Fertilizer Free Fall ContinuesWeekly Fertilizer Review for...

Fertilizer Free Fall Continues
Weekly Fertilizer Review for December 12, 2011

The free fall on international fertilizer markets continues this week, with no signs a bottom is
near. Retail costs in the U.S. haven’t budged yet, suggesting farmers will need patience –
perhaps even stubbornness – to wait for the market to come to them.

Ammonia prices were steady on international markets this week, with values out of the Black
Sea unchanged following a break of $125 since October. Weak demand due to uncertainty over
both grain prices and financial markets appears to be keeping buyers on the sidelines, with talk
plants will keep making product nonetheless – perhaps spurring even further declines.
Forward swaps for winter are running $40 to $50 below the current index price at the Gulf of
$590. That suggests about $800 at the farmgate level, but prices out of the Black Sea translate
to around $750 – right where current fundamentals put our April forecast. USDA, meanwhile,
put the average retail price last week in Illinois at $857, with Iowa at $832.
UAN dropped again at the Gulf this week, with 32% down $27.50 to $295. That translates into a
farmgate price of $370 for 30%. USDA put the Illinois price for 28% at $404, while in Iowa 28%
was at $441 with 32% at $470.
Urea prices also dropped sharply, with the Gulf down another $37.50 a ton to $380 basically
equalizing them after freight with the Black Sea, which was flat. Those values translate into a
farmgate price of around $541, with winter prices $20 to $25 cheaper. By contrast, USDA put
the price in Illinois last week at $625.

Phosphate prices were steady at the Gulf, which remained at $540 for DAP. Winter forward
contracts are $496.50. Our model puts the current fair value price at $650, with winter down to
around $600, though there’s risk to $715 if supply disruptions emerge overseas. Retail prices
remain elevated. USDA put the average price in Illinois last week at $710, with Iowa at $744.

Potash prices could be headed lower to, with demand still very sluggish on world markets.
Canadian producers are reported to be cutting production in response. USDA put the price last
week at $645, while our model shows risk this spring to $690 if wholesale prices don’t break
under the weight of current fundamentals.

www.farmfutures.com