All posts by mickeybarb@charter.net

SOP Magnesia

California, Market Watch, Pacific N.W., Southern Plains, Specialty, Sulfate of Potash Magnesia

Southern Plains:

Intrepid announced a $50-$55/st increase for its Trio grades on Aug. 9. New postings FOB Carlsbad include $370/st for standard, $405/st for granular, $420/st for premium, $445/st for OMRI standard and fine standard, and $480/st for OMRI granular.

California:

The SOP Magnesia market was pegged at $485-$500/st FOB for allocated tons in California, up $40/st from last report, depending on grade.

Pacific Northwest:

SOP Magnesia pricing continued to be reported at $480-$500/st FOB in the Pacific Northwest for limited tons, depending on grade and location.

Crops/Weather

California, Crops/Weather, Eastern Cornbelt, Market Watch, Pacific N.W., Western Canada, Western Cornbelt

Eastern Cornbelt:

Strong storms tracked through Illinois during the week, leaving thousands without power in the Chicago area. The first round of thunderstorms hit northern Illinois on Aug. 10, followed by another strong band on Aug. 12.

The Aug. 11 thunderstorms also brought torrential rains to parts of central Illinois, with more than 9.5 inches falling in six hours in Gibson City. The town experienced widespread flooding as a result, prompting officials to launch water rescues for some residents.

Thunderstorms also brought rainfall to northern Indiana during the week, while south-central areas of the state picked up a half-inch or more on Aug. 9. High-heat warnings were in effect for central Indiana at midweek, with highs reaching the mid-90s in Indianapolis on Aug. 12. Heat advisories were also in effect for several counties in central Ohio, with heat index readings expected to hit 104 degrees in some areas on Aug. 12.

The combination of high heat and plentiful moisture continued to produce exceptional crops in the region. USDA on Aug. 8 rated 78-79 percent of the Illinois corn and soybean crops as good or excellent, compared with 70-74 percent in Indiana and 73-80 percent in Ohio.

Western Cornbelt:

Hot, humid weather continued across much of the Western Cornbelt during the week, with scattered thunderstorms reported in Iowa on Aug. 12.

The previous weekend brought intense storms to parts of eastern Nebraska, leading to flash flooding in Omaha on Aug. 7. The storms also produced 60 mph winds and quarter-sized hail, which left some 18,000 Omaha residents without power late on Aug. 7.

Heat advisories were in effect for portions of Missouri at midweek, with heat index values climbing to 107 degrees in central areas of the state. The high heat and humidity sparked a number of strong thunderstorms in the state on Aug. 12, leaving nearly 30,000 Evergy customers without power in the Kansas City area.

USDA rated 60-61 percent of the corn and soybeans in Iowa as good or excellent on Aug. 8, compared with 62-70 percent in Missouri and 70-76 percent in Nebraska. Missouri’s cotton was 56 percent good or excellent, while 70 percent of the state’s rice crop fell into those two categories. Nebraska’s sorghum crop slipped to 59 percent good or excellent, down from 64 percent in late July.

California:

Hot, windy weather returned to Northern California after a brief calm early in the week, hampering efforts to contain the rapidly growing Dixie Fire. The blaze is now the largest single fire in California’s history, consuming more than 765 square miles as of Aug. 8 and surpassing last year’s Creek Fire in the Central Valley.

The Aug. 12 U.S. Drought Monitor showed extreme-to-exceptional drought covering nearly all of California, with a small area of moderate-to-severe drought reported on the southern edge of the state. USDA rated 75 percent of California’s cotton crop as good or excellent on Aug. 8, with fully 90 percent of the state’s rice crop falling into those two categories.

“The smoke has been thick at times, and it has been sustained to the point of affecting crop maturity for at least a few days,” said one California contact at midweek. “With local domestic wells pumping dry, groundwater worries and debate has intensified. The lack of state groundwater leadership over the last 30 years has come to roost. Water policy is now dictating the winners and losers.”

Pacific Northwest:

Much of the Pacific Northwest enjoyed a stretch of cooler weather as the week began, but another round of intense heat was moving in.

Excessive heat warnings were in effect on Aug. 11-15 for western and northern areas of Oregon, much of Washington, and parts of Idaho. Forecasts warned of triple-digit temperatures and possible disruptions to the power grid across the region. Highs in western Oregon were predicted to hit 105-111 degrees on Aug. 13.

Temperatures in southern Idaho dropped to the mid-80s on Aug. 9-10 after hitting 105 degrees on Aug. 4. With the incoming heat wave, however, forecasts warned of a high of 102 degrees again on Aug. 12.

The intense summer heat and drought has taken a toll on small grains in the region. The regional winter wheat harvest was nearly complete by Aug. 8, well ahead of the average pace. Washington’s spring wheat and barley were 57-62 percent harvested by Aug. 8, with 66 percent of the barley and fully 93 percent of the spring wheat rated as poor or very poor.

Montana’s spring wheat and barley were 28-35 percent harvested by that date, with poor or very poor ratings assigned to 57 percent of the barley and 70 percent of the spring wheat. Idaho was the region’s garden spot in early August, with 37-40 percent of the spring wheat and barley harvested and good or excellent ratings assigned to 61 percent of the barley and 31 percent of the spring wheat.

Western Canada:

The week began with slightly cooler temperatures, scattered rains, and breezy weather across Alberta, Saskatchewan, and Manitoba, but a return of high heat and smoky conditions was expected as the week progressed.

British Columbia was already experiencing a significant heat wave at midweek, prompting heat warnings for several portions of the province that were in effect until Aug. 15. Daytime highs reached the mid-30s C across western and southern British Columbia during the week, with humidex values climbing to the upper-30s and low-40s C in some areas.

Crop conditions continued to show the effects of summer heat and drought. “Overall, crops are not looking great in Western Canada,” said one source. “Most of the Prairies got a bit of a break from the extreme hot temperatures this week, but it’s too late for some regions,” added another. “The harvest is starting in a few areas that were very dry all July.”

“The weather has been decent, but I wouldn’t mind some rain to get some pastures and grass greened up for livestock producers,” reported a Saskatchewan source at midweek. “Harvest is pretty much fully underway here now, with next to no yields, so fertilizer markets are not going to be high on demand on our end until prices decline some here. Nobody wants to put the cash out to purchase and store until spring at the current pricing.”

Transportation

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

U.S. Gulf:

Sources noted a maintenance shutdown of the I-10 railroad bridge over Lake Charles, La., on Aug. 11-13, with navigation scheduled to be unavailable daily from 9:00 a.m. to 5:00 p.m. The closures were set to repeat on Aug. 16-18.

A dredge operation announced during the week will block access to the Mississippi River Ship Channel during daytime hours on Aug. 17, impacting large, ocean-going ships.

Construction activities that began on Aug. 2 at the Bell Chasse Bridge, located at Mile 3 in the West Canal, are projected to trigger intermittent navigation stoppages in the Algiers Lock area through late 2022. Delays up to 12 hours could be possible.

Adding to potential delays, Algiers Lock travel restrictions remained in place for the indefinite future. Length and width restrictions on unassisted lockages effectively capped Algiers movements at four standard barges or two 30,000 mt tankers, although larger crossings were possible while using industry assistance.

Travel through Bayou Chene was restricted to daytime hours only due to ongoing construction and diver activities, leaving the waterway closed to transport nightly between 7:00 p.m. and 7:00 a.m. The shutdowns were noted driving 6-12 hour overnight delays, while the use of an assist vessel was required on daytime movements.

Port Allen Lock delays were reported up to seven hours for the week, while boats were able to pass Bayou Sorrel Lock in eight hours or less. Intermittent Industrial Lock navigation outages were posted up to 25 hours for the week. Corps data revealed sporadic 5-9 hour delays through the Brazos Lock eastern lock chamber, while waits were clocked up to 11 hours through the Brazos Lock western gate.

The National Hurricane Center reported the formation of Tropical Depression Fred in the Eastern Caribbean during the week. Fred was tracked between Cuba and the Bahamas on Aug. 12. Forecasts called for the storm to strengthen later in the week, prior to a likely turn toward the west coast of Florida.

Mississippi River:

Fast flows at the lower Mississippi River’s Victoria Bend, located at Mile 595, prompted reduced tow sizes for loads moving in the upriver direction. Tows were reportedly cut by 5-10 barges from the area’s typical 25-barge capacity.

The upper river’s Merchants Memorial Rail Bridge will see a pair of 24-hour navigation shutdowns in September, part of an ongoing $222 million replacement project running through 2022. Navigation through the site is tentatively scheduled to be unavailable on Sept. 10 and Sept. 13, dependent on river conditions.

A planned Lock 27 main chamber closure has been indefinitely postponed. The project, previously scheduled for Aug. 2-19, will be necessary to complete repairs to the site’s upper bullnose. Lower bullnose repairs were successfully completed in July.

Intermittent six-hour delays were noted at Lock 18, while 3-6 hour waits were heard at Mel Price Lock during the week. Passages through Lock 27 were clocked up to 15 hours.

Illinois River:

Delays of 2-5 hours were reported at Starved Rock Lock during the week. Tows passing Peoria Lock experienced sporadic wait times up to 4.5 hours. Low water levels left wickets raised at Peoria and LaGrange Lock, necessitating locking through both sites.

Ohio River:

The auxiliary chamber at J.T. Myers Lock was fully closed to navigation on Aug. 9-13 for mechanical repairs, sources said. Traffic was noted passing through the primary chamber, with minimal delays reported.

The Montgomery Lock main chamber is shut through Aug. 27 for planned repairs and maintenance, triggering detours through the auxiliary chamber. A second main chamber shutdown is planned for Oct. 18 through Dec. 17. Wait times to transit Montgomery Lock were posted at 2-4 days for the week, increasing from 46 hours in the prior report.

Main chamber maintenance continued at Cannelton Lock during the week. The project began on June 21 and is scheduled to run through Nov. 19, prompting tows to pass through the secondary lock chamber. The site’s secondary chamber is also slated to shut for repairs and maintenance on Nov. 1-19.

Structural damage to the Markland Lock auxiliary chamber miter gate was projected to keep the chamber offline through an estimated Oct. 29. Boats were noted passing with minimal delay through the site’s primary lock chamber.

Transit through the Braddock Lock main chamber will be unavailable from Sept. 13 through Oct. 15, forcing boats to detour through the secondary chamber. Delays are expected.

The main chamber at Willow Lock will shut to navigation on Oct. 1-31, forcing lockages through the auxiliary chamber. Ahead of the primary chamber closure, the Corps announced a shutdown of the auxiliary chamber from Aug. 16 through Sept. 30. Willow Lock delays were posted up to six hours for the week.

Tows will be unable to utilize the Hannibal Lock primary chamber from Sept. 13 through Oct. 29 due to maintenance and repairs. Navigation will remain available via the 600-foot secondary chamber.

R.C. Byrd Lock wait times were reported up to 13 hours for the week. Delays through the Tennessee River’s Kentucky Lock were pegged in a wide 10-38 hour range for the current period, falling from 50 hours posted previously.

On the Cumberland River, daytime navigation stoppages were planned at Mile 130 due to bridge construction, blocking movements daily between 6:00 a.m. and 5:00 p.m. on Aug. 13 and Aug. 16-20. Intermittent Barkley Lock delays were quoted up to 25 hours on Aug. 10-11.

Main chamber access will be unavailable at the Monongahela River’s Lock between Sept. 13 and Oct. 15 due to planned repairs and maintenance. Vessels are slated to pass through the secondary chamber while work is underway.

Arkansas River:

A full closure at David D. Terry Lock is scheduled between Aug. 27 and Sept. 9 for dewatering and repairs, closing the river at the site. Preparation for the dewatering operation will prompt intermittent transit stoppages on Aug. 16-26.

Intermittent navigation shutdowns at Joe Hardin Lock are scheduled daily between 7:00 a.m. and 6:00 p.m. on Oct. 19-21. Sporadic delays are scheduled for Emmett Sanders Lock during identical daytime hours on Oct. 26-28.

U.S. Sanctions Belarus Potash Producer; Marketing Company Left Off List

Belarus, Featured, News, Potash, U.S.

The Biden administration imposed new sanctions on Belarus on Aug. 9 targeting Belarusian state-owned potash producer Belaruskali OAO, along with the country’s Olympic committee, and business leaders and companies with ties to President Alexander Lukashenko.

The sanctions came on the one-year anniversary of the country’s presidential election, which has been widely condemned by the U.S. and European Union as fraudulent and prompted weekly protests in the Eastern European nation.

However, the marketer/exporter of Belaruskali’s potash, Belarusian Potash Co. (BPC), was not named in the sanctions, leaving the door open as to whether the potash actually being marketed by BPC is sanctioned. Belaruskali reportedly owns 48 percent of BPC.

Analysts quickly picked up on the omission and major industry players were assessing the situation.

“The penalties against Belaruskali add negative sentiments for the global potash market, but the fact that BPC is not the subject of the sanctions may ease the situation,” said Elena Sakhnova, an analyst at VTB Capital, according to a Bloomberg report.

BCS Global Markets analyst Kirill Chuyko also said it may be safe to continue dealings with BPC, as long as it’s not added to the sanctions list.

BPC is studying the situation and it’s difficult to estimate what impact the sanctions will have, the company told RIA Novosti. The trader said it will make every effort to fulfill its contractual obligations, adding that the sanctions will lead to higher potash prices and less availability on the world market.

“It’s too early to tell the impact” of the sanctions, said Nutrien CEO and President Mayo Schmidt in a phone interview. “If sanctions are placed against Belarusian Potash we would expect to see the supply of, particularly granular, potash into the U.S. market tighten.” He noted that the U.S. imports about 550,000 mt/y of potash from Belarus. He said Nutrien can increase potash production if needed to meet global demand.

Canada and the U.K. also imposed new sanctions, including those on potash against Belarus. However, Canada’s imports of potassium chloride are minimal, with the country importing just 22,352 mt in full-year 2020, of which, according to Trade Data Monitor (TDM), just 1,944 mt originated in Belarus. First-half 2021 imports amounted to 2,857 mt with 1,128 mt coming from Belarus.

The U.K. imported 427,866 mt of potash in full-year 2020 and 161,094 mt in the first five months of 2021 through May, according to TDM. Of these totals, just 353 mt and 25 mt were listed as coming from Belarus. But the data showed the U.K. importing 917 mt of potash from Lithuania in 2020 and 590 mt in the first five months of 2021, which could well be Belarus tons.

Switzerland also expanded its sanctions against Belarus on Aug. 11, including restrictions on trade in Belarus potash. Switzerland imported 9,665 mt of potash last year, according to TDM, of which Belarus was shown to have supplied 1,092 mt.

The new Swiss sanctions also hit Belarus’ financial sector, including the provision of loans to the Belarusian government and other public bodies and agencies.

Green Markets has learned that Belarus has also restricted access to its export statistics. Previously, the country exported about 1 million mt of potash per month, but official numbers were not available for the month of June.

Following their announcement of new measures against the regime, Lukashenko launched a blistering attack on the U.S., Canada, and the U.K. He warned that countries need to think carefully before imposing sanctions against Belarus, according to a report by Belarus state-news agency BelTA. “No matter how difficult it was, we have survived this year. It was not easy. We will withstand other years. We will not back down, we will not fall to our knees….”

In addition, the Belarus’ government announced Aug. 11 retaliatory measures against the U.S. including blocking the U.S. ambassador from entering its country.

The E.U.’s sweeping set of further sanctions against the Belarusian regime, announced on June 24, included restrictions on imports of Belarusian potash into member states, as well as other Belarus fertilizers, which predominantly comprise NPKs (GM June 25, p. 1). However, the measures excluded a key grade of Belarusian potash that accounts for about 80 percent of Belarus supplies to the E.U.

Belarus’ current supply contracts with India and China also are not subject to the Brussels sanctions.

Lithuania is threatening to stop the export of Belarusian potash and other fertilizers through Klaipeda port (GM Aug. 6, p. 1). Belarus rails most of its potash for export through the port, using Lithuanian railways, with some 10-11 million mt transshipped annually via the port.

Lukashenko on Aug. 9 said Belarus would reroute potash shipments to Russian ports if Lithuania halts the transit of Belarusian potash, according to a BelTA report. However, while Belarus and Russia in February inked an agreement on routing transshipments of Belarusian oil products through Russian ports, Belarus Transport and Communications Minister Alexei Avramenko said at the time the shipment of Belarusian potash via Russian ports would need “more consideration.”

However, the Deputy CEO of Russian Railways (RZD) Aleksey Shilo was cited this week as saying that as part of the rerouting shipments of Belarusian cargo to Russian ports, RZD is ready to receive for transportation not only oil products, but also fertilizers and timber from the country, according to media reports, citing the Belarus government press office.

While having to use other transit routes for the export of its potash and other fertilizers would have a serious economic impact on Belarus, the loss of transhipment revenues would also cost Lithuania dearly.

Belarus also exports NPK fertilizers via Klaipeda, with Belarusian goods providing for some 30 percent of the port’s [annual] throughput, according to a Tass report, citing the CEO of Lithuanian railway operator, Lietuvos Gelezinkeliai, Mantas Bartuska, speaking to reporters on Aug. 12.

According to Bartuska, the whole transit chain of Belarusian fertilizers would lose €100 million (approximately $117 million at current exchange rates).

He said costs required to maintain the infrastructure “can be shuffled off to other clients” or “rail tariffs can be raised by 30 percent,” according to the Tass report.

Bartuska warned that a €60-million subsidy is required to ensure that this doesn’t happen.

U.S. ITC Advances UAN Complaint

Eastern Cornbelt, Featured, News, U.S., UAN

The U.S. International Trade Commission (ITC) on Aug. 13 made a preliminary determination to proceed with antidumping and countervailing duty (CVD) investigations into UAN imports from Russia and Trinidad and Tobago. The initial petition was filed by CF Industries Nitrogen and two of its units on June 30 (GM July 2, p. 1).

ITC will now report its findings to the U.S. Department of Commerce on Aug. 16, which will then proceed with its own investigation.

Schedule AD CVD
ITC Preliminary Determination Aug. 16, 2021 Aug. 16, 2021
DOC Preliminary Determination Dec. 7, 2021 Sept. 23, 2021
DOC Final Determination Feb. 22, 2022 Dec. 7, 2021
ITC Final Determination April 8, 2022 Jan. 21, 2022

CF Industries Holdings Inc., Deerfield, Ill., was anticipating the decision at its Aug. 10 earnings call. “Our expectation is that if we get a favorable outcome, we would expect UAN to go back to the historical practice of trading at a premium to other upgraded nitrogen products,” said Tony Will, CF President and CEO.

“And so because it is good for the grower and it is higher cost to produce, it ought to carry a premium, and that’s where it was,” added Will. “And that is really where it should be in the absence of dumped tons.

“The U.S. domestic manufacturing capacity is sufficient to serve the U.S. demand, and so there’s really no need for those imported, particularly the subsidized tons, to show up over here,” he said. And as a result, he said CF would not have to export tons.

Will said CF plans to supply a higher portion of the U.S.’s UAN needs with a system that is built for the logistics on all major railroads and on rivers and now with a reach into California and the East Coast. He said CF now has very competitive rail rates into California and it has invested with partners in tank space. He said CF’s ability to satisfy U.S. domestic demand is better now than it has ever been.

On the other hand, other major players that import UAN have argued that CF built up its Donaldsonville UAN capacity to export product and ignored coastal markets, leaving the door open for imports (GM July 23, p. 1). They said after the European Union imposed duties on U.S. product, CF turned back to the U.S. to dump its formerly exported product.

Yara North America Inc., Tampa, on Aug. 9 added its voice to the fray with a letter to Secretary of Commerce Gina Raimondo suggesting a “cautious approach to the use of tariffs and duties.”

“Due to logistical constraints, certain market regions, especially in coastal agricultural areas, are highly dependent on imports from a globally competitive supply source to meet their necessary crop nutrition and input demand,” said Gary Vogen, Yara Vice President, Corporate and Regulatory Affairs. “The analysis must take into consideration the restraints that limiting supply options would impose on each individual market, in order not to burden farmers in those regions with added costs.”

The Agricultural Retailers Association (ARA) on Aug. 6 expressed its opposition to the duties, also listing its concern for coastal markets (see related story).

Land O’Lakes 2Q Earnings Up 22 Percent; Improved Crop Nutrient Margins Cited

Earnings, News

Land O’Lakes Inc., Arden Hills, Minn., reported a 22 percent increase in second-quarter net earnings to $99.7 million on net sales of $4 billion, up from the year-ago $81.6 million and $3.5 billion, respectively. Six-month earnings were up even more at 99 percent, to $235.6 million on net sales of $7.97 billion from $$118.3 million and $7.31 billion, respectively.

The company said second-quarter earnings were driven by strong performance in Crop Inputs with higher volumes and favorable product mix in crop protection and improved margins in crop nutrients. The company said net sales growth reflected strength in Crop Inputs and Animal Nutrition and higher pricing across the portfolio to offset rising input and supply chain costs. Net sales accelerated in the second quarter as farmers invested in their crops and animals.

“We are pleased we’ve been able to maintain the strength and accelerate the momentum of last year’s performance,” said Beth Ford, Land O’Lakes President and CEO. “Despite increasing costs, the fundamentals of our industry remain favorable and our differentiated approach has delivered sustained performance in all business segments through the first half of the year. We also recognize third quarter could be our toughest year-over-year comparison in our historically smallest quarter, as during 2020, COVID-19 drove above normal retail purchasing.”

AN Causing Beirut Blast Just One-Fifth of Original Shipment, Says FBI

Ammonium Nitrate, Lebanon, News, News Briefs

An FBI investigation into the deadly explosion in a Beirut warehouse on Aug. 4 last year involving ammonium nitrate (AN) that rocked the Lebanese capital, killing 218 people and injuring more than 5,000, found that just one-fifth of the original shipment exploded.

The findings of the FBI probe, which were published on July 30 by Reuters, found only 552 mt of the original 2,754 mt of AN that arrived in Beirut port seven years before the blast went up in flames on the day of the explosion.

The FBI investigation did not provide a reason for the discrepancy or indicate where the remainder of the AN may have gone, according to the report. But it adds to suspicions that most of the stockpile in the warehouse went missing or was diverted before the August 2020 fire and explosion.

According to Reuters and other media reports this week, many officials in Beirut believe that much of the shipment was stolen, while others said not all of the cargo detonated.

The 2013 shipment was loaded in the Georgian port of Batumi aboard the MV Rhosus, a Russian-leased ship steaming under the Moldovan flag. According to the shipping documents, the ship and the cargo were headed for Mozambique. However, the ship was instructed to make an unscheduled stop in Beirut, reportedly to pick up additional cargo to help boost its Russian lessee’s earnings. But the Beirut port authorities detained the ship as it was deemed to be unseaworthy, as well as a dispute over unpaid port fees, according to an Associated Press report at the time, citing the ship’s captain.

The impounded AN cargo was subsequently transferred to the port’s hangar 12 in October 2014, where it remained for the next six years.

Evidence to date has raised questions regarding whether the AN was intended for Mozambique, and whether Beirut was the intended destination.

The detonation of the AN, which was reported to have been triggered by a fire in a nearby warehouse filled with fireworks, caused one of the largest non-nuclear explosions in history, decimating the port and damaging over half of the city.

Media reports talk of longstanding corruption and mismanagement at the port, with systemic problems in Lebanon’s legal and political system allegedly allowing senior officials to avoid accountability.

The Beirut Bar Association on Aug. 2 filed a lawsuit in the High Court of Justice in London against U.K. company Savaro Ltd., the importer of the AN that exploded.

The lawsuit seeks indemnification for, among other things, “the failure to take any actions to secure or properly dispose of the ammonium nitrate, causing death, injury, loss, and damage to the Claimants in the Beirut Port Explosion, for which the Claimants hold Savaro Ltd. liable together with other parties.”

The civil action was filed in a London court due to Savaro Ltd. being incorporated in the U.K. with offices in London, and therefore subject to the jurisdiction of English courts, according to media reports, citing Melhem Khalaf, President of the Beirut Bar Association.

Hawthorne Boosts Scotts 3Q Sales; Guidance Retained Despite Commodity Price Uptick

Earnings, Eastern Cornbelt, News, Specialty

The Scotts Miracle-Gro Co., Marysville, Ohio, reported net income of $225.9 million ($3.94 per diluted share) on net sales of $1.61 billion for the third-quarter ending July 3, 2021, compared to the year-ago $203.3 million ($3.55 per share) and $1.49 billion, respectively. Adjusted EBITDA was $357.1 million, up from $345.1 million.

The company noted that second-quarter sales were up 8 percent, driven by its specialty Hawthorne Gardening Co. segment, which saw sales growth of 48 percent. While the U.S. Consumer sales declined 4 percent, they were still up for the year-to-date by 19 percent.

“Our results in the third quarter continue to speak to the strength of our brands and the execution of our strategy,” said Jim Hagedorn, Chairman and CEO. “Despite difficult year-over-year comparisons, we saw record Q3 sales at Hawthorne with growth in all categories. Our U.S. Consumer business continued to excel despite a modest decline in sales compared with last year’s record levels.” The company noted that the year-ago quarter included six more days in the peak lawn and garden season.

“Even in the face of increasing distribution and commodity costs that are putting pressure on our gross margin rate, we remain on track to deliver the updated full-year guidance we provided in early June, which would result in both record sales and adjusted earnings.”

The company said going forward it expects to add $20 million in annualized sales from the recent purchase of HydroLogic Purification Systems, Santa Cruz, Calif. (see related story).

Nine-month net income was $561.3 million ($9.81 per share) on net sales of $4.19 billion, up from the year-ago $384.4 million ($6.76 per share) and $3.24 billion, respectively. Adjusted EBITDA was $911.7 million, up from $704.7 million.

Scotts is maintaining its guidance of 17-19 percent sales growth with the U.S. Consumer segment expected to grow 7-9 percent in fiscal 2021 and Hawthorne sales expected to increase 40-45 percent. Guidance for non-GAAP adjusted earnings per share was also reaffirmed in a range of $9.00-$9.30. The gross margin rate is now expected to decline 250 to 275 basis points, with SG&A expected to be flat to slightly down on a full-year basis.

“The continued pressure from commodity prices is likely to result in a lower gross margin rate than we expected when we last updated our guidance in June,” said Cory Miller, Senior Vice President and Interim CFO. “However, we’re finding offsets to that pressure that are allowing us to maintain our earnings guidance on a full-year basis.”

Scotts is planning to sell about $400 million of bonds to provide greater liquidity, added Miller in the company’s earnings call. “We currently are contemplating another bond offering to lock in longer-term bonds, probably with a 10- to 12-year maturity, at roughly 4 percent,” Miller said. “This will allow for flexibility on liquidity and lock-in strong borrowing rates for the next decade.”

“Like a lot of consumer companies, the cost pressures we’re seeing from commodities are starting to feel unrelenting,” said CEO Hagedorn, who said the company may take a second price increase in January, depending on what happens with commodities.

“As we look ahead to next year, only about 25 percent of our costs are locked in right now,” said Miller. “That’s lower than normal for two reasons. First, it’s been harder to lock in rates on some commodities, especially resin. And second, we’ve paused our hedging effort for a few weeks with a hope of seeing some relief. I’ll reinforce Jim’s point that our goal is to take enough pricing for fiscal 2022 to offset the commodity pressure.”

Asked about urea, Hagedorn added that the company likes to be around 50 percent hedged, but has chosen not to do that. He said he expects prices to generally soften, and that the company is monitoring that right now.

Urea, diesel, and resin are among the major commodities purchased by Scotts.

($ millions) 3Q-21 3Q-20 YTD-21 YTD-20
Net Sales        
U.S. Consumer 1,046 1,093 2,828 2,372
Hawthorne 422 286 1,095 686
Profit (Non-GAAP)        
U.S. Consumer 264 314 746 648
Hawthorne 52 38 134 74

The Andersons 2Q Income Up 43 Percent; Record Quarterly Adjusted EBITDA Reported

Earnings, Eastern Cornbelt, News, Specialty

The Andersons Inc., Maumee, Ohio, reported second-quarter net income attributable to the company of $43.5 million ($1.30 per diluted share) on revenues of $3.27 billion, up from the year-ago $30.4 million ($0.92 per share) and $1.89 billion, respectively. Adjusted EBITDA hit a record, the highest ever for a quarter at $118.1 million, up from the year-ago $70 million.

Pretax income from the company’s Plant Nutrient segment was up at $24 million on revenues of $321.4 million from the year-ago $19.4 million and $279.8 million, respectively. Adjusted EBITDA was $31.6 million, up from $27.2 million.

The company said the Plant Nutrient segment saw margin improvements across the breadth of product lines and reflect strong demand, improved grower income, and well-positioned inventory, though it said its engineered granules manufacturing lines remain challenged with labor and material cost inflation.

“We expect our Plant Nutrient business to continue to perform well,” President and CEO Pat Bowe told analysts. “Without the typical summer price reset and continued tight stocks, fall demand looks to be solid. Demand for engineered granules and specialty liquids, agricultural and industrial products, has also been strong. We expect that to trend on into the next year.

“I’m very pleased that each of our four businesses delivered outstanding, year-over-year improvement with good execution in volatile markets,” said Bowe. “I’m proud of our team; they anticipated market opportunities and executed well. These market conditions play into our strengths of commodity trading, logistics, and position management. We expect that North American demand will remain strong and currently anticipate large harvests in our key draw areas this fall, which should drive strong performance into 2022.

“While ethanol margins have been volatile, risk management and effective hedging coupled with strong returns from co-products are evident in the segment’s results,” he added. “Plant Nutrient followed up a very strong first quarter with a great second quarter driven by strong margins in supply-constrained markets.

“And while Rail continues its slow recovery, it has capitalized on record high scrap steel prices to extract value on end-of-life railcars,” Bowe continued. “Lastly, I’m pleased to announce that our twelve trailing months adjusted EBITDA was greater than $342 million, well in excess of the $300 million run rate goal we established for 2021.”

Company-wide six-month net income was $58.6 million ($1.74 per share) on revenues of $5.91 billion, up from the year-ago loss of $7.2 million ($0.22 per share) and $3.74 billion, respectively. Adjusted EBITDA was $198.3 million, up from $81.3 million.

Six-month Plant Nutrient pretax income was $32.5 million on revenues of $490.7 million, up from $18.2 million and $404.7 million, respectively. Adjusted EBITDA was $47.6 million, up from $34.2 million.