The general trend of fertilizer prices through the third quarter was down. The Pro Farmer Inputs Monitor Nutrient Composite Index (NCI) fell 5.2% during the quarter to post a five-year low in the last week of September. Anhydrous ammonia was the downside leader, and nitrogen prices through the quarter all followed the downward trend in close formation. However had phosphates, including DAP and MAP, fallen in kind, the NCI would have fallen much farther. Meanwhile, potash prices maintained a sideways trajectory, also limiting pressure.
As the third quarter unwound, we began to note a significant fundamental change that bodes well for anhydrous ammonia users going forward. In years past, imported urea had been the driver of nitrogen prices including NH3 and UAN. By mid-September, urea began to show signs of firming. Historically, that has been a sign anhydrous and UAN were set to firm as well. But as urea forged a clear uptrend, anhydrous ammonia accelerated to the downside. That decoupling suggests domestic nitrogen production has the power to trump the influence of higher-priced imported nitrogen.
Compared to expected new-crop corn revenue based on December 2018 futures, all of the fertilizers in this survey spent the entirety of the third quarter at a sharp discount. That discount means that fertilizer prices will help keep a lid on 2017-18 production costs, especially for producers who apply nutrients in the fall or locked in at least a portion of spring needs at the September low.