The U.S. Commodity Futures Trading Commission (CFTC) announced July 22 the filing and simultaneous settlement of charges related to the failure of Gage’s Fertilizer & Grain Inc. to register as a futures commission merchant (FCM), and of Steven W. Gage to register as an associated person (AP) of Gage’s Fertilizer, as required by the Commodity Exchange Act and CFTC regulations. The CFTC order requires Gage’s Fertilizer and Gage jointly and severally to pay a $75,000 civil penalty and disgorge $100,000 of ill-gotten gains.

Gage’s Fertilizer is a grain elevator and farm supply company based in Stanberry, Mo. Gage, who resides in Stanberry, is the company’s president, director, and majority owner.

The CFTC order finds that, from at least January 2004 to December 2008, Gage’s Fertilizer acted as an FCM by soliciting and accepting orders for the purchase and sale of domestic, exchange-traded commodity option contracts without registering with the CFTC as an FCM. The order finds that Gage’s Fertilizer failed to properly account for or segregate customer funds relating to such transactions. The order also finds that Gage solicited and accepted orders for the purchase and sale of domestic, exchange-traded commodity option contracts while failing to register as an AP of Gage’s Fertilizer. Gage’s Fertilizer allowed Gage to engage in such acts, usually conducted by an AP, without registering as such with the CFTC, according to the order. The order also requires Gage’s Fertilizer and Gage to comply with undertakings, including the commitment to disclose the CFTC order to Gage’s Fertilizer’s principals and employees, and to cooperate with any further investigation or legal action arising from this matter.

The order appoints the National Futures Association to collect payments by Gage’s Fertilizer and Gage, and to distribute such payments to those harmed by the violations described in the CFTC order.

Both Gage and his attorney, Todd Graves, told Green Markets that Gage should have registered with the CFTC, and that was the problem. Otherwise, Graves said there was no admission of wrongdoing. He denied that there were any allegations of fraud, and said the charges were in relation to trades on the grain elevator side of the business.

According to its Web site, Gage says it has provided quality agricultural supply sales and grain purchasing and storage options for farmers throughout Northwest Missouri since 1988, and that it has eight locations – in Stanberry, Maitland, Ravenwood, Albany, St. Joseph, Kansas City, Skidmore, and Bethany, Mo.

Gage is one of the plaintiffs in one of several antitrust lawsuits brought against potash producers a few years ago (GM Sept. 22, 2008; Feb. 9, 2009). Sources said last week that those cases continue to linger in the court system before the U.S. Court of Appeals for the Seventh Circuit.

Yara International ASA, while announcing a tripling of earnings for the second quarter ending June 30 (GM July 19, p. 13), also points to a positive outlook going forward. “We are running at close to full production capacity, including NPK,” Jørgen Ole Haslestad, Yara president and CEO, told analysts. “The fertilizer demand is backed by a tightening grain market as demand is strong, while yield estimates were lowered recently from USDA ….”

Yara also says ammonia demand has improved sharply from last year due to the return of industrial demand and a strong phosphate market. The company noted that while Ukraine has increased its exports from year-ago levels, they are still well below full capacity.

On urea, Yara noted recent price increases and said that while the Chinese have material to export, these volumes are not expected to be offered below $260/mt for granular, supporting recent price increases in the Black Sea. Yara also noted that coal prices in China are higher, and it pointed out the recent appreciation of the Chinese currency. The company said that both factors might boost the chances for higher prices from China.

Yara said that another positive is India’s new subsidy scheme, which is creating a new market for NPK imports into India. Yara said it has run its NPK plants at close to full capacity since early January without stock build-up as phosphate demand has recovered, giving strongly improved margins, while potash deliveries remain subdued.

In the past few years, Yara has been very vocal about the impact high potash prices have had upon its NPK business. It told analysts July 16 that it is investing in a potash project in Ethiopia. “I think our starting point is that we have seen the potash price that is (at a) sufficiently high level to find it interesting to evaluate the mine in Ethiopia,” said Hallgeir Storvik, Yara CFO and head of strategy. “… But we are putting some rather small money into the project to evaluate it. And I think it is a business idea that could have an interesting potential if some of those risk hurdles that we face in areas like Ethiopia in relation to developing such a potential mine will be sorted out. So we are reasonably optimistic in relation to the opportunities around that project.”

Yara said it would not comment on how much it has invested in the Ethiopian project, except to say that it is in a pre-study/feasibility phase. At least three groups have been prospecting for potash in Ethiopia in the past few years – Allana Potash, BHP Billiton, and Indian firm Sainik Potash. Yara said it was not involved with Allana and did not specify in which venture it is invested. Sources close to Sainik say it is the one with Yara connections.

Compared to the price of other nutrients, Haslestad said Yara would like to see a potash price below $300/mt.

Yara said NPK margins were better in the first half of 2010 than in the reasonably good years of 2006 and 2007. It said with lower potash prices it has been able to get NPK margins back to normal levels.

One concern is natural gas prices, with Yara worried over the higher European gas prices versus those in the U.S. However, it noted that its Canadian plant, Belle Plaine, has lower gas prices than even the Henry Hub in the U.S. Yara said Belle Plaine has had extremely good earnings.

While Yara global fertilizer deliveries were down 9 percent in the second quarter, the company noted that year-ago margins were low as producers reduced stocks from high levels. Industrial volumes increased 21 percent, with higher volumes for all main product groups.

In other news, Yara said it is taking a NOK18 million (US$23.2 million) write-down as a result of the planned sale of its 25 percent stake in Agrico Canada Ltd. (GM July 12, p. 1). Yara said the expected sales price is below the carrying value, and it recognized the impairment. It said the sales transaction, which is expected to take place in the third quarter, will have a minor impact on its condensed consolidated interim statement of income, and any gain or loss will be included in the downstream segment.

“It is correct that we do not view retail as a core activity, but it does not imply that we limit our scope only to production,” Yara spokesperson Asle Skredderberget told Green Markets. “It means we focus mainly on wholesalers/distributors, as well as our own downstream sales force and agronomists. We recently also sold our South African retail activity. However, in some markets it will still be natural to be present in retail also, due to the structure of the market.”

In addition to the planned sale of its Agrico stake and the sale of South African assets, Yara said that during the second quarter it sold two subsidiaries – Nuova Terni Industrie Chimiche S.p.A. (Italy) and Peremartoni Fertilizers Kft (Hungary). It also sold its shares in Carbonor, a joint venture company, back in January. And as previously reported, it sold its 15.5 percent stake in Fosfertil, as well as its 50 percent stake in the Anitapolis phosphate rock project, to Vale S.A.

Yara said the company was recently misquoted when it was reported by a wire service that it plans to gain a 20 percent share of the nitrogen market. “It is correct that our global market share is approx 6.5-7 percent,” Skredderberget told Green Markets. “However, the 20 percent is based on a misinterpretation. What Mr. Haslestad said was that consolidation is good, we support it, and we intend to be part of it. He used the 20 percent as a picture of how a global industry looks when it is consolidated, i.e., that the biggest players have a share of about 17-20 percent. It was a general example, and not a stated ambition on how much we want to grow. We do not want to quantify our growth ambition.

“It is important to note that from a customer point of view a consolidated market implies more stable prices and less volatility,” Skredderberget added. “Economies of scale give the opportunity to increase or maintain margins through cost.

Carlsbad, N.M.-The Eddy County Commission adopted an ordinance last week authorizing industrial revenue bonds up to a maximum of $90 million to finance expansion of Intrepid Potash Inc.’s mining properties in the state. County Manager Allen Sartin told Green Markets it’s a done deal after the public hearing on the bond ordinance at the commission’s regular session July 20. “The next step will be that the underwriters will work with the market and ultimately sell the bonds,” Sartin reported. “Closing should take place sometime toward the end of August. Then the moneys will be available to the potash company to start the project.” Under the New Mexico Industrial Revenue Bond Act, the county may authorize a company to seek the industrial revenue bonds with the understanding that the county is not liable for repaying the debt. The county had been assured by its bonding attorney that it would be held harmless if the potash company were to default on its bond payments. Sartin said the legal documents drawn up fully protect the county. Intrepid, which has been eyeing various expansion plans, had not responded to inquiries at press time. The company has three production facilities in New Mexico and has indicated plans to apply solution mining technology presently employed at the company’s facility in Moab, Utah, as well as to expand its langbeinite recovery, the latter of which is expected to cost $85-$90 million (GM May 10, p. 13). Intrepid is still in the environmental impact statement process with the Bureau of Land Management for the HB Solar Solution Mine. Movement is going forward on a draft environmental impact statement (EIS). Intrepid is also evaluating the reopening of its North mine in New Mexico.