All posts by hlancey@bloomberg.net

Canada, India Spat Prompts Travel Restrictions, May Impact Trade; Three-Year Potash Contract in Place

Belarus, Canada, Featured, India, Potash, Russia

There were fears that some Canadian firms that generate revenues from sales to India may see a drop in stock prices after Prime Minister Justin Trudeau on Sept. 18 accused the Indian government of involvement in the killing of a prominent Sikh leader in Surrey, B.C., in June. There was speculation that potash miners Nutrien Ltd. and The Mosaic Co., both members of Canpotex Ltd., might move down. Canpotex lists India among its five largest export markets.

While both stocks were off slightly on the New York Stock Exchange between Monday and Thursday’s close, neither company wanted to comment. A recent decision by the US Court of International Trade remanding phosphate countervailing duties back to the US International Trade Commission was another possible factor (See related story).

“Canadian potash is vital to India’s food security and Canpotex has been a reliable supplier to India for 50 years,” said Gordon McKenzie, Canpotex President and CEO last year when the organization inked a new three-year contract with three Indian companies (GM Sept. 30, 2022). “Canpotex is committed to supporting India’s potash needs as their agriculture sector continues to grow, particularly in light of current restrictions on Russia and Belarus.”

At the time, Canpotex signed Memorandums of Understanding (MOUs) with three of its customers in India: Indian Potash Ltd., Coromandel International Ltd., and Chambal Fertilisers and Chemicals Ltd. The MOUs confirmed Canpotex’s willingness to supply, and each customer’s willingness to acquire, up to 500,000 mt of potash annually during the period from Jan.1, 2023, to Dec. 31, 2025.

India Potash Ltd. Managing Director P.S. Gahlaut told Reuters on Sept. 22 that his company does not expect any impact on potash imports from Canada. “Canpotex’s deal with Indian companies are commercial contracts,” Gahlaut said. “So far, it is business as usual for us.”

On Sept. 18, Prime Minister Justin Trudeau announced that Canadian investigators were “pursuing credible allegations of a potential link” between Indian agents and the shooting of Hardeep Singh Nijjar, 45, outside a temple in B.C. last June. Trudeau said he had raised the issue directly with Prime Minister Narendra Modi and called on India to cooperate in the investigation, emphasizing that “any involvement of a foreign government in the killing of a Canadian citizen on Canadian soil is an unacceptable violation of our sovereignty.”

The Indian foreign ministry has rejected the charges as “absurd and motivated.” It repeated calls for Canada to crack down on figures such as Nijjar, whom India had designated a terrorist bent on promoting the so-called Khalistan movement, which during the 1980s and early 1990s violently sought to carve out an independent Sikh state in India’s Punjab region. Several other Sikh activists have died overseas under suspicious circumstances in recent months.

Ties between the nations are at their lowest point in decades due to tensions over demands by some Sikhs in Canada – the largest population outside of India’s Punjab state – for an independent homeland. Both countries expelled senior diplomats from the other side.

Officials in New Delhi have long accused Canada of serving as a haven for Sikh separatists and doing little to protect Indian missions and consulates from protests carried out by these groups. On Sept. 20, New Delhi issued warnings for its citizens living and studying in Canada to exercise caution in areas where there are anti-India activities and “politically condoned hate crimes.”

The notice was shared widely on social media in India along with calls to boycott Canadian brands such as coffee chain Tim Hortons and frozen food manufacturer McCain Foods. Indian media has taken a nationalist tone in their coverage of the issue, questioning the veracity of Trudeau’s claims and asking why no evidence has yet to be released. 

Prime Minister Narendra Modi, who has yet to address Trudeau’s accusations, is widely seen by analysts as benefitting politically from the diplomatic spat ahead of elections next year, when he’ll be vying for a third term in power. His party has pushed a Hindu nationalist agenda and the government takes a rigid position against secessionist Sikh groups, which tracks well with voters.

At the same time, Trudeau’s minority government is kept in power by the New Democratic Party, whose leader is Jaymeet Singh, a Sikh. There are some 1.4 million Canadians of Indian heritage, or 4% of the population, many of them Sikhs.

By Sept. 21 the situation had been exacerbated, with India suspending visa applications in Canada. The move meant Canadians would not be able to travel to India if they didn’t already have a visa, affecting both business and leisure travelers. Canadians made 280,000 tourist arrivals in India last year, according to Indian government data, making it the No. 5 source of such visitors.

Montreal-based engineering firm SNC-Lavalin Group Inc., which now operates under the brand name of AtkinsRealis, has limited travel to India for Canadian employees to “essential reasons only” until further notice, the firm told Bloomberg.

Orica Touts Strong Performance, Exits Venezuela

Ammonia, Australia, Earnings

Melbourne-based explosives manufacturer Orica Ltd. on Sept. 19 confirmed its full-year outlook for fiscal 2023 is in line with the guidance given in the first-half results in May (GM May 19, p. 25), and said the strength of the underlying business performance is expected to continue into the 2024 financial year.

For the second half of FY2023, the company expects improvements in both trade working capital and operating cash flow, resulting from reduced inventory valuation and inventory volume optimization. Net finance costs in the second half are also anticipated to be slightly lower than for the first half of FY2023.

Orica expects strong business performance in 2024 “supported by the ongoing execution of the strategy, commercial disciple, strong customer demand, and increased earnings” from its blasting and digital technology offering.

The company has a number of major turnarounds scheduled in the first half of 2024, including one at the Kooragang Island ammonia plant in New South Wales, which occurs every six years. The plant will be down for around 11 weeks across two stages in October and February.

Jefferies analyst Richard Johnson, as cited by a Dow Jones report, noted that “this shut means that Orica will be short circa 70,000 mt of ammonia, or circa 160,000 mt of ammonium nitrate.” Based on some very broad assumptions, he said the dollar impact of this loss could be around A$30 million ($19.4 million).

Orica said it continues to remain cautious of external challenges from geopolitics, inflationary pressures, and high energy costs. It said the business will continue ongoing cost-efficiency initiatives to reduce the impact of these external factors. Orica will report its fiscal 2023 full-year results on Nov. 9.

Orica in its Sept. 19 ASA release confirmed its intention to exit Venezuela following the cessation of its operations in the country in 2019 after US sanctions were imposed on Venezuela, and due to what Orica described as “the complex operating environment.”

Orica said it is finalizing a sale of the legal entities and expects to complete this during the current month. It puts the current estimated loss on sale, including the non-cash impact of reclassifying historical amounts deferred in the Foreign Currency Translation Reserve (FCTR), at A$20 million after tax, which will be reported as an individually significant item.

Grupa Azoty Posts Second-Quarter Loss

Ammonia, Earnings, Poland, Urea

Polish fertilizers and chemicals group Grupa Azoty SA posted a Pln543 million (approximately $125 million at current exchange rates) net loss for the second quarter ended June 30, 2023, according to a company statement of preliminary results. The group reported a Pln799.6 net profit for second-quarter 2022 (GM Oct. 7, 2022).

Azoty expects to report a second-quarter EBITDA loss of Pln608 million versus an EBITDA of Pln1.24 billion in last year’s second quarter.

The loss would have been even greater had it not been partially offset by a Pln289 million contribution from the sale of CO2 emission allowances purchased on the market in previous periods by Azoty subsidiaries Zakłady Azotowe Puławy S.A., Zakłady Chemiczne “Police,” and Zakłady Azotowe Kędzierzyn S.A., according to the Sept. 18 statement.

Revenues for the quarter are expected to be 46% off at Pln3.49 billion, down from the prior-year Pln6.41 billion.

Azoty’s Agro/Fertilizers segment is expected to report a second-quarter EBITDA loss of Pln520 million, down from the year-ago positive EBITDA of Pln657 million. The group reported a 24% decrease in total fertilizer sales volumes in the quarter, citing low demand. Compound fertilizer sales volumes saw an even steeper decline, with sales volumes down 49% year-on-year.

“Unfavorable conditions prevailed in Polish agriculture, with grain prices following a downward trend in the domestic market, leading to diminished demand and downward pressure on fertilizer prices,” Azoty said.

The group also cited an increase in imports of urea and ammonia into the European Union and the domestic market during the EU’s six-month suspension of tariffs on urea and ammonia. The import duties came back into effect on June 17, though some origins remain exempt from the tariffs, including Trinidad and Tobago, Egypt, and Algeria (GM June 23, p. 29). Duties on ammonia and urea imports originating from Russia and Belarus remained in effect through the six-month suspension.

Due to the weak demand, Azoty said it aligned its production in the second quarter with the prevailing supply and demand conditions. Its total fertilizer output was 43% lower in the quarter compared with last year’s second quarter, while production of compound fertilizers was down 49% year-over-year.

Azoty’s Chemicals segment, which produces sulfur, technical grade urea, and melamine, is expected to report a second-quarter EBITDA loss of Pln252 million versus the year-ago positive EBITDA of Pln431 million.

The second-quarter earnings were much lower than market expectations. Azoty’s shares dropped as much as 4.9% in Warsaw immediately following the release of the preliminary results on Sept. 18, their lowest level since June 13, according to a Bloomberg report.

Azoty earlier this month signed waiver and amendment letters with 13 financing institutions whereby they agreed to waive certain covenants laid down in loan agreements to the group and its “Police” subsidiary (GM Sept. 8, p. 26). The group had been seeking covenant waivers from its lenders since June amid an expected breach in its debt/EBITDA ratio covenants at the end of the second quarter.

For the six months to June 30, 2023, Azoty expects to report an EBITDA loss of Pln1.009 billion and consolidated revenue of Pln7.39 billion. However, Azoty expects fertilizer markets to improve during the second half of the year, based on the upward trend in fertilizer demand observed in the third quarter. This is expected to have a positive impact on the group’s financial results, Azoty said.

Northern Country, Viafield Approve Merger

News, News Briefs, Western Cornbelt

Members of Northern Country Cooperative in Stacyville, Iowa, and Viafield in Charles City, Iowa, have voted in favor of a proposed merger, according to a Sept. 13 announcement from both cooperatives. The combined cooperative will have staff of more than 270 serving some 4,700 farmer members across 16 counties in southern Minnesota and northern Iowa.

The proposed merger was first announced in July, when the boards of both co-ops sent letters to members stating that a unification study had determined that a merger would allow for optimal growth and opportunities. The two businesses have shared some agronomy resources and operations for more than two years, though the boards said there is “little to no” overlap of trade territories.

Actual voting results were not disclosed, but the board announcement said the member ballot return exceeded the Iowa requirement and overall approval votes met the two-thirds threshold for the merger to pass.

The name of the combined company has not yet been announced, but the unified business will take effect on Feb. 1, 2024, with corporate offices continuing to be based in both Stacyville and Charles City. Jason Schwenneker, current Northern Country CEO, will serve as the new co-op’s CEO, while Derrick Davis, current Viafield CEO, will serve as Chief Operating Officer.

“This merger is truly the best path forward for our respective cooperatives, employees, and communities,” Schwenneker said. “We will be best positioned in size and scale to continue serving the expanding needs of our customers today and those in next generations. That is truly something we all can be proud of.”

The new board will consist of 12 directors, with six appointed from each co-op. The equity that members currently hold will be honored dollar-for-dollar in the new cooperative. No significant changes to operations or employees are planned as a result of the merger.

Northern Country currently has 2,200 farmer members, 130 employees, and 13 locations in northern Iowa and southern Minnesota, with operations in grain marketing, storage, and drying; fertilizer and chemical sales; feed manufacturing; and lumber sales. The company in July celebrated the grand opening of a new agronomy service center in Stacyville.

Viafield operates agronomy, energy, feed, and grain businesses from 14 locations in northern Iowa and one in southern Minnesota. The company was formed in 2010 through the merger of Farmers Cooperative, Northeast Iowa Cooperative, and Progressive Ag Cooperative, and currently has 2,500 farmer members and 140 employees.

“We are grateful for the trust our fellow members showed in this merger vote, said Dave Huper, Northern Country Board President. “It is through that active member ownership that we will be able to further strengthen the services and resources for our farmer-owners.”

“Our boards pursued this unification with consideration of mutually sound financial standings and individual strengths that we recognized would bring increased value to our neighbor farmers,” said Steve Fullerton, Viafield Board President.

Agrow Plans Fertilizer Facility in Washington

News, News Briefs, Pacific N.W.

Agrow Solutions, Pullman, Wash., plans to invest $2.5 million at Washington’s Port of Whitman County for a new fertilizer manufacturing and distribution facility. It will be located on a vacant 11-acre lot at the Port’s Central Ferry site, which is located on the southeastern end adjacent to the lower Snake River.

The Port on Sept. 21 was awarded a $1.6 million low-interest loan from the Washington State Community Economic Revitalization Board (CERB) to expand rail and water infrastructure to the site. Planned infrastructure expansions supported by the loan include an extension of the property’s Port-owned rail lead and installation of a well. The loan will cover the permitting, engineering, and construction of the public utility infrastructure, which is anticipated to be completed in early summer 2024.

“Adding rail and water to the Central Ferry site is an important step in bringing custom fertilizer blends to local farmers at a larger scale,” said Agrow Solutions Owner Ben Moehrle. “We’re excited to partner with the Port of Whitman County for Agrow Solutions’ next chapter.” The new infrastructure will allow Agrow to bring bulk quantities of fertilizer to the location, mix personalized fertilizer packages, and move the product to market.

The company provides crop consulting and custom fertilizer blends to farmers in the Palouse region. It has reached capacity at its flagship facility and is seeking additional space to conduct fertilizer mixing and distributing practices. The planned facility is anticipated to create seven jobs upon construction completion next summer.

Construction on the public rail and water infrastructure is anticipated to begin in early 2024 pending engineering design and construction bid collection and selection.

In addition to the $2.5 million investment, Agrow is providing the required $400,000 match for the public infrastructure project. The public infrastructure project, including engineering, fees, contingency and construction, is expected to total $2 million.

Russia Sets Exchange Rate Premium on Export Duties

News, News Briefs, Nitrogen, Phosphate, Russia

The Russian government has further clarified the new duty on exports of most fertilizer products that became effective on Sept. 1 and will be in place until the end of 2024 (GM Sept. 1, p. 26).

According to an Interfax report, citing a Russian government resolution published on Sept. 21, “the ‘exchange rate rent’ for exporters of mineral fertilizers is a premium to the recently introduced duties rather than a separate duty.”

As previously reported, the ad valorem rate is 7% of the customs value, while the specific rate, meaning the minimum duty per tonne in roubles, varies according to the type of fertilizer and includes RUB1,100/mt (approximately $11.47/mt at current exchange rates) for nitrogen fertilizers; RUB1,800/mt ($18.77/mt) for potash; and RUB2,100/mt ($21.90/mt) for phosphate and compound fertilizers.

According to the resolution, the 7% rate is applicable when the exchange rate averages at or below 80 roubles/$1 for the month. However, the 10% rate is applicable when the exchange rate averages above 80 roubles/$1 for the monthly monitoring period.

Acron Targets Production Start at Talitsky Mine

News, News Briefs, Potash, Russia

Russia’s Acron Group has confirmed plans to start potash production in 2026 at its Talitsky potash mining project under development in Russia’s Perm Region. The operation will have an initial production capacity of 2 million mt/y of potash when fully ramped up.

Acron Group CEO Alexander Popov confirmed the production start in a Sept. 20 company statement following a meeting in Perm between the CEO, Acron Group Vice President Vladimir Kantor, and Perm Krai Governor Dmitry Makhonin.

According to the statement, construction of Talitsky’s mine and surface facilities is well underway. Acron reported in March that the construction of the skip and cage shafts had been completed (GM March 10, p. 29). Some 2,000 people will be employed at the site when it becomes operational.

The potash mine project is the largest in Acron’s history, Kantor said. Total investment will be $2.7 billion, of which $1.3 billion already has been invested. Talitsky is being developed through the CJSC Verkhnekamsk Potash Co. (VPC), in which Acron currently owns 50% plus one share.

Early this month, Interfax reported that Acron had extended options to buy back two share tranches in VPC until December 2023 in the case of a 19.5% tranche, and until February 2024 for a 10% tranche (GM Sept. 1, p. 26). Russian banks Sberbank Investments, Otkritie Bank, and VTB Group reportedly hold the remaining shareholdings in VPC.

BioConsortia Expands into Brazil

Brazil, Latin America, News, News Briefs, Nitrogen

Microbe product developer BioConsortia Inc., Davis, Calif., on Sept. 19 announced a strategic expansion into Brazil.

“We have accelerated our entrance into Brazil because, even as the country leads the world in use of biologicals, we believe BioConsortia’s products offer improved performance to growers because of their ease-of-use and consistent contribution to yield,” said BioConsortia CEO Marcus Meadows-Smith. “We are eager to collaborate with local partners to create a lasting positive impact on the environment and the economy by improving farmer profitability.”

BioConsortia said Brazil’s biological product market exceeds $850 million and offers the company a prime opportunity for its seed-delivered microbial products.

BioConsortia’s expansion to Brazil is already underway. The company recently appointed Cesar Lamonega as Business Development Lead, Latin America, who will accelerate BioConsortia’s commercial partnering activity in the territory. In addition, the company also added Debora Chaves Coelho Leite to the regulatory team. It said she brings broad regulatory experience from her previous roles at Vigna Brazil and Monsanto Brazil.

BioConsortia said it has begun registration efforts for multiple seed-applied products, including a fungicide targeting early season pathogens like rhizoctonia and pythium, as well as a broad-spectrum nematicide that also shows activity against soil insects like corn rootworm and wireworm.

BioConsortia previously announced an R&D and Commercial Agreement with The Mosaic Co. for nitrogen-fixing microbial solutions in row crops in territories including Brazil (GM Dec. 11, 2020).

Field testing in Brazilian corn production is already underway and the company aims to demonstrate meaningful yield increases and reduced application of synthetic nitrogen fertilizer, thereby producing more grain for every unit of applied nitrogen.