US midwest ammonia demand firm despite rain

14 May 2008 22:08  [Source: ICIS news]

HOUSTON (ICIS news)--Ammonia demand in the US midwest has stayed firm despite lingering rain delays to corn planting, and the prospects for summer sales of the fertilizer remain bright, market sources said on Wednesday.

Ammonia ex-tank was priced around $810/short ton ($892/tonne) in the midwest, steady with a week earlier.

That compares with an average of $530/short ton that farmers pre-paid for ammonia for the current application season, so there was a strong incentive for them to carry through with the corn crop, one supplier that operates a midwest terminal said.

Farmers have until the end of June to collect their pre-paid supplies.

The slow start to corn planting in recent weeks had raised speculation that some farmers might switch to soybeans, which would favour demand for urea and other fertilizers over ammonia.

However, there was no sign yet of that happening, an Iowa-based fertilizer retailer said.

As well as above-normal rainfall, below-normal temperatures have been a factor in the crop outlook.

Those farmers who were able to plant their corn earlier than others are only just starting to see the shoots emerging, the retailer said.

"Corn that's in the ground didn't get a big jump, because of the cold," the retailer said.

US Department of Agriculture (USDA) data issued on Monday showed that corn planting in 18 key states was 51% completed as of 11 May, compared with only 27% done a week earlier and with the five-year average for this time of year of 77%.

The retailer said that with the milder, drier weather forecast, it would not be a surprise to see the corn planting figure jump to 90% in 10 days' time.

The improving prospects for the crop have been reflected in a drop in corn values on Chicago's CME.

The July corn futures contract finished at 596.25 cents/bushel on Wednesday, down by 11.00 cents from Tuesday and down by 7% from a peak of around 640.00 cents/bushel last week.

In a commentary, the CME cited the drier weather forecast as a factor in the decline.

The current National Weather Service (NWS) forecast for eastern Iowa and western Illinois pointed to a dry week ahead, with the exception of a 20% chance of showers on Friday.

That region, in the heart of the corn belt, has been one of slowest to plant in the current cycle.

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By: Stephen Burns
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