeing a drop-off in demand, particularly from Asia.

In India, a big user of potash, the government has slashed fertilizer subsidies over the past several years, so farmers there are paying more and using less. In talks with Canada's potash cartel Canpotex, India is close to negotiating a 2013 import price that will help set a benchmark for world wholesale potash prices this coming year.

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