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   Non-TechUAN - The variable distribution MLP that could go a long way


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From: Elroy10/13/2021 5:01:59 PM
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Interesting past few days. The Nov and Dec 2021 prices have moved up, while 2022 prices haven't moved.

I take this to mean 2022 is likely not trading at all, while the remaining 2021 months are selling fertilizer, with rising prices.

cmegroup.com

Last year in Q1 UAN informed us that most of Q1 2021 sold out in Nov and Dec 2020. If that pattern remains the same this year, I think we'll start to see Q1 2022 prices move up in the coming few months.

The only thing going the wrong way now is the price of corn, which has dipped from about $5.50 back toward $5.00. Even at $5.00 per bushel corn remains much higher than the price of the past few years.

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To: Paul Senior who wrote (268)10/13/2021 5:07:52 PM
From: Elroy
   of 354
 
UAN is in such a cyclical business though, I have to ask, do you really believe this is a type of stock you/we/they will still be in years from now until you/we/they kick-off?

I don't know the real evidence that selling fertilizer is so cyclical, as you claim.

The latest info on building new plants (which makes other capital intensive industries cyclical) is that there's probably no new US nitrogen fertilizer plants that are going to be built, ever. The CEO of CF said something to that extent recently.

So.....as prices go up, what's going to bring them back down? In other cyclical industries, when prices go up EVERY maker builds a new plant, prices collapse due to waaaaaay too much supply, and then the market has to grow to absorb this newly built supply. When the market grows enough that the existing supply is too little, prices go up, and EVERY maker again builds a new plant, producing excess supply, falling prices, and the cycle.

Have you heard any announcements by any fertilizer maker that they are going to build a new nitrogen fertilizer plant? I haven't. So again......where's the "cycle"?

----------------------------------

UAN runs two large fertilizer manufacturing plants, and distributes all the free cash from those operations to unit holders. I would guess that's a great thing to own forever. Maybe some year you receive $30, and in another year you receive $6, but with interest rates at something like 1% any distribution is pretty good.

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To: Elroy who wrote (270)10/13/2021 5:30:41 PM
From: Paul Senior
   of 354
 
Well I Google and I read commentary that agriculture has been and will be a cyclical business.

If fertilizer prices remain high, I certainly will believe some company, maybe more than one -- maybe companies with government subsidies - at some point will try to significantly increase their output. You don't see this as a possibility? I see it as a good probability.

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To: Elroy who wrote (270)10/13/2021 6:04:58 PM
From: Area51
   of 354
 
<<
Have you heard any announcements by any fertilizer maker that they are going to build a new nitrogen fertilizer plant?>>

Looks like this company in Russia may be expanding. kuazot.ru
As part of the joint venture with Maire Tecnimont Group, the implementation of one of the most ambitious projects of the Company continues - the construction of a urea unit with a capacity of 1,500 tons / day. The project envisages the use of advanced technologies that ensure environmentally friendly and safe production, as well as the resource consumption at the level of the best world analogues. The total investment is estimated at 11 billion rubles. Project completion is scheduled for 2021-2022.


Granted Russia exports are more likely to go to Europe and the cost advantage may not be large when you add in the transport costs to middle America?. With corn at $5.2x and UREA at $710 demand destruction may also be something to worry about. I wouldn't count on fertilizer staying high ad-infinitum unless corn also stays high. I suspect there will still be future down cycles in the price of fertilizer. But not until after 2023 I hope <g>.
https://twitter.com/JLinvilleFert/status/1447938979236618246

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To: Paul Senior who wrote (271)10/13/2021 6:12:37 PM
From: Elroy
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I'm just telling you what the CEO of CF said on the topic.

I think they believe it makes more sense for companies located in regions with low cost natural gas (Iran, Russia, etc.) to build new nitrogen fertilizer plants.

Another poster says it takes four years to build such a plant. So.....the cycle should be quite long.

We can't expect the supply interruptions (Feb cold storm, Hurricane Ida in Aug) to recur every year, but I believe there is no new significant nitrogen fertilizer supply coming online in the USA for years.

But as I've said, I'm no expert.

When the companies do normal planned maintenance plant "turnarounds", one of the goals is to reduce bottlenecks and increase production capacity at existing plants. But this is incremental supply, not the type of supply increase that would cause an industry to be cyclical.

If some US-based fertilizer company plans to build a new factory, I'm sure we'll read about it and know about it years before it begins production. So far, nothing at all like that in the news I've read.

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To: Area51 who wrote (272)10/13/2021 6:17:01 PM
From: Elroy
   of 354
 
I wouldn't count on fertilizer staying high ad-infinitum unless corn also stays high.


Corn at $5.00 is, I think, "high".


UAN at $300 is what I would call high. It's about $500 now, depending on the month of delivery, so it's now what I would call Sky High.


I have no idea how to forecast the expected fertilizer price drop after 2022 spring planting season (the prices should drop from June 2022 on), and there's plenty of time before that begins. How low the UAN price per ton drops in summer 2022, and what it rises to in spring 2023 planting season will give us some idea of what's going to happen in the future.


But those dates are already pretty far in the future!

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From: Elroy10/13/2021 6:36:06 PM
1 Recommendation   of 354
 
These are "retail" fertilizer spot prices, so not applicable to what UAN may realize as it sells wholesale.

DTN Retail Fertilizer Trends
Anhydrous Breaks $800 Per Ton as Fertilizer Prices Soar


https://www.dtnpf.com/agriculture/web/ag/crops/article/2021/10/13/anhydrous-breaks-800-per-ton-prices


Both UAN28 and UAN32 were 8% higher compared to last month. UAN28 had an average price of $400/ton while UAN32 was at $456/ton.

UAN28 crossed the $400/ton level for the first time since the second week of May 2013. That week the price was $400/ton as well.

Anhydrous is 7% more expensive compared to a month prior. The nitrogen fertilizer has an average price of $803/ton.

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To: Elroy who wrote (274)10/13/2021 9:55:09 PM
From: Area51
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From @JoshLinville: Normally costs 55 - 60 bushels for 1 ton UREA; now costs 135. If corn/soybean prices stay where they are, he thinks farmers plant less corn and more soybeans That said, can corn allow the loss of many acres before it has to battle to get them back?


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To: Elroy who wrote (274)10/15/2021 4:28:47 PM
From: Area51
   of 354
 
Decent close on option expiration. Holding 80 and since hitting 80 it has gone sidewise and worked off the overbought condition. If Earnings are good in early November it should fly

@Publicus had some posts that agree with your position saying that there simply may not be enough fertilizer to service all the crops that will be planted in the US next year. So maybe I'm still too bearish on the stock. I hope so <g>.

Thanks for posting this bloomberg.com . They kind of intimate but dodge around what I think is the primary issue. That is that no matter what there will NOT BE ENOUGH NITROGEN FERTILIZER, to plant all of the acres that the US and other government authorities are saying will be planted next Spring. There simply isn't enough capacity at this point, and there are zero inventories anyplace. This is inevitably going to force up the price of all crops, but especially corn since the harvest next Fall will be vastly less than currently projected, and could well drop stocks to effectively zero at the end of the next planting year.

I assure all of you, the price of corn is NOT going to pull down the price of nitrogen fertilizer. The price of corn is going to be pulled up to the point where it is at least minimally profitable at whatever the ultimate price of fertilizer is. The shortfall is just too great.


seekingalpha.com

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To: Elroy who wrote (236)10/15/2021 5:29:19 PM
From: Elroy
   of 354
 
UAN for Q1 delivery is now $550/ton or more......

cmegroup.com

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