Expert says oversupply on the way, prices will fall
By MATEUSZ PERKOWSKI
Prices for urea skyrocketed in early spring, driving up the cost of other nitrogen fertilizers, but the market has peaked and is expected to head downward, experts say.
"What you're looking at is a real oversupply coming," said Glen Buckley, chief economist for the NPK Fertilizer Advisory Service. "We could see a major collapse in all the nitrogen markets."
Urea prices rose as high as $730 per short ton in early April from about $400 per short ton in January along the Gulf of Mexico, a major wholesale trading region, according to the Profercy fertilizer market analysis firm.
Urea has dropped to $690 per short ton and is available for $610 per short ton for delivery in mid-May, said Clive Yearsley, Profercy's chairman.
High urea prices boosted demand for urea ammonium nitrate, or UAN, driving up the cost of that nitrogen fertilizer as well, said Buckley.
The price per short ton of UAN went from about $290 in January to $400 in mid-April, according to Profercy.
Anhydrous ammonia has seen a similar effect, with wholesale prices per short ton going from the mid-$600s earlier in the year to about $870 now, said Loran Thom, Northwest crop nutrients regional manager for the CHS farm cooperative.
As the market for urea softens, it will have more downward pressure on ammonia prices than on UAN, as that fertilizer can be applied after planting, said Thom.
"I believe it will hold wind in its sails for a while," he said.
Favorable spring weather in the Midwest spurred demand for fertilizers at a time when urea shipments from overseas hadn't yet arrived in the U.S. or had been diverted elsewhere, said Buckley.
"Demand hit early and the supply wasn't there," he said. "It was really a timing issue."
The USDA's forecast of record-high corn planting in late March also affected nitrogen prices, said Yearsley. "People got really excited after that. The market went bananas."
Volatility in fertilizer prices can also be attributed to the reluctance among dealers to stock up on the material because they fear it will drop in price, said Yearsley.
"The distribution system has been running on lower stocks than it has in the past," he said. "The U.S. went into the season without the warehouses full."
The situation has been favorable for some farmers who have enough supplies of fertilizer left to sell back to dealers or other growers, said Thom.
"Farmer to farmer selling has been fairly robust," he said.