A record 1,454 industry participants were on hand in San Antonio July 24-28 for the 2010 Southwestern Fertilizer Conference. The attendance surpassed last year’s record by more than 100, and a record 133 suites were booked at the Marriott Rivercenter Hotel for the event.
The previous week’s run-up in prices for ammonia, urea, UAN, and DAP (GM, July 26, p. 1) left conference-goers with plenty to talk about, but most said little actual business was concluded at the conference. “If you haven’t already booked your DAP and urea, this was not the place to do it,” said one contact. Added another, “Dealers had empty bins going into the conference, and they are still empty coming out of it.”
Steve Wilson, president and CEO of CF Industries Holdings Inc., kicked off the conference’s General Session with a look at global fertilizer dynamics. He contrasted the industry’s positive near-term fundamentals with the boom/bust cycle of 2008/09. “I don’t have to remind any of you of the bubble of 2008,” he said. “The snap-back was clearly inevitable. And when this happened, everyone in the industry suffered.”
Wilson referred to the “intense globalization” of the fertilizer industry. “We are all wise to keep our fingers on the pulse of the global marketplace,” he said, outlining consumption/production figures for the countries that are playing a major role in the global fertilizer market – the so-called BRIC nations of Brazil, Russia, India, and China.
Wilson described a tight supply/demand balance, with low producer and downstream inventories. He also detailed strong farm-level demand for nitrogen, phosphates, and potash, and the demands placed upon the industry by renewable fuels. Wilson said natural gas pricing in the U.S. has become less volatile and pricing more attractive relative to the rest of the world, which translates into an advantage for domestic producers.
Wilson offered what he described as an “infomercial” about the CF/Terra combination, calling it a “transformational change.” The combined companies establish a clear nitrogen leader in North America, he said, as well as the third-largest global phosphate business among publicly-traded companies.
Wilson touted CF’s rationale for the Terra acquisition, saying the company’s expanded size nearly doubles revenues and will create $105-$135 million in annual cost synergies over the next 18-24 months. He said the merger more than doubles the company’s nitrogen manufacturing capacity and exposure to cost-advantaged North American natural gas, and establishes CF as the North American leader in ammonia, UAN, and urea production.
“CF Industries was a great company before we acquired Terra,” he said. “In the future, we’ll be even more capable of serving our customers and other stakeholders.”
Michael Prud’homme of the International Fertilizer Industry Association (IFA) also talked about the “quick recovery” in global fertilizer demand in 2010, which is supported, he noted, by a “still-fragile rebound in the global economy.” Food production has to double while arable land remains static to feed the world’s growing population, he said.
Like Wilson, Prud’homme discussed consumption/production trends from the “fertilizer powerhouses” of China and India, as well as the impact of energy prices, climate change policies, ocean freight rates, and exchange rates on the global fertilizer industry.
Prud’homme said IFA remains optimistic about the period beyond the current rebound, predicting that global consumption of nitrogen, phosphates, and potash will recover fully in three years to the levels the industry experienced in 2007.
Dr. Dave Downey of Purdue University outlined changes in the grower and retail sectors, noting the growth of large commercial farms that are “dramatically impacting the way we do business.” Downey cited Purdue research showing that farms of 2,000 acres or more are “growing dramatically fast.” He said ag retailers are in a squeeze as a result, due to rising input costs, demand from growers for lower prices, intense competition for fewer customers, and eroding margins.
“Farmers are changing fast in the way they buy, their attitude toward suppliers, what they rely on for information, and what they expect from suppliers,” Downey said. “It is the customer who will ultimately dictate the nature of the distribution system.”
The Fertilizer Institute President Ford West offered a legislative update, referring to what he described as “an aggressive regulatory environment” in Washington. He cited the Florida Numeric Nutrient Criteria issue as an example, saying it illustrates “an aggressive EPA, backed up by an aggressive White House, and solidified by an activist judge.”
Contrasting last year with the political environment of today, West said there is a “continuing erosion of trust in the major institutions of government.”
West said the U.S. Department of Agriculture has adopted the fertilizer industry’s mantra of the Four Rs – the right product at the right rate, the right time, and the right place – but said the agency believes only 15 percent of farmers use it. “We want farmers to improve their nutrient use efficiencies,” West said.
In an effort to conclude on a positive note, West said perhaps the best news for the industry is that “the White House garden is NOT organic.” This came from a recent quote from the White House chef in the Baltimore Sun.
David Asbridge, president of NPK Fertilizer Advisory Service, ended the program on a positive note, saying planted acreage next year should shift toward fertilizer-intensive crops, with corn acreage at 91 million acres.