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.

Agrium’s Wholesale segment’s gross margins declined from 27% in 1Q15 to 24% in 1Q16. This was primarily driven by a decline in gross margins in the Nitrogen and Phosphates segments.

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.

Last week, the Fertilizer Affordability Index was unchanged week-over-week at 0.7x.

CVR Partners (UAN) emerged as the top gainer among fertilizer stocks with a 6.7% rise last week to close at $3.18 per share.

Realized prices for fertilizer companies are the main culprit for the dismal performances among companies in the agricultural fertilizer sector.

According to the U.S. EIA, for the first time natural gas will be the largest fuel source for energy. Natural gas should pass coal in 2016, which may explain why coal prices are low.

Urea prices in the US Gulf NOLA rose 4.8% week-over-week to $197 per short ton. Prices in the Middle East rose 3.1% week-over-week to $200 per metric ton.

In 4Q17, the overall nitrogen shipments of the five companies discussed below moved lower year-over-year.

The week ended March 10, 2017, was broadly negative for agricultural fertilizer stocks. Israel Chemicals (ICL) emerged as the top performer, falling ~3.7% to $4.43 per share.

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

Last week, the fertilizer affordability showed some positive momentum week-over-week.

In the week ending November 3, agricultural fertilizer stocks were broadly positive.

Last week, as reported by the EIA, natural gas prices at Henry Hub rose 1.3% week-over-week to $3.03 per MMBtu (million British thermal units).

Agrium (AGU) is set to announce its 3Q16 earnings on November 3, 2016, before the market opens. It will hold the earnings conference call the same day. Agrium’s performance is generally more stable than peers’.

CF Industries (CF) is set to announce its 4Q16 earnings on February 15, 2017, with estimated earnings per share of -$0.05. In 4Q15, CF Industries reported EPS of $0.76.

CF Industries (CF) closed at $27.3 per share on June 9, which was 13.4% lower than its levels at the beginning of this year.

The importance of capacity utilization Capacity utilization measures how much of an industry’s or company’s available production output is being used. It’s based on dividing actual output by potential output. Because an industry or firm will often try to match production to demand, a rising capacity utilization rate means faster growth in demand relative to […]

Natural gas is a major input in the production of nitrogenous fertilizers, such as urea and ammonia. Therefore, when the natural gas price in the United States rises, it is a negative move for producers. Natural gas price rose on the week ending March 15th The Henry Hub Natural Gas Spot Price, a benchmark for […]

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

In 3Q16, CF Industries’ (CF) consolidated nitrogen margins plunged almost 30 basis points from 18% in the corresponding quarter a year ago.

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

Natural gas and nitrogenous fertilizers Natural gas is a major raw material input in the production of nitrogenous fertilizers, such as urea and ammonia, ranging from 40% to 70% of cost of goods sold. A higher natural gas price increases the cost of goods sold and compresses margins. This in turn lowers earnings and free […]

CVR Partners (UAN) emerged as the top gainer last week, rising 17.4% week-over-week to close at $3.70. CF Industries (CF) followed, rising 4.4% to close at $39.30.

Natural gas prices trended lower week-over-week for the week ending April 24. Summer months are usually less demanding for natural gas.

Urea prices have fallen YTD (year-to-date) as of June 23, 2017. They’re now trading even lower than the levels they saw in the corresponding week in 2016.

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.

In its January report, the USDA (United States Department of Agriculture) reported that the world’s ending stock for wheat rose to 253 million metric tons from 252 million metric tons in December.

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.

In the recent quarters, fertilizer companies (MOO) have rationalized their output and costs to sustain the downward momentum in fertilizer prices that seemed to keep going down.

With respect to CF Industries’s (CF) upcoming 4Q16 earnings, Wall Street analysts expect the company to report total sales of $908 million from all segments.

The week ended February 17, 2017, was negative for agricultural fertilizer stocks. In this series, we’ll take a look at the performance of eight major publicly listed agricultural fertilizer companies.

Industry experts often show ex-China global urea capacity utilization because China’s export tax makes domestic producers’ urea more expensive for international buyers.

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.

For the week ending March 18, the pet coke index remained unchanged compared to a week ago.

In the week ending April 22, 2016, ammonia prices in Tampa CFR (Cost and Freight) continued to move sideways for the 13th straight week.

The operating rate in China is below average Historically, the expense of using coal to produce nitrogen-based fertilizers has kept Chinese firms away from increasing production, because they would have had to sell the fertilizers at a loss. As a result, the operating rate (capacity utilization) in China has been lower than the rest of […]

The week ending January 27 was broadly positive for agricultural fertilizer stocks. The VanEck Vectors Agribusiness ETF (MOO) rose by 64 basis points.

In recent weeks, US natural gas prices have started trending higher, and they continued to do so last week. Prices significantly impact nitrogen fertilizer producers.

CF Industries (CF) is expected to announce its 1Q16 earnings on May 4, 2016. CF Industries has lost 17% of its value since January 2016, with the stock trading at $33.70 as of April 27, 2016.

Based on data provided by the EIA last week, average weekly natural gas prices at Henry Hub rose by an average of 1.2% to $2.95 per MMBtu.

Low crop prices raise concerns about the recovery in the fertilizer sector. Low crop prices mean a lower farm income. Farmers have to rethink operating expenses.

Coal prices, like natural gas prices, have hit a low point due to a low demand and excess supply imbalance. Recently, natural gas prices have ticked up while coal prices are mostly unchanged.

Natural gas is a major input in the production of nitrogenous fertilizers, such as urea and ammonia. According to Terra Nitrogen Company L.P.…

Corn prices often drive fertilizer prices. Among the three major crops, corn, soybean and wheat, corn requires more nitrogen based fertilizers.

Brent crude oil price is a leading indicator for nitrogenous fertilizer revenues. When the price of Brent oil rises, it’s generally followed by a rise in ammonia prices.

So far, global economic growth is expected to pick up in 2014. This case would generally be positive for commodities like coal.

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 […]

Why coal prices affect fertilizer producers While most of the world uses natural gas as an input, 80% of China’s plants use coal to produce nitrogen-based fertilizers like urea and ammonia. As one of the costlier producers of the fertilizer used to support plant growth, fluctuations in coal prices can have a significant impact on […]

Why Australian and Indonesian currencies affect fertilizer price The currency movements of major coal-exporting countries can have a major influence on nitrogenous fertilizers. When the currency of an exporting country like Australia and Indonesia depreciates, it can have a negative impact on fertilizer prices. Conversely, when the currencies of the two exporters are rising, they […]

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, […]

Coal prices’ significance to the fertilizer industry While most of the world uses natural gas as an input, 80% of China’s plants use coal to produce nitrogen-based fertilizers like urea and ammonia. As one of the costlier producers of the fertilizer used to support plant growth, fluctuations in coal prices can have a significant impact […]

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

The impact of China’s urea prices China’s urea prices can have a significant impact on global fertilizer prices. Although the production cost of urea is on the higher end, as urea production uses a large source of nitrogen extracted using coal instead of natural gas, coal prices can have a significant impact on the cost […]

Continued from Part 2 Increased supply will drive exports to a record Given the increased supply, Chinese firms have already begun exporting some of their urea, a type of nitrogenous fertilizer. While exports have historically remained close to zero during the busy season, export activity has remained above 200,000 metric tonnes a month this year. […]

Continued from Part 1 Operating rate rises as China becomes more competitive Historically, the expense of using coal to produce nitrogen-based fertilizers has kept Chinese firms away from increasing production, because they would have had to sell the fertilizers at a loss. As a result, operating rate (capacity utilization) in China has been lower than […]

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 […]

Coal is one of the main inputs used in China to make nitrogenous fertilizer. Fluctuations in coal prices can have a significant impact on global prices.

According to the China National Chemical Information Center, the average selling price of urea stood at 1,751.48 renminbi per metric tonne on November 22.

Retail urea price in decline Let’s start with U.S. retail urea price. On September 13, U.S. urea retail price stood at $509 per metric tonne, according to DTN Energy. Just last week, prices were at $513 per mt (metric tonne), and at the end of August, they were $543 per mt. Persistently high corn prices […]

Prices for wholesale urea slumping hard Prices for urea sold wholesale have performed worse than retail prices so far. According to Green Markets’ data, prices started to fall towards the end of March, when wholesale urea exchanged at ~$450 per mt (metric tonne). As of September 16, the last exchanged price was $309 per mt, representing a […]

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.

After collapsing about 20% in November, Terra Nitrogen Company LP (TNH)—a nitrogenous fertilizer producer—continued to slide.

For years, nitrogen prices have been trending lower, but in 4Q17, ammonia, urea, and UAN (urea ammonium nitrate) realized prices finally improved.

With the 4Q17 earnings season behind us, it’s time to take a closer look at how fertilizer companies (MOO) performed in the recent quarter.

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.

Last week, urea price movements were broadly positive with prices in the Middle East experiencing strong gains week-over-week.

CF’s Ammonia segment’s gross margin per ton expanded from $1.00 per metric ton to $36.00 per metric ton.

During 4Q17, CF Industries’ Ammonia segment grew 58.0% year-over-year to 1.2 million metric tons.

In the week ending January 19, natural gas prices at Henry Hub remained elevated with the prices peaking at $5.46 per MMBtu (million British thermal units) on January 16, 2018.

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

In the week ending January 19, the VanEck Vectors Agribusiness ETF (MOO) rose 1%, and the broader market S&P 500 (SPY) also ended in positive territory with a gain of 1.2%.

Natural gas is one of the critical input materials needed for nitrogen and some phosphate-based fertilizers.

Urea is sold in the granular and prilled variety. In the week ending January 12, granular urea prices were broadly flat to positive week-over-week.

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.

Nitrogen in 2018 Nitrogen prices remained weak for most of 2017, falling as much as 27% YoY (year-over-year). Ammonia, a fundamental nitrogen input, is further upgraded to nitrogen fertilizers such as urea and urea ammonium nitrate. Ammonia supply As shown in the above chart, ammonia capacity saw a net addition of five million metric tons, or […]

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).

The average weekly natural gas prices at Henry Hub for the week ending November 17 moved higher week-over-week.

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.

In 3Q17, CF Industries (CF) sales saw growth across each of its five segments year-over-year. Overall, the company’s sales grew 28% year-over-year to $870 million from $680 million in 3Q16.

CF Industries (CF) has managed to deliver a strong performance over the last month, rising 12.5% as of October 16, 2017.

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).

In the EIA’s recent outlook, natural gas prices are expected to average $3.29 per MMBtu in 2018—compared to an average of $3.05 per MMBtu in 2017.

EV Energy Partners (EVEP) was the top MLP gainer last week, which ended on September 8, 2017. It rose 13.9%.

Teekay Offshore Partners (TOO) was the top MLP loser last week, which ended September 1, 2017. It fell 6.3%.

The higher supply of nitrogen fertilizer was the key reason that producers experienced lower selling prices YoY.