Terra Nitrogen Co LP

For the week ending October 28, the overall movement in urea prices was flat to positive. Granular urea prices rose 6.6% to $211 per metric ton in China.

Last week was mostly negative for agricultural fertilizer (FXZ) stocks. However, the VanEck Vectors Agribusiness ETF (MOO) ended the week in positive territory.

According to CF Industries, nitrogen prices could remain under pressure as new capacities come online in 2017. However, the company believes that things should improve in 2018.

Generally, a capacity increase tends to lag demand growth, as producers like to see a stronger market before making significant investments.

CF Industries (CF) is expected to see a significant reduction in its capital expenditure (or capex) year-over-year (or YoY) in 2Q17 and for the next four quarters.

The average price of ammonia for the week ending March 11 stood at $310 per metric ton, remaining unchanged from the previous week.

China is the largest consumer of nitrogen fertilizers, but it produces most of it within its borders. Urea is Chinese farmers’ top choice.

For the week ending April 28, the Fertilizer Affordability Index fell slightly to 0.58x—compared to 0.59x the previous week.

Recently, the Fertilizer Affordability Index has seen an upward trend.

Fertilizer affordability has seen some tightening in the last couple of months.

Without an understanding of factors that affect crop prices, it would be difficult to formulate a view on future crop prices and demand for nitrogenous fertilizers.

There’s a handful of big players in the agricultural fertilizer industry. Setting up business requires huge capital, which makes for a high barrier to entry.

The average price of ammonia for the week ending March 4, 2016, stood at $310 per metric ton compared to $311 per metric ton a week ago.

On average, granular urea prices were flat to positive week-over-week. In NOLA (New Orleans), granular urea prices rose as much as 3.5% week-over-week.

Why oil affects fertilizer price In a competitive industry like nitrogenous fertilizer, the marginal producer’s cost sets the floor for the industry. These producers are the most expensive manufacturers to supply the product at that point in time. When the marginal producer’s cost rises, so does the industry’s. On the the other hand, falling costs […]

The importance of costs Understanding how fertilizers are produced is an important part of investing. What companies buy and what they pay for will be their costs. When costs are rising, they can have a negative impact on earnings and cash flow if the industry can’t pass them on to buyers. Conversely, when costs are falling, […]

In a competitive industry like the nitrogenous fertilizer industry, the marginal producer’s cost sets the industry floor.

How China affects the global fertilizer market China, the world’s largest producer of nitrogen (a chemical used to make nitrogenous fertilizers for growing plants) occupies roughly 40% of global production capacity. Although much of its output is sold to domestic farmers—as an export tax of as much as 75% during the on-season restricts domestic firms […]

According to the EIA (U.S Energy Information Administration), natural gas prices were broadly mixed from November 29 to December 6, 2017.

This series covers key trends that are currently affecting coal and natural gas prices and, consequently, nitrogen fertilizer producers as well.

The United States is one of the largest producers of agricultural products in the world, but it’s not a key producer of nitrogen fertilizers.

Nitrogen is an important nutrient for crop development and growth. It’s also the most important input that allows farmers to feed billions of people in the world.

Urea prices for the standard grade in the NOLA (New Orleans) region of the US and in Egypt saw the steepest weekly change last week.

Nitrogen fertilizer prices remained volatile on the back of the volatility in the input prices of natural gas.

Natural gas is one of the key input components for gas-based nitrogen fertilizer producers (MOO)(MXI) such as CF Industries (CF), Terra Nitrogen (TNH), CVR Partners (UAN), and Nutrien (NTR).

In the week ending January 5, the prices for granular as well as prilled urea were broadly higher week-over-week.

In the earlier part of this series, we discussed how shipments impacted CF Industries’ (CF) sales. From our analysis, it’s clear that a rise in selling prices remains the most important growth catalyst for the company.

For the week of December 6–13, 2017, natural gas spot prices at Henry Hub were broadly lower, according to the EIA.

Henry Hub (MOO) natural gas prices saw a negative week-over-week trend, a continuation of the trend from the previous week.

Last week, the average weekly natural gas prices were broadly lower week-over-week at the Henry Hub in the US (MOO).

Last week, urea prices at the Yuzhny location fell as much as 4.1% week-over-week to $256 per metric ton from $267 per metric ton a week ago.

The natural gas prices at Henry Hub in the US fell 4.1% week-over-week from a weekly average of $2.96 per MMBtu to a weekly average of $2.84 per MMBtu.

So far this year, Henry Hub natural gas prices have hovered around $3 per MMBtu (million British thermal units).

Last week, granular urea prices moved higher, which helped bring some relief to urea producers. But the falling global ammonia prices remained a challenge.

Not only did CF Industries’ earnings fall year-over-year (or YoY) in 1Q17, its margins were also significantly lower YoY. To understand why, let’s dig deeper into the cost curve.

Urea prices have fallen by an average of 14% annually over the past five years. The consistent fall has been due to falling energy costs, leading to lower production costs across the board.

In 4Q16, the average price of ammonia for the five producers in our chart fell by an average of 38%.

In 4Q16, the overall average nitrogen selling price fell 37.0% to $182 per ton, from $288 per ton in 4Q15.

Global corn prices are significantly lower than they’ve been for the past four years, considering the high global corn stock-to-use ratio last year.

Energy as well as freight and handling can be the two biggest costs for nitrogen fertilizer production.

Anthracite coal is used to produce nitrogen fertilizers. For the week ending November 18, average weekly anthracite coal prices in China rose 3.8%.

Producers in China primarily use coal as an input material to produce nitrogen, especially urea-based fertilizers. China is the world’s biggest urea exporter.

Nitrogen selling prices PotashCorp (POT) sells nitrogen fertilizers such as ammonia, urea, and nitrogen solutions. It competes with other natural gas–based nitrogen producers such as CF Industries (CF) and Terra Nitrogen (TNH), which primarily produce and sell nitrogen fertilizers. Agrium (AGU), which is a part of the PowerShares International Dividend Achievers ETF (PID), produces nitrogen fertilizers […]

Chinese producers primarily use coal to produce nitrogen, especially urea-based fertilizers, while producers in North America mostly rely on natural gas.

The current levels of ammonia prices at several locations are below their comparative levels last year.

Producers in China mainly use coal as an input material to produce nitrogen fertilizers, especially urea. China is impacted by price movements in coal.

Corn prices on September 12 were 1.6% higher at $3.30 per bushel compared to $3.20 per bushel in August 2016.

For the week ending September 9, average weekly anthracite coal prices in China fell 4.2% to $81.1 per metric ton—compared to the previous week.

The global nitrogen fertilizer capacity is abundant, allowing it to fulfill the current market requirements. This has put pressure on nitrogen prices, which fell significantly over the past year.

While most North American producers use natural gas to produce nitrogen fertilizers, CVR Partners (UAN) mainly uses pet coke as a hydrogen source.