OREANDA-NEWS. The US urea market heads into 2016 with prices under pressure from high global supply, while domestic demand from retailers and growers ahead of the spring season has been slow to materialize.

Oversupply remains the dominant theme for urea heading into 2016, with expanded production seen domestically and abroad. Meanwhile, swing producer China has so far shown no signs of cutting back operating rates, despite prices thought to be testing many producers' cost of production.

In the US, four major urea expansions are expected to be completed in 2016. CF Industries, which brought online on an additional estimated 1.2mn st/yr of capacity in Louisiana in November, will also add another 1.4mn st/yr of production in the third quarter of the 2016 at its Port Neal, Iowa, plant. Koch's 900,000 st/yr Enid, Oklahoma, expansion will also be completed in the third quarter. Agrium plans to finish a new 672,000 t/yr urea plant at Borger, Texas, by the end of the year. Two major UAN expansions will also be finished in 2016, giving growers more supply of the competing nitrogen fertilizer.

Traders, meanwhile, continue to bring in a steady stream of offshore shipments to Nola, with Middle East producers in need of outlets for granular urea, particularly with Brazilian demand lagging because of currency issues.

The supply situation began to pressure US prices in November, when they pushed below $230/st fob Nola to their lowest levels since May 2009. Current barge prices are at their lowest level at the end of a calendar year since 2008.

While increased supply is widely expected, 2016 demand remains more difficult to pin down, with farm incomes squeezed over the last two years because of low corn and soybean prices. Those factors, combined with the sense that fertilizer prices could fall further, has limited restocking demand from retailers and growers so far this winter.

A potential positive for urea demand could be an increase in corn acreage in 2016. Corn and soybean future prices suggest an increase in corn planted area from last year's 88.4mn acres, the lowest since 2009, with growers likely to switch more acreage from soybeans to corn because of more favorable prices for the latter. Soybeans require minimal nitrogen fertilizer as compared with corn.