All posts by mickeybarb@charter.net

Strong Energy Earnings Boost CHS’s 2Q; Ag Segment Posts Loss on Lower Prices

Earnings, News, Northern Plains

CHS Inc. on April 5 reported second-quarter net income of $292.3 million on revenues of $11.3 billion, up from $219.0 million and $10.3 billion, respectively, in last year’s second quarter. The improvement was driven by strong refining margins and market conditions in the company’s Energy segment.

Decreased prices for agronomy products and ethanol contributed to lower earnings in the Ag segment, however, which posted a pretax loss of $81.6 million, compared with earnings of $55.2 million in last year’s second quarter. CHS reported lower margins due to market-driven price decreases across most Ag segment categories, including wholesale and retail agronomy products and renewable fuels.

The Ag segment was also impacted by a reduction in oilseed processing margins due to the timing of the impact of mark-to-market adjustments. In addition, CHS reported that its CF Nitrogen investment delivered pretax earnings of $81.7 million, down $72.5 million from last year due to lower equity income attributed to a decrease in urea and UAN selling prices.

“Strong global demand for commodities and improved market conditions for refined fuels led to increased earnings for the quarter, as well as the first half of the fiscal year,” said Jay Debertin, CHS President and CEO. “The strength of our diversified portfolio offset margin pressures experienced within our Ag segment, particularly wholesale and retail agronomy products.”

CHS’s Energy segment posted pretax earnings of $264.8 million for the second quarter, up $254.0 million from last year on higher refining and propane margins, partially offset by higher prices for renewable energy credits.

For the first six months of fiscal year 2023, the company reported net income of $1.1 billion and revenues of $24.1 billion, compared with $671.0 million and $21.2 billion, respectively, in the first half of fiscal year 2022.

“Looking ahead, we will continue to invest on behalf of our owners in infrastructure, supply chain capabilities, and innovative technology throughout our expansive global network to maximize value for our member cooperatives, farmer-owners, and customers,” Debertin said.

Biden Vetoes Resolution to Overturn WOTUS Rule

Featured, News, U.S.

As he promised, President Joe Biden on April 6 vetoed a congressional resolution that would have overturned his administration’s“Waters of the United States” (WOTUS) rule, saying the resolution would “negatively affect tens of millions of US households that depend on healthy wetlands and streams.”

Officially announced on Dec. 30 (GM Jan. 6, 2023) by the US Environmental Protection Agency (EPA) and the Army Corps of Engineers, the new WOTUS rule claimed to restore protections that were in place prior to 2015 under the Clean Water Act (CWA), but with “updates to reflect existing Supreme Court decisions, the latest science, and the agencies’ technical expertise.” The rule was published in the Federal Register on Jan. 18 and took effect on March 20.

The US House in late February, however, passed H.J. Res. 27 (GM March 3, p. 26), a resolution to overturn the Biden new WOTUS rule, calling it “flawed” and “overreaching.” The US Senate on March 29 voted 53-43 to approve a similar resolution (GM March 31, p. 1).

In his veto statement to the House, Biden defended the new rule, saying it “carefully sets the bounds for which bodies of water are protected” under the CWA.

“It provides clear rules of the road that will help advance infrastructure projects, economic investments, and agricultural activities – all while protecting water quality and public health,” Biden said in the statement.

The resolution to overturn the rule, he argued, would leave Americans without a clear definition of WOTUS and cause uncertainty that would threaten economic growth for agriculture, local economies, and downstream communities.

“Farmers would be left wondering whether artificially irrigated areas remain excluded or not. Construction crews would be left wondering whether their waterfilled gravel pits remain excluded or not,” Biden said. “Therefore, I am vetoing this resolution.”

The veto is only the second issued by Biden since his inauguration. Republican lawmakers indicated quickly that they would push to override the veto, though doing so would require an unlikely two-thirds vote in Congress.

“We’ve talked at length about the perils of WOTUS,” said Rep. Sam Graves (R- Mo.), Chair of the House Transportation and Infrastructure Committee that approved the resolution. “You should know them by now. President Biden’s ‘Waters of the US’ rule is going to place much of your land under the purview of the federal government under the guise of ‘clean water.’ However, this isn’t actually about clean water. Every little possible dry puddle shouldn’t be subject to the authority of the federal government. It’s bad for farmers, builders, and landowners. That’s the bottom line.”

In an April 6 statement, Graves said the next step is to override Biden’s veto. “We already had bipartisan support for the resolution,” he said. “Now, we just need more of our colleagues on the other side of the aisle to recognize the pain that these kinds of costly, overreaching policies are inflicting on Americans across the country.”

Graves said he has also signed a brief to the US Supreme Court, which is expected to issue a ruling this year in Sackett v. EPA, a pivotal WOTUS test case. “Either way, our message is clear,” Graves said. “The Biden WOTUS rule needs to go.”

Challenging 2022 Impacts Grupa Azoty

Earnings, News, Poland

Polish fertilizer and chemicals group Grupa Azoty, SA, Tarnów, reported a group net loss of Pln1.02 billion (approximately $238 million at current exchange rates) for the fourth quarter of 2022, with the EBITDA loss also in line with the preliminary figure of Pln296 million (GM March 24, p. 25).

Fourth-quarter group revenues fell 7% compared with last year’s fourth quarter, to Pln5.12 billion. Azoty said earnings were dragged down chiefly by the Fertilisers/Agro segment, which posted a negative EBITDA of Pln173 million for the quarter, a 5% decrease from the same period last year.

The group also confirmed an 8% decline in full-year net profit, to Pln584 million from FY2021’s Pln634 million. However, FY2022 EBITDA increased 31%, to Pln2.55 billion from Pln1.95 billion last year, while revenue rose 55% to Pln24.7 billion.

“The supply and demand situation in the European fertilizers and chemicals industry throughout 2022 was determined by the consequences of Russia’s military invasion of Ukraine and high prices of raw materials and energy carriers, leading to production cuts by European manufacturers,” Azoty said.

As a consequence of the macroeconomic climate, each of the group’s business segments recorded a significant rise in product prices and a simultaneous decrease in sales volumes, and experienced demand-supply imbalances, the group said.

Operating profits were also negatively impacted by impairment losses on non-financial current assets and inventories of finished goods, semi-finished products, and raw materials (GM March 17, p. 25).

The write-downs on inventories in 2022 lowered group EBIT and EBITDA by Pln428 million. The recognition of the impairment losses on non-financial non-current assets resulted in a decrease of Pln924 million in FY2022 group EBIT.

Looking ahead, Grupa Azoty Vice President of the Management Board Marek Wadowski said the group expects the environment in 2023 to remain “challenging” after difficult 2022 conditions associated with the rapid growth of commodities prices, especially gas prices.

“A lot will depend on inflation trends and on central bank policy, because the Azoty group does not sell products solely on the Polish market,” he said. Azoty expects lower demand in agriculture, as well as for products from its plastics and chemicals segments in comparison to previous years.

Ostara Ltd. – Management Brief

Management Briefs, Western Cornbelt

Specialty fertilizer manufacturer Ostara Ltd., St. Louis, Mo., announced on April 6 that Dr. Aaron Waltz has been named Chief Technology Officer. Waltz brings more than 20 years of experience in the agriculture industry, beginning his career at DuPont Pioneer in corn genetics and transgenic traits. He has also worked in technology development roles in the adjuvants, biologicals, and fertilizer industries. He earned a Ph.D. from The University of Nebraska in Lincoln.

“Aaron’s skills are highly complementary to the existing executive team and will enable Ostara to realize our vision of global expansion as we increase production of our portfolio of Crystal Green phosphate fertilizers,” said Kerry Cebul, Ostara CEO. “Aaron’s agronomic expertise, diverse science background, and leadership will be critical as we rapidly expand our platform of technologies and significantly increase production to meet grower needs.”

The Far West Agribusiness Association – Management Brief

Management Briefs

The Far West Agribusiness Association (FWAA) has named Craig Smith as its new Executive Director. He replaces Margaret Jensen, who announced her resignation in October to pursue personal and family interests. Smith has spent more than 30 years as Director of Government Affairs for Food Northwest, the regional trade association that represents the food processing industry.

Smith graduated from Oregon State University with a degree in Business Finance, holds a master’s degree in International Development from William Carey International University, and is also a graduate of the Institute of Organization Management, sponsored by the U.S. Chamber of Commerce.

EuroChem VolgaKaliy to Double Potash Production in 2023

News, News Briefs, Potash, Russia

EuroChem VolgaKaliy LLC, a wholly-owned subsidiary of EuroChem Group AG, produced 427,000 mt of potassium chloride at its VolgaKaliy operation in Russia’s southern Volgograd region in 2022, an increase of “1.9 times” compared to 2021, and plans to produce 906,000 mt this year, according to an Interfax report, citing a representative of the company.

Potash sales volumes from VolgaKaliy also increased 1.9 times compared to 2021, with some 378,000 mt sold. The company is targeting to increase sales volumes to 981,000 mt this year.

According to the report, EuroChem VolgaKaliy plans to increase investments in the development of production by 21.6% in 2023, to RUB21.4 billion (approximately $268.3 million at current exchange rates). The development plans include the completion of construction and commissioning of the second skip shaft this year, which will hoist mined potassium ore to the surface.

New mining equipment will also be put into operation this year, which, according to the company, will increase the volume of penetration and will start “cleaning work” in the mine.

The company is also targeting the commissioning of the granulation lines at the sylvinite processing plant in 2023, which it said will increase the production of potassium chloride from 58.7% of design capacity to 80-82%, with “at least 95% product quality.”

EuroChem’s VolgaKaliy potash mine has been burdened by geological issues that have impacted and delayed the mine’s development. The operation made its first commercial sales in 2021 after producing 228,000 mt that year, according to comments made by EuroChem in February 2022 (GM Feb. 25, 2022).

The group this past January said it expected VolgaKaliy to reach full production capacity of 2.3 million mt/y of potassium chloride by 2025, with the possibility of subsequently expanding capacity to up to 4.3 million mt/y (GM Jan. 13, p. 29).

However, some analysts and market watchers are skeptical that VolgaKaliy can achieve its planned output by 2025. Green Markets Research Director Alexis Maxwell viewed the announcement with caution. “This site has had persistent geological issues, while sanctions have restricted Russian producers’ parts procurement activities,” she said.

EuroChem produced 2.39 million mt of potash at its other potash production site, Usolskiy, south of Berezniki, in 2021 (GM Feb. 25, 2022). The group has not published any operational results since 2021.

PhosAgro Posts 6% Rise in 1Q production

News, News Briefs, Russia

Russian fertilizer group PhosAgro PJSC, Moscow, reported that it increased production in the first quarter by 6% compared to the same period last year, according to an Interfax report, citing PhosAgro CEO Mikhail Rybnikov.

The group provided no breakdown of the quarter’s output, but it confirmed plans to increase production in 2023 to 11.3 million mt, which if achieved, would be a 2% increase over 2022’s 11.1 million mt (GM March 10, p. 26).

PhosAgro said the main drivers of production growth are a new 1 million mt/y phosphate fertilizer plant in Volkhov in Russia’s Leningrad region, where it launched the first stage of MAP production in March 2021 (GM March 12, 2021).

A second-stage development program is also being completed at the group’s production complex in Balakovo.

Fire Reported at Pennsylvania Fertilizer Plant

News, News Briefs, Northeast

Firefighters in Bainbridge, Pa., extinguished a fire at the Fertrell Company soil and fertilizer plant on April 3, according to local news reports. The company produces dry blends, liquid fertilizer and amendments, and custom blends at the plant, according to its website.

Emergency crews responded at 9:52 a.m., with a total of 16 emergency units, including five from Dauphin County, at the scene as of 10:15 a.m. Local news reports said firefighters had the fire under control in about 25 minutes and contained it within the main building, with no injuries reported. An investigation into the cause of the fire is underway.

Ammonia Leak Prompts Evacuation, Road Closure

Ammonia, News, News Briefs, Southern Plains

JBS officials are investigating an ammonia leak at the company’s beef plant in Greeley, Colo., on March 30 that required an evacuation of the plant and sent 53 people to area hospitals for precautionary screening, the Greeley Tribune reported. No major injuries were reported, however, and no one was admitted for treatment.

Greeley firefighters and hazardous materials crews responded at 10 p.m. to reports of a leak at the plant. Greeley Fire Department units quickly isolated the leak, the newspaper reported, as hazmat crews monitored the scene and closed portions of nearby streets while responders worked at the site.

JBS and Greeley Fire Department crews ventilated the facility and operations resumed the following day, the newspaper reported. Front Range Fire Protection District, Windsor Severance Fire Rescue, and Platteville-Gilcrest Fire Protection District provided hazmat assistance.