What a roller coaster ride the nitrogen markets have been this year. The 2019 nitrogen market issues started at the end of the 2017 fiscal year when UAN manufacturers had a hangover from low profit margins. They were determined to make more money in 2018-2019. As you all know, the corn prices were in the tank, and the summer 2018 summer fill offer was approaching in July. So to try their best at squeezing blood from a turnip, the manufacturers decided to come out with slightly higher pricing than the year before, but only offer 20% of your purchases from previous year, paired with about a three hour selling window. Most retailers didn’t get in on this first level of buying and tried to buy the next day. Satisfied with their 20% sales from the previous day, the manufactures decided to pull out of the market. This created fear and anxiety in the market place. As the weeks went on and not willing to sell anyone anything the tension grew to the point that a lot of retailers didn’t care what the price was, they just wanted to get some in their tanks.
About the time the manufactures were going to sell some more product, we had a late, wet fall and there were more fears of not being able to get anhydrous applied. This created hesitation to sell liquid nitrogen too cheap.
The way anhydrous contracts are written, you get to pay storage fees, or you get to reset your booked tons to the spring price. With virtually none of the anhydrous applied, the manufacturer knew they were in the driver seat. Again, corn prices have not moved. Because of being between a rock and a hard place, our anhydrous prices were reset a lot higher than they should have. This made liquid nitrogen even more complicated because if they sold 32% at a discount to anhydrous, they would be giving up profit margin, even though the import market on 32% didn’t justify the price. In December they came out with new 32% pricing that was almost $100/ton higher than the summer fill pricing. Because of the fear that had built over the market, they were somewhat successful on selling some product at these prices. The only saving grace to the US farmer was the import market. The import price was about $40/ton lower than the domestic prices, and it helped keep a lid on it.
As the late winter progressed, the import markets kept getting cheaper and pressured the domestic manufacturer to lower prices. About mid-February 2019, we saw the first price reduction, followed by about $50-$75/ton reduction between late February and mid-March. The beginning of May we saw a short term spike back up, due to heavy selling of new tons, and issues with rivers opening up allowing imports to hit the ground before needed.
At Wells Ag Supply we try to be very honest and transparent and give the best advice we can. Most of our growers purchased their products at the best time to buy this year. For side-dress, we feel the market will not go up any more, and has a good chance to soften-up for late June. Every year presents new dynamics in the market, we try to stay on top of the trends and keep your best interests in mind.
