TFI ’20: US urea Nola barge market – bull and bear divide

PALM DESERT, California (ICIS)–The US urea market agrees that there are a number of unknown variables that have the potential to boost demand and prices or conversely dampen demand and pull barge values down from their recent highs.

There were a number of bullish factors cited during discussions with industry sources on the sidelines of The Fertilizer Institute (TFI) annual Business Conference.

Equally, there were just as many factors spoken about as having a negative impact on the Nola urea barge market.

While the US has been providing the rest of the world with some direction, participants in the US urea market are banking on India coming to the market sometime in March with a large requirement.

Although there are so many unknowns about the impact of the coronavirus in China, and its bearing on production and trade flow, a large requirement from India is not expected to be serviced with Chinese tonnes.

This in turn will mean the need to supply India with tonnes from other major exporting hubs. It is some of these exporting regions that have been moving volume to the US these past weeks.

In addition to this, the wet weather in the Midwest, while ultimately having a negative impact on fertilizer sales and a devastating impact for the farming community, has narrowed the window of application for ammonia for the second year running. This means more demand for alternatives such as urea and urea ammonium nitrate (UAN).

A major talking point during the TFI meeting was total corn acreage, which was most frequently estimated at 92m tonnes for 2020. This is a positive for fertilizer retailers and farmers.

While the general mood among the urea community was slightly more bullish than bearish, there was an undertone of cautious optimism.

The weather is the key to how good the spring will be for producers, retailers, traders, distributors and farmers.

Wet weather remains a feature in the Midwest and concerns were raised about flooding along the river.

“If we don’t get better weather we are going to see a dip in demand. We have barges on the river that are under water,” commented a US urea trader.

A switch to urea from UAN could also impact on urea demand. UAN is currently at its lowest level since ICIS records began in 2005.

“It’s wet everywhere and we see urea prices much higher [than UAN]. Everybody recognises UAN is at a good price so there will be some switching,” commented another US trader.

But it is only the larger farmer that is able to switch – those with farms of 15,000 tonnes or more acreage, according to the trader. “Smaller farmers don’t have the money to pay for prepaid tonnes.”

There is also uncertainty about India coming to the market with a new tender. These tenders typically attract huge volumes, but it does not necessarily mean global prices will firm which was the case in 2019.

Four-year lows for natural gas in the US, caused by warmer weather, are also expected to have some impact on the urea market. Cheap natural gas means lower production rates for fertilizer producers so whether a bull or a bear, this might prove favourable for producer and consumer.

Urea prices might not reach the sort of levels sellers would like to achieve, which is good for the farmer, but costs will be much lower having minimal impact on the bottom line.

The TFI conference runs through Wednesday in Palm Desert, California.