Urea prices at New Orleans (NOLA) continue to rise, finishing last week at an average price of $316 per ton. Barge urea prices have now increased for ten (10) straight weeks at the Gulf. The last time Gulf urea was above $300 was in June 2015. Urea prices in the NOLA region are up $90 per ton or 40% compared to the same week a year ago.
A number of factors are combining to drive urea prices higher. It’s likely less supply from China will be available following the latest round of U.S. tariffs that went into effect on September 24th. Virtually all types of fertilizer exports (including urea) by China to the U.S. would be subject to the initial 10% tariff rate, which later increases to 25% on January 1, 2019. The U.S. tariffs list on Chinese goods include urea, ammonium sulphate (AS), ammonium nitrate (AN), urea ammonium nitrate (UAN), diammonium phosphate (DAP), or monoammonium phosphate (MAP).
Higher energy prices are another factor which increases urea manufacturing and transportation costs. West Texas Intermediate (WTI) crude oil is currently trading near $75 per barrel; the highest since November 2014. Announced sanctions on Iran and the inability of the OPEC cartel to produce more oil are both factors that have supported energy prices in recent months. Iran is also a producer and exporter of urea fertilizer.
The early private forecasts for 2019 crop acres are also supportive to urea prices. Corn acres in the U.S. are anticipated to increase 4.4 percent next year; nearly 4 million acres. Given current price relationships with competing crops, soybeans could lose several million acres next year. Corn, wheat, cotton and rice all stand to gain acres in 2019 and all are nitrogen using crops.
Given the prospect that the above factors may persist for the foreseeable future in the nitrogen market, growers should expect any price corrections to be shallow and short in duration. Over the previous three years there has been a seasonal tendency for Gulf urea prices to peak near the end of October. Following this peak, urea prices would generally trend lower through November. More favorable pricing opportunities may be available by the end of November and into the first week of December. Afterwards, fertilizer prices have a tendency to trend higher into spring.