Navigating Fertilizer Markets: NOLA Urea Futures, Farmland Trends, India Tender and North America Prices

How quickly price expectations change in commodities!

The chart below shows the forward NOLA Urea futures curve on two different days. Series 1 shows the expected forward prices on January 2, 2024. You can see how March moved from US$318/st to US$385/st from January 2 to March 18. Also on January 2, the market was expecting forward prices to be flattish. Series 2 shows forward price expectations on Monday March 18. The market is now anticipating a steep backwardation in forward prices meaning the market expects future prices to be much lower than spot prices. Normally when the market sees this in the futures market, buyers will hesitate to build long physical positions. It’s a wait-and-see game now heading into spring.

This great article from FCC Knowledge outlines provincial trends in cultivated land values. The analysis covers the Jan 1 – Dec 31, 2023 period and displays the average land value changes over that period. Interesting to read that strong field crop receipts between 2022 and 2023 suggest a correlation between liquidity and demand for farmland which drove prices up. Strong farm current ratios in 2022 supported the demand for land. Farm profit margins expected to be tighter in 2024 could impact the demand for farmland.

India issued a long-awaited urea tender. The market, however, did not react due to a few reasons — no indication of volume, the tender close date is March 27 and the shipping window is extremely long with a shipping deadline of May 20. This gives the market plenty of time to react.

According to Green Markets, urea prices in Western Canada were flat WoW in a range of C$750-$765/mt DEL for the third week in a row. These prices are up C$93/mt or 14% since the recent trough of C$665/mt seen in early January.

Earlier this week we heard of offers of prompt at C$800/mt and May at C$830/mt FOB Gravelbourg SK.

NOLA urea prices rose again to a range of US$375-$417/st from US$367-$400/st last week on the back of strong demand and limited supply. The market is also showing backwardation with the first half April trading at US$375-$380/st.

It appears that the market did not anticipate such an early start to spring seeding in the US and therefore the urea supply continues to tighten pushing prices up.

We believe that prices in Western Canada could pop again once spring seeding starts.