The 2020 fall fertilizer application season was one for the record books. Early harvest, ideal weather conditions along with favorable fertilizer prices meant farmers were anxious to cover a lot of ground. These combinations drained the supply chain, and we have been playing catchup ever since.
Additional factors playing into supply constraints included river issues, increased number of plant turnarounds, the Countervailing Duty (CVD) phosphate investigation, and strong global demand from India, Brazil and others. All these factors have unfortunately led to increasing fertilizer prices this spring.
On ammonia, the system was nearly empty in December from a big fall run. Since then, international production has been lower due to gas curtailments in Trinidad, an increased number of plant turnarounds worldwide and a slight rebound of industrial demand. Manufacturers have taken all these factors as good reasons to start increasing pricing for spring prepay season due to reduced short-term supply and increasing corn prices.
With UAN, the major domestic manufacturer has kept a lid on pricing since summer fill to try keep imports to a minimum. On a price-per-pound basis, UAN has won the story for six months, so retailers have taken advantage of that and locked in a lot of their spring supply.
Now that we have turned a corner on the new year, UAN manufacturers had many reasons to start increasing prices to satisfy Wall Street investors, but it was mainly driven by strong ammonia prices. It remains to be seen what top-dress demand remains, so buying new tons at these high levels should be a last-minute strategy for you.
For urea, traders have too much interest in driving this market to suit their short-term needs. India and Brazil drive the biggest demand worldwide, but the U.S. market still needs 4 million tons of imports per year, heavily weighted toward spring. Supply will be plentiful when we need it for the May/June top-dress season, so probably best to be patient.
On the domestic nitrogen front, no one predicted the historic cold weather that slammed North America in February, which parlayed into plant outages as companies sold off their gas hedges for huge profits. This has helped tighten the nitrogen supply unexpectedly before spring, which gave another reason for the manufacturers to increase pricing once again.
The CVD filing on phosphate imports had a negative effect on phosphate pricing, as Moroccan and Russian manufacturers shied away from the U.S. market while the case was before the Department of Commerce. Once the CVD was filed, supply tightened rapidly prior to fall season as new supply lines had to emerge globally, but MAP supply continues to be a challenge today. If there was one bright side to the phosphate market, TSP has offered good value relative to DAP/MAP this year to those who could handle it in their system.
Potash was inexpensive and farmers applied a lot of it this fall. Prepay season was incredibly big and manufacturers were quick to fill up their spring order books and increase prices throughout the process. There now seems to be a divergence between inland warehouse values as compared to imported river prices. Time will tell if domestic suppliers are committed to hold that story after spring season, as imported tons keep arriving.
Ammonium sulphate (AMS) and ammonium thiosulfate (ATS) producers are reporting tighter raw sulfur supplies due to less refined fuels usage and refinery shutdowns due to the cold February weather. Sulfur demand has been increasing exponentially on corn, beans and wheat as growers chase improved yields, so plan early to ensure you get what you need.
In closing, we can never predict how spring will unfold, but we do know a lot of fertilizer has been purchased to move throughout the system for the spring planting season. If current predictions for spring planting intentions come to fruition, then we should see a very strong spring ahead.