Buy Now? Urea Prices Could Move Higher

With a challenging harvest underway, it’s probably not be a high priority, but now could be the time to lock in prices for some of next year’s nitrogen fertilizer.

Lower crop prices will place an extra emphasis on managing input costs for the 2015 crop, notes Mike Jubinville, president and senior analyst with ProFarmer Canada, in the interview below.

While urea prices have climbed slightly since summer, he says there’s much more upside than downside potential in the market.

“If I were to guess the next $100 move in urea prices, it’s probably higher rather than lower,” he says. “In that context, picking away at what future needs may be seems like a reasonable strategy.”

One of the reasons Jubinville thinks prices could rise is that much of the world’s nitrogen supply originates in areas facing geopolitical tension.

“Whether it’s out of Russia, where we know the economic circumstances the West is imposing with trade restrictions. There may be some questions about product moving out of Black Sea ports,” he notes. “There are also issues in North Africa — Algeria, Libya and such — where a lot of nitrogen is produced as well.”

Closer to home, a plugged transportation system in the U.S. could also contribute to higher prices..

“The Americans are soon going to encounter, if they’re not already in the process of, the transportation-related problems that we had in Western Canada during the past year. This logistical problem may create some difficulties in moving nitrogen from southern areas, say the New Orleans port position, into the consumptive areas in the U.S. Midwest,” says Jubinville. “I think some of that impact will be felt in western Canada as well.”

Considering prices at port, he says offers below $500 per tonne for urea on the Canadian Prairies should probably be seen as an opportunity to buy.

“Once prices in today’s manufacturing environment drop below $450, you’re essentially seeing wholesalers, merchandisers, retailers just trying to move product out the window and not making money anymore,” he notes. “We had reached down toward that breaking point and we’re starting to see some upward movement in price.”

Mike Jubinville discusses the market for N with Kelvin Heppner:

Can’t see the audio? Listen to it on Soundcloud.


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