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Fertilizer Stocks Are Gaining, but What about Prices?

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Part 3
Fertilizer Stocks Are Gaining, but What about Prices? PART 3 OF 7

Nitrogen Fertilizer Ahead: Natural Gas Price Outlook Update for 2017–2018

Natural gas prices

Last week (ended July 14), Henry Hub natural gas spot prices rose on a week-over-week basis, and a similar move was observed in the prices of near-month contracts. According to the EIA (US Energy Information Administration), working natural gas stocks were about 9% lower on a YoY (year-over-year) basis at 2,945 Bcf (billion cubic feet).

Nitrogen Fertilizer Ahead: Natural Gas Price Outlook Update for 2017–2018

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Weekly movement

Last week, the Henry Hub natural gas spot price rose 2.7% to $2.98 per MMBtu (million British thermal units), up from $2.9 per MMBtu one week previously. The near-month contracts expiring in August 2017 rose 5% to $2.98 per MMBtu, up from $2.84 per MMBtu. Henry Hub is where natural gas is heavily traded in the US, and prices at these locations are used as reference prices by users (MOO).

Notably, natural gas can account for 70%–90% of input costs for nitrogen producers like CF Industries (CF), Terra Nitrogen (TNH), PotashCorp (POT), and Agrium (AGU). To learn more about nitrogen fertilizers and the industry, check out Market Realist’s Agricultural Fertilizer Industry: Your Comprehensive Overview.

Outlook

The EIA issued its latest Short-Term Energy Outlook report on July 11, 2017, and gave its view on natural gas price movements in coming years. In 2017, the EIA forecasts that natural gas spot prices will average $3.1 per MMBtu, and in 2018, natural gas spot prices are expected to rise to $3.4 per MMBtu.

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