Better Farming - October 2016

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Better Farming October 2016 Farm News First > 35
MOE’SMARKET MINUTE
Two factors play a key role in
forecasting fertilizer prices:
crude oil price outlook (which
determines fertilizer supply) and
grain prices outlook (which deter-
mines fertilizer demand). For nitrog-
enous fertilizers (ammonia, urea,
ammonium nitrate), natural gas is
the direct feedstock for their produc-
tion, and the fuel’s price is correlated
to crude oil. The other main fertilizer
types are phosphates (diammonium
phosphate or DAP and monoammo-
nium phosphate or MAP) and
potash, both of which are mined and
processed, so fuel makes up a signifi-
cant portion of their direct and
indirect costs.
In 2016, crude oil prices were low
on average because of concerns about
high levels of U.S. and global petro-
leum product inventories, despite
relatively strong demand, and a drop
in U.S. oil rig counts. U.S. Energy
Information Administration (EIA)
expects global oil inventory builds to
be on the higher side in the second
half of 2016, limiting upward price
pressures in the coming months. EIA
expects consistent global oil invento-
ry draws to begin in mid-2017. The
expectation of inventory draws
contributes to accelerating price
increases in the second quarter of
2017, with price increases continuing
later in 2017.
Average West Texas Intermediate
(WTI) crude oil prices are forecast to
average a little above $40/barrel
during the second half of 2016 and
$52/barrel in 2017. Forecast WTI
prices average $58/barrel in the
fourth quarter of 2017, reflecting the
potential for more significant inven-
tory draws beyond the forecast
period. EIA expects natural gas prices
to gradually rise, with Henry Hub
natural gas prices to average $2.41/
A look ahead at fertilizer prices
Crude oil prices are predicted to remain low until mid 2017 and grain prices are
expected to remain low, too. Here’s how those factors will affect fertilizer prices over the
next several months.
by MOE AGOSTINO and ABHINESH GOPAL
Anhydrous Ammonia
DAP
MAP
Potash
Liquid Nitrogen
Urea
$684.84
$551.96
$551.96
$457.96
$306.27
$453.38
$515.22
$427.23
$431.50
$289.01
$222.46
$311.40
-25%
-23%
-22%
-37%
-27%
-31%
$515.22
$427.23
$431.50
$289.01
$222.46
$311.40
$750.51
$583.53
$603.97
$515.11
$346.46
$504.07
$500 - $625
$420 - $480
$420 - $510
$270 - $370
$200 - $290
$300 - $380
U.S. Wholesale Fertilizer Prices (in USD per Ton)
Source: USDA, Risk Management
Nutrient % CHANGE
VS. YEAR AGO
AUG-20-
2015
AUG-18-
2016
5-YEAR
LOW
5-YEAR
AVERAGE
EXPECTED 2017
RANGE