All posts by hlancey@bloomberg.net

Crops/Weather

Crops/Weather, Eastern Cornbelt, Market Watch, South Central, Southeast, Southern Plains, Western Cornbelt

Eastern Cornbelt:

US Drought Monitor

Strong storms brought heavy rain, damaging winds, and tornado warnings to northern Illinois and northern Ohio on Aug. 7.

The system prompted a severe thunderstorm warning in the Chicago area early in the day, while northeastern Ohio was hit later with high winds, large hail, and at least one tornado near the town of Parma. Some 400,000 homes and businesses were without power in northeastern Ohio at the peak of the storm.

Indiana avoided most of the several weather, though a cold front dropped temperatures roughly 10 degrees at midweek. Highs across central Indiana were expected to reach the upper-80s and low-90s again by the end of the week, however.

Good or excellent ratings were assigned to 75-81% of the corn and soybeans in Illinois on Aug. 4, compared with 68-70% in Indiana, 63-64% in Ohio, and 60-61% in Michigan.

Western Cornbelt:

A powerful storm spawned several tornadoes in southern Minnesota and northeastern Iowa on Aug. 5, including an EF-1 near Waukon, Iowa, that reached peak wind speeds of 105 mph. A round of showers in central and southern Missouri at midweek brought temperatures down to the low- to mid-80s for the balance of the week.

Fully 70-77% of the regional corn crop and 73-76% of the soybeans were rated as good or excellent on Aug. 4, along with 74% of Nebraska’s sorghum, 76% of Missouri’s rice, and 61% of Missouri’s cotton crop.

Southern Plains:

Rain and cooler temperatures were reported across Kansas and northern Oklahoma as the week progressed, with highs in the 70s and 80s. Heat advisories continued across southern Oklahoma, northern Texas, and New Mexico, however, with highs reaching the triple digits during the week.

Areas of extreme-to-exceptional drought were reported in southern New Mexico and western Texas in early August, with a much broader area of moderate-to-severe drought covering northern New Mexico and a wide swath of Oklahoma and Kansas.

The corn harvest was on in Texas and Kansas, with good or excellent ratings assigned to 35% of the acreage in Texas, 47% in Kansas, and 50% in Colorado. The Kansas soybean crop was 59% good or excellent, while cotton in those two categories totaled 61% of the acreage in Oklahoma, 57% in Kansas, and 32% in Texas. Sorghum rated as good or excellent totaled 60% of the crop in Oklahoma, 45% in Colorado and Kansas, and 41% in Texas.

South Central:

Corn Wheat Soybean Index

Heat advisories were in effect for southern Arkansas earlier in the week, but cooler weather moved in as the week progressed, with highs in Arkansas and Tennessee topping out in the mid-80s on Aug. 8-9.

High heat continued to blanket much of Louisiana and Mississippi, however, with triple-digit highs reported in both states during the week. New Orleans was bracing for its hottest days of the summer so far on Aug. 7-9.

Crop conditions remained favorable in the region in early August. Good or excellent ratings were assigned to 68% of Kentucky corn crop on Aug. 4, compared with 57% in Tennessee, while soybeans in the good or excellent categories totaled 64% of the acreage in Kentucky and Tennessee, 71% in Mississippi, 73% in Arkansas, and 83% in Louisiana.

Fully 79% of Louisiana’s cotton was rated as good or excellent, compared with 70% in Arkansas, 61% in Tennessee, and 56% in Mississippi. With the rice harvest now 34% complete in Louisiana and 16% in Texas, USDA placed 83% of Louisiana’s crop in the good or excellent categories, along with 76% of the acreage in Arkansas, 64% in Texas, and 57% in Mississippi.

Southeast:

Hurricane Debby brought heavy rain and damaging winds to parts of the Southeast, producing widespread flooding and spawning several deadly tornadoes.

After making landfall in Florida as a Category 1 hurricane on Aug. 5, Debby dumped more than a foot of rain over parts of Florida, Georgia, South Carolina, and North Carolina during the week. Flooding, downed trees, and power outages were also reported in Virginia on Aug. 6. At least six deaths were attributed to the storm.

Debby was expected to move into the Mid-Atlantic region by Friday before sweeping through the Northeast, with forecasts warning of 2-6 inches of rain in parts of Maryland, New York, and New England.

USDA on Aug. 4 assigned good or excellent ratings to 50% of North Carolina’s soybeans and just 21% of the corn, while cotton in those two categories totaled 63% of the crop in North Carolina and Alabama, 66% in Virginia, 67% in Georgia, and 52% in South Carolina. Peanuts rated as good or excellent totaled 91% of Virginia’s crop, compared with 88% in Alabama, 79% in Florida, 70% in Georgia and North Carolina, and 61% in South Carolina.

Transportation

Arkansas River, Illinois River, Market Watch, Mississippi RIver, Ohio River, Transportation, U.S. Gulf

US Gulf:

Travel will be unavailable through Port Allen Lock on Aug. 12-15 to allow for the completion of repairs that began in March. Port Allen Lock was closed for nearly a month following a March 28 miter gate hinge anchorage failure.

Bayou Sorrel Lock guidewall repairs scheduled through Oct. 30 halted weekday travel from 7 a.m. to 4 p.m. Wait times were noted up to 25 hours at midweek, down from a maximum 18 hours at last report.

Ongoing work at Brazos Lock limited Monday-Friday movements from 7 a.m. to 7 p.m. Intermittent delays were reported at 4-16 hours, according to Corps data, down from 72 hours in the prior week. The project is expected to run through October.

Sources continued to report lingering backups at Industrial Lock following a July 25-27 shutdown for equipment inspection and hurricane preparations. With 22 tows counted in line to lock, Corps data showed delays up to 45 hours on Aug. 8.

Port Allen Lock delays were reported up to 10 hours at midweek. Early-week delays were quoted up to 18 hours at Algiers Lock, but fell below the six-hour mark on Aug. 7-8. Intermittent 6-11 hour waits were reported at Calcasieu Lock, and Corps data showed a handful of 8-13 hour delays at Colorado Lock.

Mississippi River:

A steady decline in water levels in the St. Louis area limited harbor activity and slowed travel through the area, sources said. Depths were posted at 10.3 feet and falling on Aug. 8, with forecasts calling for 6.2-foot levels on Aug. 22.

Heat advisories were in effect for parts of southeast Louisiana and southern Mississippi on Aug. 8, with heat index values predicted up to 112 degrees.

Revetment operations at Mile 775 of the Lower Mississippi River will likely block southbound travel from 6 a.m. to 6 p.m. daily starting in September. The Corps is expected to finalize dates for the project in late August.

Rock placement underway at Mile 759 will block southbound travel between 7 a.m. and 7 p.m. daily through an estimated Sept. 18. Pipeline removal at Mile 158 is slated to run from Aug. 18 through Sept. 24 but is unlikely to force major impacts to navigation, though intermittent slowdowns and stoppages are expected.

Dredging was underway at Miles 598-599, through potential shoaling concerns at Miles 604-606 could prompt the dredge to shift locations before the current project is completed, sources noted.

Sporadic 4-18 hour delays were reported at Lock 14, and intermittent 19-hour waits were observed at Lock 15. Lock 24 wait times were quoted in the 5-9 hour range, and tows transiting Lock 25 waited up to 15 hours to pass. At Lock 27, Corps data showed intermittent 4-7 hour delays.

Illinois River:

Maximum loading drafts continued to be reported at 9.5 feet for Miles 1-231 and 9.0 feet above Mile 231. Lockport Lock at Mile 291 is projected to close in 2025 from Jan. 14 through March 11 for vertical lift gate installation, blocking movements to and from the Chicago area.

Ohio River:

Loading drafts remained limited on the Ohio River, sources said. Drafts were capped at 10-10.5 feet, depending on location and direction of travel, down 5-10% from normal levels. Tow lengths were permitted up to 15 barges for the full length of the river.

McAlpine Lock is shut to downriver lockages between 7 a.m. and 7 p.m. through Nov. 30. The primary chamber at Markland Lock will close for 19 hours daily between Aug. 12 and Sept. 6, forcing detours through the auxiliary chamber.

The main chamber at Hannibal Lock is offline for miter gate repair through Nov. 8, with delays noted up to 28 hours during the week. The John T. Myers Lock main chamber is slated to shut from Aug. 21 through Nov. 9. A similar outage in October 2023 produced delays up to four days. Belleville Lock will see 30-day main and auxiliary chamber closures before the end of the year.

The Tennessee River’s Kentucky Lock was scheduled to return from gate fender replacement on Aug. 10. Travel through the site had been unavailable during daytime hours since June 11. Delays topped out at 37 hours during the week. Wilson Lock, closed to daytime travel since July 22, was due to resume normal locking hours on Aug. 8. Midweek delays were noted up to 12 hours.

On the Monongahela River, a seven-foot draft limit at Lock 3 due to construction will effectively block commercial travel through the site until an estimated Aug. 25.

Arkansas River:

The Van Buren Bridge, located at Mile 300.8 of the Arkansas River, will shut for repairs on Aug. 16 through Sept. 8. Queued vessels will be permitted to pass sometime after the ninth day of work, sources said, while shuttle barges will be free to transit through the site whenever the channel is free of equipment.

Northbound barges were advised to depart Rosedale by Aug. 16 to make the cutoff, while southbound vessels were suggested to release from Catoosa no later than Aug. 19.

Webbers Falls Lock will shut for miter gate inspections between Aug. 26 and Sept. 8. Intermittent delays are expected in the weeks leading up to the closure.

CPKC CEO Says Canadian Rail Strike Likely in Second Half August

Canada, Featured, Vancouver

The CEO of Canadian Pacific Kansas City Ltd. (CPKC) railway said a strike by the Teamsters Canada Rail Conference (TCRC) now seems likely in the second half of August, according to multiple media reports.

TCRC represents nearly 10,000 conductors, locomotive engineers, and yard workers at Canadian National (CN) and CPKC, including 3,300 at CPKC alone. CPKC CEO Keith Creel told analysts on a July 30 conference call that the railroads and union remain “fair apart” on negotiations over a new collective agreement.

“I’m just being transparent and honest. It’s going to be a challenge,” Creel said. “We’re going to remain cautiously optimistic. But we’re not going to do a bad deal, either.”

The railroads and TCRC are still awaiting a decision by the Canadian Industrial Relations Board (CIRB), which is considering whether a strike would compromise safety and essential services. CIRB in July said it expects to make its ruling by Aug. 9 (GM July 19, p. 1), and no strike or lockout can take place until at least 72 hours after the decision.

“You can imagine the impact, obviously, of most railroads in the nation being shut down,” Creel said, warning of “mass chaos” if the railway can’t alert their clients to a work stoppage several weeks in advance.

Creel noted that revenues from container traffic fell 4% year-over-year as customers rerouted some shipments due to strike concerns, but said a labor disruption will not affect CPKC’s financial guidance so long as it lasts less than two weeks, the Canadian Press reported. Last week, CN lowered its forecast for earnings growth amid fallout from the strike threat as clients seek to steer clear of Canadian ports and rail lines.

“It’s impacting our business, particularly in the international intermodal where customers have taken actions to reroute vessels away from Canadian ports until the labor questions have been resolved,” said CN CEO Tracy Robinson in a July earnings call. Intermodal volume dropped 17% from May 12 to July 14, according to CN.

According to Trains magazine, a strike would shut down both CPKC and CN in Canada, and would also affect commuter operations in Vancouver, Toronto, and Montreal because the trains operate on trackage dispatched by CPKC rail traffic controllers, who are represented by the TCRC.

ICL Acquires Custom Ag Formulators, Adds to Growing Solutions Business

Brazil, Featured, U.S., West Coast

ICL Group Ltd. on July 29 announced that it has acquired Custom Ag Formulators (CAF), a North American provider of customized agriculture formulations and products for growers. The acquisition for approximately $60 million is part of ICL’s effort to expand its Growing Solutions product offering and to position the business for further growth in new and adjacent end-markets.

“We are pleased to have Custom Ag Formulators join ICL and bring their expertise to our customers in the US,” said Elad Aharonson, President of ICL Growing Solutions. “This acquisition helps further the growth of our global Growing Solutions business, by enabling us to meet the distinctive needs of local growers through our existing distribution partners. It also allows us to address the specific requirements of farmers across the growing regions of the West Coast and the Southeast, where crops – and their nutritional needs – can vary greatly.”

CAF operates two manufacturing sites, one in Fresno, Calif., and the other in Adel, Ga., where the company produces liquid and dry adjuvants and enhanced nutrients, as well as various other specialty products, in customized agricultural formulations and packaging. CAF’s strategic locations allow it to ship same-day to growing regions on both the US East and West Coasts, as well as to the central US.

“Custom Ag Formulators was founded to provide quality products with custom formulations and packaging in a timely and efficient manner,” said Patrick Murray, CAF Principal and Director of Sales. “For more than 25 years, our mission has been to consistently lead the industry in customer service, quality, and product innovation, and we are excited to move this mission forward with ICL Group.”

This is the second Growing Solutions acquisition for ICL in 2024. The first, completed earlier this year, was the $30 million purchase of Nitro 1000, a manufacturer, developer, and provider of biological crop inputs in Brazil (GM March 1, p. 30).

Yara Launches Cost/Capex Reduction Program; Second Quarter Benefits from Improved Margins

Clean Ammonia, Earnings, Egypt, Featured, Low-Carbon, Nitrogen

Yara International ASA reported second-quarter EBITDA excluding special itemsof $513 million on improved margins, compared with $252 million in second-quarter 2023 and beating the average analyst estimate of $462 million. Net income for the quarter was $3 million on revenues of $3.53 billion, compared with a net loss of $298 million last year.

Yara said the global nitrogen market tightened during second quarter, due to the absence of Chinese exports and supply restrictions in Egypt.

“I’m pleased to see improved results, with higher margins and deliveries in a more stable price environment,” said Svein Tore Holsether, President and CEO. “However, returns are not at satisfactory levels. We have been through turbulent, volatile years which Yara has navigated well, but we now need to adjust our priorities and cost base, to improve Yara’s profitability.”

To that end, Yara said it has initiated a cost and capex reduction program to strengthen its financial performance and improve shareholder returns going forward. The Oslo-based company plans to cut fixed costs and capital expenditure by $150 million each by the end of 2025 by prioritizing high-return core business and scaling down tail-return activities.

Yara said that a final investment decision for its US clean ammonia investments is still planned for the second half of 2025, provided projects “are set for strong double-digit returns.” Sound funding and risk-adjusted project returns above 10% are key requirements for all growth projects, the company noted.

“Yara has unique competitive edges as an integrated nitrogen producer with a global asset footprint and downstream presence,” Holsether said. “This gives us scale, flexibility and optionality in how we optimize our business, including our ammonia production and trade, and it positions Yara well for profitable decarbonization. With a sharpened strategic focus and growing demand for low-carbon crop solutions, Yara is set to increase value creation and shareholder returns going forward.”

Yara shares rose as much as 4.1% after the earnings release, the most since Feb. 9, but have declined about 19% over the past year, with subdued fertilizer demand and uncertainty over how the company will raise funds for its clean ammonia plans weighing on the stock.

“Yara’s $300 million plan to trim costs and reduce capital spending aims to boost return on invested capital metrics by 2%, bringing it closer to its target of 10% in the next 18 months,” said Bloomberg Intelligence Analyst and Green Markets Research Director Alexis Maxwell. “The company sees $150 million in fixed-cost savings and the rest coming from capex, which falls to $1.2 billion in 2024.”

Low Refining Margins Impact CVR’s Second Quarter; Nitrogen Fertilizer Sales Beat Estimates

Ammonia, Earnings, Featured, Nitrogen, Texas, UAN

CVR Energy Inc., Sugar Land, Texas, on July 29 announced second-quarter net income attributable to CVR Energy stockholders of $21 million (21 cents per diluted share) and EBITDA of $103 million, down from $130 million ($1.29 per diluted share) and $300 million, respectively, in last year’s second quarter.

Net sales for the second quarter came in at $1.97 billion, beating the average analyst estimate (Bloomberg Consensus) of $1.78 billion. Adjusted earnings per diluted share was 9 cents and adjusted EBITDA was $87 million, compared with $1.64 and $347 million, respectively, last year and up from the average analyst estimate (Bloomberg Consensus) of $80 million.

The second quarter earnings results were attributed to lower refining margins due to a decrease in the Group 3 2-1-1 crack spread and reduced throughputs related to a fire at the company’s 78,000 b/d Wynnewood, Okla., refinery that occurred during severe weather in late April, said Dave Lamp, CVR Energy’s CEO. The refinery is now operating at normal rates.

Net income from CVR’s petroleum operations fell to $18 million from $194 million in last year’s second quarter, with Lamp citing weakness in the Midcontinent refined product market as well as downtime and higher expenses related to the Wynnewood fire.

The Nitrogen Fertilizer Segment reported second-quarter net income of $26 million and EBITDA of $54 million on net sales of $133 million, down from last year’s net income of $60 million and EBITDA of $87 million on net sales of $183 million. Nitrogen fertilizer net sales came in at $133 million, beating the average analyst estimate of $115.9 million.

Production at the CVR Partners LP’s fertilizer facilities remained consistent compared to the second quarter of 2023, producing a combined 221,000 st of ammonia during the second quarter, of which 69,000 st were available for sale while the rest was upgraded to other fertilizer products, including 337,000 st of UAN.

Last year’s second quarter saw combined production of 219,000 st of ammonia, with 70,000 st available for sale and the rest upgraded, including 339,000 st of UAN. Average second-quarter realized gate prices for UAN were down 15% from last year, to $268/st from $316/st, while ammonia was down 26%, to $520/st from $707/st.

“CVR Partners achieved solid operating results for the second quarter of 2024 driven by a combined ammonia production rate of 102%,” Lamp said. He added that CVR continues “to explore strategic transactions both in refining and potentially related to the CVR Partners, although we have nothing to report at this point.”

Consolidated cash and cash equivalents were $586 million as of June 30, an increase of $5 million from Dec. 31, 2023. Consolidated total debt and finance lease obligations were $1.6 billion as of June 30, including $548 million held by the Nitrogen Fertilizer Segment.

CVR Energy announced a second-quarter cash dividend of 50 cents per share, while CVR Partners declared a second-quarter cash distribution of $1.90 per common unit. Both will be paid on Aug. 19, 2024, to common unitholders of record as of Aug. 12, 2024.