Moscow-Russian fertilizer producer UralChem OJSC recently announced that four core production units at Azot OJSC, one of UralChem’s key subsidiaries, reached their planned annual production volumes ahead of schedule during the first eleven months of 2009, mainly due to consistent execution, the optimization of maintenance periods, and favourable market conditions for ammonium nitrate sales. The output of Azot’s ammonia large-tonnage units 1A and 1B was up by 111.6 percent and 108 percent year-on-year, producing 450,000 mt and 468,500 mt of ammonia, respectively. Its urea unit manufactured 494,800 mt, increasing its production capacity by 124.6 percent compared to the same period in 2008. The total output of Azot’s production unit of water-resistant ammonium nitrate for the first eleven months more than doubled year-on-year and generated 203,400 mt of all types of ammonium nitrate. Currently, four different types of ammonium nitrate (porous white ammonium nitrate, porous yellow ammonium nitrate, water-resistant ammonium nitrate, and GOST 2-85 ammonium nitrate) are produced at the Azot plant. “We are delighted that our production facilities have achieved excellent results ahead of plan in ammonium nitrate, urea and ammonia,” said Konstantin Kiselev, deputy chief engineer of Azot. “Thanks to the joint cooperation of all departments, today we can witness Azot’s balanced development and its increased production. We look forward to developing new product lines to meet customer demand in the future.”
All posts by traceybg@gmail.com
Management Briefs
United Services Association (USA), Des Moines, reports that Michael Meether has joined the association’s staff effective March 1 as part of the crop nutrient procurement team.
Prior to joining USA, Meether’s 30 plus-year career has centered on crop nutrient sales, marketing, procurement, and distribution responsibilities in the Midwest regional cooperative systems. In his new role he will report to Mark Morrissey, USA CEO, and he will work closely with Ralph Owens and Amanda Davis in providing procurement services to the association’s members. He will be relocating to the Des Moines area, and he can be reached at 515-276-6763.
Market Watch
AMMONIA
U.S. Gulf/Tampa: The NOLA market continues to see movement. Last week, a new sale was reported at $420/st FOB, up from the prior week’s $330-$410/st FOB. Sources say this is simply a reaction to the recent Tampa business at $450/mt DEL.
Eastern Cornbelt: The ammonia market was steady at $415-$425/st FOB regional terminals in late February. CF’s cash market postings on March 3 included $415/st FOB Terra Haute, Ind., Seneca, Ill., and Peru, Ill., $420/st FOB Albany, Ill., and $425/st FOB Cowden and Kingston Mines, Ill., and Frankfort and Huntington, Ind.
Western Cornbelt: Anhydrous ammonia was steady at $390-$410/st FOB regional terminals, with the low in Nebraska and the upper numbers out of Missouri terminals.
California: Agrium’s anhydrous ammonia postings moved on March 4 to $560/st truck-DEL in Central California and $565/st truck-DEL in Northern California. Effective March 8, Calamco will raise its truck-delivered anhydrous ammonia price in the state by $80/st, to $560/st. The company’s aqua ammonia posting will firm on that date from $132/st to $152/st FOB. Rail-delivered ammonia pricing will move on March 8 from $515/st to $595/st.
Pacific Northwest: Anhydrous ammonia continued to be quoted at $435-$440/st DEL in the region.
Western Canada: Anhydrous ammonia remained at $700-$745/mt DEL in Western Canada, with the lower numbers reported to dealers in Manitoba and Saskatchewan.
Black Sea: The market is looking a bit tighter after the Tampa price moved up last month. Asian sources say more plants in the area should be restarting as soon as prices rise.
Sources report that deals among producers late last month indicate the tightness of supplies.
The lower end of the market has moved out of the $360s/mt FOB. Sources also say the upper end shifted, but did not point to anything other than pricing ideas from producers.
Sources are comfortable calling the market at $370-$380/mt FOB. Producers say $390-$400/mt FOB is a more reasonable range.
Middle East: The area remains tight. Producers continue to point to a strong Asian market and firmer prices in the U.S. as reasons they will not back off on their pricing ideas.
Producers have been arguing that the new price out of the region should be $400/mt FOB. As February closed and March opened, however, no one could point to cargoes being sold at that level.
The consensus is that $400/mt FOB should be hit this month. For now, the price range has tightened in line with the Yuzhnyy market to $370-$380/mt FOB.
UREA
U.S. Gulf: The granular barge market last week sank as low as $310-$312/st FOB, according to most sources. Most large sellers were not too keen on cutting prices as the season approached, and the lower prices were blamed on just a couple of sellers shedding a few barges.
By week’s end, sources said the market saw a bounce to new sales in the $315-$317/st FOB range. Sources credited these to the coming of sunshine in some areas, and said this prompted more and more inquiries about product availability. As one source noted, “Spring is ahead of us, not behind us.”
Eastern Cornbelt: Urea prices were down slightly from last report. One supplier reported March 2 at $340/st FOB Peoria, Ill., and Cincinnati, Ohio, while other sources continued to report dealer pricing in the $350-$355/st FOB range last week.
Western Cornbelt: Some lower urea prices prompted one source to refer to the influence of a “weather market” in the Midwest. With nothing moving due to snow accumulation and rainfall, he observed, those with inventory are getting antsy and are testing the market with a price drop to see if it sparks some movement. He added that this tactic “usually has the reverse effect,” because potential buyers see the price falling and think it will go lower.
The granular urea market was quoted at $335/st FOB St. Louis, Mo., on the low end last week, while Iowa sources continued to quote the upper end of the market at the $355/st FOB level to the dealer. The urea market FOB Enid and Inola, Okla., was also reported at the $335/st FOB level.
California: Granular urea remained at $375-$390/st FOB and $400-$420/st DEL in the state.
Pacific Northwest: Granular urea was quoted at $395-$410/st DEL in the region, reflecting a slight increase from last report.
Western Canada: Granular urea pricing was unchanged at $491-$516/mt DEL in the region, depending on location. Dealer reference levels were quoted as high as $525/mt DEL in some areas.
India: The ministries of agriculture and finance spent the better part of last week talking with representatives of the main buying houses – IPL, MMTC, and STC – to develop a buying plan for the upcoming application season.
Sources speculate that once the intra-Indian talks are finished, each buying house will be targeting producers in the Black Sea and Arab Gulf. The talks at that point will be to try to secure a reasonable – to the buyer – price for India’s annual urea needs.
The houses tried this tactic several times in the past, to no avail. The last time was in 2008, when Middle East urea was about $400/mt FOB instead of the current low-$300s/mt FOB. If a deal can be made, said one trader, then the amount of urea purchased by tenders will be significantly lower than in previous years. Few think, however, that the buyers will be successful in their efforts.
One thing that might help India in international urea talks this time is the change in the subsidy program. Instead of covering the costs of a specific product, such as urea, government subsidies will be based on nutrient content. Sources say this arrangement could encourage farmers to use fertilizers more in line with the soil’s actual needs. For example, buyers could look at more purchases of ammonium sulfate instead of urea.
If the government can convince producers that the urea intake will be less this year, they might be able to convince the producers to sign an annual contract.
The increase in global production will mean more tons are available at a time when the world’s largest single importer could be looking at reducing the amount of urea it buys. Sources say producers might be interested in ensuring a piece of the action by signing a long-term deal with the Indian buying agents.
Others in the industry dismiss the impact of the new subsidy plan on imports this year. One trader noted that even with the massive publicity campaign the government is waging to educate farmers about the plan, the 2010 demand will most likely remain the same.
Next year may be a different situation, however, as the new subsidy plan sinks in.
Sources say the discussions the buyers will have with producers will take a couple of weeks. After that, they will have to report to the agriculture and finance ministries before calling a tender. The government agencies will then need another week or so to figure out how much urea should be imported in the first round of tenders.
Industry observers are now saying the first tender call should not come until early April.
Black Sea: For many in the industry, the bottom was hit as
February ended. Prices are now matching that March feeling
of roaring in like a lion.
Producers started the month’s discussions at $280/mt FOB and ended this past week with pricing ideas of $285-$290/mt FOB.
Sources report business was done in the low-$280s/mt FOB, but not yet at $285/mt FOB. Traders figure $285-290/mt FOB will be done this week.
The move in prices came as Mexico, Brazil, Colombia, and other Latin American countries bought tons when the market hit its nadir.
The Latin American buyers took cargoes based on their immediate needs rather than looking to build up reserves.
The fluctuations of the market have made buyers nervous about taking any major forward purchases. Buyers have been buying in a hand-to-mouth manner for the past few months.
Middle East: Producers continue to claim they are comfortable and see no reason to lower prices.
Proponents of the buyers point to the latest granular cargo sold to Australia by PIC at a reported $325/mt FOB.
Traders are quick to point out, however, that Australian sales have always earned producers a higher netback. Sources say that even with the run-up in prices from Yuzhnyy, the Middle East market has only edged up slightly.
The granular market has moved up to $315/mt FOB, but some sources report that with a little hard negotiating a lower price might be achieved.
Prills remain at a $10/mt discount to area granular.
The issue that will ultimately affect the pricing will be how many tons India buys. If the price comes under more pressure because of hesitancy by other buyers to step up, sources say the producers might be interested in hearing the pricing ideas the Indians have for long-term contracts instead of regular tenders.
Indonesia: With the last sale from Pusri concluded, Asian sources say no more exports from Indonesia are expected soon. Of course, many of these same sources were saying no more sales would occur until the second half of the year right up to the time Pusri announced its selling tender.
China: The domestic market appears to be softening. The upside for the producers, however, is that the price of coal and natural gas also seem to be easing off.
Producers were hard pressed during the winter as input prices were rising while urea prices were steady or soft. Some plants reportedly sold their product below production cost in order to keep running.
With spring around the corner, coal and gas are not needed as much for home and office heating. The subsequent price drops are a welcome sight to the producers.
NITROGEN SOLUTIONS
U.S. Gulf: UAN barge price ideas were mixed last week. While some said barges were under pressure and that sales had occurred as low as $207/st FOB, others were bullish, saying the market was heading to $220/st and beyond. Most sources remained in the middle, seeing no real change from last week’s $210-$215/st FOB. Sellers overall seem to be upbeat about the prospects for their product, but some appeared to be getting impatient for movement in both product and price. As with urea, sunny weather in some locations was giving them hope.
Eastern Cornbelt: UAN pricing was up slightly from last report. Sources tagged the dealer market for UAN-32 at $250-$272/st ($7.81-$8.50/unit) FOB, with the low reported out of spot river locations in Illinois. The upper end reflected new dealer reference prices from some suppliers, although no new sales were confirmed at the higher numbers.
Western Cornbelt: UAN-32 was pegged at $248-$265/st ($7.75-$8.28/unit) FOB regional terminals, with dealer reference levels quoted as high as $272/st ($8.50/unit) FOB based on new replacement costs.
California: UAN-32 was pegged at $242-$255/st ($7.56-$7.97/unit) FOB in the region, with delivered UAN-32 at $270-$275/st ($8.44-$8.59/unit) in the state. Effective March 4, Agrium’s UAN-32 postings moved to $258/st ($8.06/unit) FOB Sacramento, $280/st ($8.75/unit) truck-DEL in Central California, and $285/st ($8.91/unit) truck-DEL in Northern California. Those postings reflected a $10/st increase from Agrium’s Feb. 17 list prices.
Pacific Northwest: Regional sources tagged the UAN-32 market firmly in the $270-$285/st ($8.44-$8.91/unit) DEL range last week following posted increases in late February and early March.
IRM’s postings for UAN-32 moved on Feb. 23 to $285/st ($8.91/unit) DEL in eastern Oregon and Washington from terminals in St. Helens, Portland, Pasco, Umatilla, and Central Ferry. Effective March 4, Agrium’s UAN-32 postings moved to $270/st ($8.44/unit) DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $275/st ($8.59/unit) rail-DEL and $280/st ($8.75/unit) truck-DEL in southern Idaho, Nevada, and Oregon’s Malheur County; and $290/st ($9.06/unit) DEL in Montana and northern Wyoming. Agrium’s UAN-28 postings in Montana and northern Wyoming moved on March 4 to $254/st ($9.07/unit) DEL. Those levels reflect a $10/st increase from Agrium’s Feb. 17 UAN postings, and a $20/st increase from the Feb. 3 list prices.
Western Canada: UAN-28 was steady at $294-$310/mt ($10.50-$11.07/unit) DEL, with the low in Manitoba and the upper end in Alberta. Dealer postings were referenced as high as $320/mt ($11.43/unit) DEL in Western Canada.
AMMONIUM NITRATE
U.S. Gulf: New barge sales were reported within the $252-$253/st FOB range. Sources said $260/st FOB had been quoted for prompt and forward as far out as May, but with no takers.
Western Cornbelt: Ammonium nitrate remained at $285-$290/st FOB in the region.
California: No market was reported for ammonium nitrate in California. CAN-17 pricing, however, was unchanged at $255-$275/st FOB in the state.
Pacific Northwest: Ammonium nitrate was quoted at a nominal $365/st rail-DEL last week. CAN-17 pricing remained at $245-$250/st FOB and $260/st DEL in the region.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $230-$235/st FOB or DEL in the region.
Western Cornbelt: Granular ammonium sulfate was reported at $225-$230/st FOB in the region.
Effective March 8, American Plant Food’s granular ammonium sulfate postings in Texas will firm to $205/st FOB Freeport, $215/st FOB Galena Park, $230/st FOB Fort Worth, $235/st FOB Mermentau, La., and $245/st FOB Littlefield. APF’s coarse grade ammonium sulfate postings will firm on that date to $195/st FOB Freeport, $205/st FOB Galena Park, $220/st FOB Fort Worth, and $235/st FOB Littlefield, with standard grade moving to $190/st FOB Freeport and $230/st FOB Littlefield. The company’s N-Pac Compacted postings will firm on March 8 to $220/st FOB Galena Park.
California: Ammonium sulfate was steady at $210-$247/st FOB, depending on grade and location.
Pacific Northwest: Granular ammonium sulfate was pegged at $230-$240/st DEL in the Pacific Northwest region, reflecting a slight increase from last report.
Western Canada: Granular ammonium sulfate was tagged at $325-$335/mt DEL to the dealer, with postings at the $340/mt DEL level on the upper end.
PHOSPHATES
Central Florida: The Central Florida DAP market trailed both the export and the NOLA DAP barge markets last week, and that situation was not likely to change anytime soon. The Northeast has seen even worse weather than the Midwest, and will probably take a little longer before the spring season begins.
Another factor in a slower start in the East may be higher dealer inventories there. Most want to see some empty space in their bins before they start reordering, and that may not come until early April.
Contract shipments of railcars were continuing last week, but the only prompt sales found were for trucks, which were running at the top of the range of $410/st FOB.
Dealers in some areas of the South that are served by Central Florida were recoiling in horror at the higher prices. One large trader pointed out that the situation was unlikely to impact the price rise of phosphate, because the area does not account for a majority of consumption, or even close to it.
On a very positive note, a trader noted that a customer in Ohio said his area had about two weeks in which trucks could get onto the fields to spread phosphate, and farmers were applying more than normal.
The Central Florida DAP price range last week increased from $400-$405/st FOB the previous week to $405-$410/st FOB. Small buyers will likely pay the higher price. Truck sales of DAP were done at $410/st FOB. Mosaic’s posted price was $410/st FOB, while CF’s price was $405/st FOB. PCS Sales was charging market-based prices. Agrifos posted prices of $450/st FOB for DAP and $460/st FOB for MAP, but railcars were about $5/st FOB less, if available.
U.S. Gulf: Early in the last reporting period, beginning Feb. 26, barge prices had sagged from the previous week’s high of $424/st FOB and at least one NOLA DAP barge sold for $420/st FOB, but prices began a sharp trend upward shortly afterwards.
The run-up was credited to buys in relatively large numbers by both CF and Transammonia, but by the end of the week prices were beginning to soften. With the beginning of the spring season for most of the Midwest a few weeks away, sales to end users – i.e., dealers – will remain suppressed in the short term. CF was said to have bought about 10 NOLA DAP barges at prices ranging from $423/st FOB to $430/st FOB, and Trammo’s buy range was $425-$432/st FOB.
Signs still point to a bullish season. The all-important price of corn futures climbed during the week from a little over $3.50/bushel for December to about $4.13/bushel, before retreating slightly. That’s great news for farmers and really good news for fertilizer sellers, especially phosphate. Another promising sign was the amount of phosphate in Midwest dealers’ bins, which was believed to be half capacity or less. Farmers have skimped on phosphate and potash during the past two years, and cannot afford lower yields when corn prices are high.
In Oklahoma the spring season normally begins in February, but weather delayed farmers from getting into their fields – at least until last week, when activity was underway, along with increased phosphate sales. However, inventories were low there, and terminals could run short.
Both Central Florida and the Gulf markets will have to compete with the export market to obtain enough phosphate for the season, and the export market was still much more lucrative last week. At the same time, sulfur continued to be in extremely short supply, and that will limit phosphate production for at least the next three-to-six months. As a result, the long-term picture was for higher prices – although not into the absurd range of two years earlier.
Based on sales last week, the NOLA DAP barge price changed from the previous week’s range of $421-$424/st FOB to $420-$435/st FOB, but prices appeared to be weakening into the low-mid $430/st FOB range late in the week.
Eastern Cornbelt: The DAP market was pegged at $445-$455/st FOB regional warehouses, with MAP $15/st higher. An Indiana source confirmed spot offers of MAP at the $470/st mark FOB river warehouses in early March. The 10-34-0 market was quoted at $350-$365/st FOB in the region.
Western Cornbelt: DAP was tagged at $445-$455/st FOB, with MAP $15/st higher. 10-34-0 remained at $345-$355/st FOB in the region. Effective March 1, Agrium’s phosphoric acid postings firmed to $755/st rail-DEL for both super phosphoric acid (SPA) and merchant grade acid (MGA) in Iowa, Nebraska, Minnesota, the Dakotas, Kansas, Colorado, Oklahoma, Texas, New Mexico, and Wyoming.
California: Effective March 1, phos acid postings firmed to $8.15/unit DEL in the state for both SPA and MGA, with Simplot referencing MGA at $8.35/unit FOB. Agrium’s phos acid postings moved on March 1 to $815/st rail-DEL for both SPA and MGA in Arizona and California.
DAP and MAP were up as well, with dealer pricing quoted at $485-$490/st FOB or DEL in the state. 16-20-0 was tagged at $324-$331/st FOB warehouses, up $5/st from last report.
A $10/st price hike was in effect for 10-34-0 in response to the phos acid increase, bringing the dealer market to $358-$379/st FOB in the state. Sources said another $10/st increase would take effect March 8 following the ammonia pricing increase, bringing 10-34-0 at that time to $368-$389/st FOB.
Pacific Northwest: SPA and MGA had firmed to $8.15/unit DEL in the region. Effective March 1, Agrium’s phos acid postings moved to $815/st rail-DEL for both SPA and MGA in Washington, Oregon, Idaho, Montana, Utah, and Nevada, up $30/st from February pricing levels.
DAP and MAP pricing had firmed to $485-$490/st FOB or DEL in the region, with talk from some sources of very tight supplies. 16-20-0 was up as well, to $319-$325/st DEL in the region. 10-34-0 pricing had climbed to $375-$385/st FOB in the region following the March 1 phos acid increase.
Western Canada: MAP pricing was steady at $582-$617/mt DEL to the dealer, depending on location, with the low reported in Manitoba and Saskatchewan and the upper end in Alberta and British Columbia. Dealer reference levels were as high as $625/mt DEL in the region.
10-34-0 was tagged at $470-$483/mt DEL in the region.
U.S. Export: Export phosphate sales from U.S. producers were absent last week, but Russia and Morocco were doing business in South America. However, most of the sales were for MAP, which was in short supply in this country.
Brazil was said to have purchased two vessels of phosphate from Russia and Morocco at a price of between $525/mt CFR and $530/mt CFR, while Argentina was said to have also made buys from Russia in the same range. The Russian phosphate was believed to have been sold by Ameropa, and possibly Gavilon.
India was expected to enter the market sometime soon, and Central and South America will continue to buy.
A source said wholesale phosphate prices in Australia were running $700/mt FOB, and close to $800/mt FOB for retail.
The export DAP price range last week continued at $505-$510/mt FOB. The prospect was for higher prices in the near future, although at a slower pace than during the past month or so.
POTASH
Eastern Cornbelt: Although most of the recent potash sales to take place to dealers were concluded at the $390/st FOB mark, sources placed the current potash market in the $405-$420/st FOB range in early March, with the upper end reflecting producer postings.
Western Cornbelt: Potash was pegged at $395-$420/st FOB regional warehouses, with the low from spot resellers and the upper end reflecting producer postings.
California: Potash was steady at $440-$460/st DEL in California, depending on grade. Potassium nitrate pricing remained at $929-$996/st FOB, with the low for bulk tons and the upper end for bagged product.
The sulfate of potash (SOP) market was steady as well at $590-$610/st FOB for bulk tons, depending on grade and supplier. Great Salt Lake Minerals Corp. announced a $30/st increase in the selling price of all SOP specialty fertilizer products, effective April 1. The increase will apply to both standard and granulated products shipped to all locations worldwide, the company said.
Pacific Northwest: Potash was pegged at $435-$445/st FOB regional warehouses and $440-$450/st DEL, depending on grade and location. Effective March 1, potash postings from Intrepid Potash FOB Moab and Wendover, Utah, moved up $30/st to $385/st for 60 percent standard and $390/st for 60 percent granular.
Western Canada: Potash to Canadian customers FOB Saskatchewan mines remained at $431-$437/mt FOB, depending on grade.
Russia: Government agencies are considering a 15 percent tax on potash exports, according to a report this week in The Moscow Times.
SULFUR
Tampa: Sulfur demand continued strong last week and supplies remained anemic, as buyers scraped together what little bits were available. Some suggested that phosphate producers might have to limit capacity due to the shortage during the next few, critical months.
When negotiations for the second quarter’s pricing start in April, the cost of molten sulfur for Tampa delivery will have to go up – and probably a lot, according to players. Adnoc raised the price at Abu Dhabi another $45/mt FOB, to $210/mt FOB. Coupled with the $55/mt FOB hike on Feb. 1, the price has increased $100/mt FOB in just a bit over a month.
Spot deals were made last week at levels that would result in a price as high as $200/lt DEL to Tampa, although that was not an actual spot price for Tampa. However, it may be an indication of what could be in store.
Fortunately for phosphate producers, the price of their product has been rising steadily, and will probably continue to do so into the spring season. With higher prices for raw materials, such as ammonia and sulfur, that will help to ease the pain.
Refinery production rates continued to improve last week and were up to about 82 percent of capacity, as the summer driving season grew nearer. In addition, the economy appeared to be on the rebound. Refiners were continuing to see slim margins, but a boost in sulfur prices might help.
Martin’s sulfur barge, the Margaret Sue, was back at sea last week, after damage suffered during rough weather was repaired. Still, the lost deliveries to Tampa cannot be made up.
Vancouver: Semester contracts were in the process of being negotiated last week, and projections were the new prices would be in line with current spot prices, which were in the $150-$160/mt FOB range.
India: Recent imports reflect higher prices. Swiss Singapore reportedly sold 6-8000 mt to MMTC at US$227/mt CFR Vizag – a new import high. In another sale, Transfert agreed to supply 25-30,000 mt to Coromandel at $190/mt CFR Kakinada.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 67.18 | 64.83 | 33.97 |
| CF Industries | CF | 108.23 | 105.39 | 62.74 |
| Intrepid Potash | IPI | 28.36 | 27.51 | 17.73 |
| Mosaic | MOS | 60.43 | 58.52 | 41.88 |
| PotashCorp | POT | 114.92 | 111.40 | 74.63 |
| Terra Industries | TRA | 44.80 | 41.23 | 20.58 |
| Terra Nitrogen | TNH | 91.56 | 100.30 | 114.27 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 32.60 | 32.35 | 11.91 |
| Deere & Co. | DE | 58.50 | 56.96 | 26.92 |
| Scotts | SMG | 40.34 | 38.64 | 26.51 |
SPOT BARGE PRICES
Green Markets audio conference offers fertilizer, crop outlook
Registrants representing over 40 companies tuned in Feb. 24 to the Green Markets 2010 Agriculture and Fertilizer Outlook audio conference to hear detailed projections about 2010/11 acreage estimates, crop prices, fertilizer supply and demand, and the many factors that continue to influence all three.
The interactive event, the fifth annual spring outlook conference sponsored by Green Markets, allowed registrants to hear, by means of telephone and computer, three industry experts talk about a range of issues, augmented with more than 70 graphs and slides.
Dr. Gerald Bange, chairman of the World Outlook Board for USDA, kicked off the event with a look at the USDA’s most recent acreage estimates for major crops in the 2010/11 timeframe.
Dr. Bange said the USDA is estimating U.S. corn acreage for 2010/11 at 89 million acres, up 2.9 percent from the 2009/10 crop year. Soybeans were projected at 77 million acres, down just slightly from the 2009/10 crop year, while wheat production for 2010/11 was estimated at 53.8 million acres, down a full 9 percent from the previous year. All cotton acres are estimated at 10.5 million acres, up more than 16 percent from the 2009/10 crop year, while rice is projected at 3.2 million acres for 2010/11, nearly 2 percent above the prior year total. Dr. Bange estimated Conservation Reserve Program (CRP) acreage for 2010/11 at 31.4 million, down some 7.1 percent from the prior year, resulting from the expiration of CRP acres in 2009.
Dr. Bange noted the influence of significantly lower fertilizer prices in growers’ planting intentions, with retail prices for ammonia, urea, DAP, and potash down some 14-43 percent from year-ago levels. He also presented in-depth supply/demand figures for corn, soybeans, wheat, and cotton, as well as global production statistics for all four major crops, and detailed capacity figures for the U.S. ethanol and biodiesel industries.
Tom Blue, senior fertilizer industry consultant for Blue, Johnson and Associates, tracked the fertilizer/crop price relationship in the U.S. through recent years, and gave detailed fertilizer demand statistics for all three major nutrients from 2005 through 2010. Blue also talked about the state of fertilizer production in the U.S. and globally, and the relationship between plant cash margins and major consolidations and/or bankruptcies within the U.S. industry dating back to the 1990s.
One of Blue’s graphs detailed the number of NPK production owners in the U.S., Canada, and Mexico from 1960 to the present. He said there were 82 corporate names producing fertilizers in the 1960s, but only 33 of those are still in existence ?Çô and of those, only four are still producing fertilizer.
Jason Moss, of Brock Associates, an agricultural marketing advisory service and publisher of The Brock Report, rounded out the nearly two-hour webinar with a detailed look at the key issues impacting agriculture, including tight credit, a global recession, a deflationary economy, and the influence of index funds. Moss presented his own supply and demand statistics for corn, soybeans, wheat, and cotton, and said farm income will be strong in 2010 because of high profits in corn and soybeans and a strong recovery in livestock. He also predicted that farm consolidations will accelerate.
Koch announces major fertilizer expansion
Koch Fertilizer LLC and its affiliates are significantly expanding their ability to serve customers and suppliers through development of new deepwater terminals and expansion of existing operations at ports around the world. Locations include Sète, France; Avonmouth, U.K.; Geelong, Australia; Topolobampo, Mexico; and Charleston, S.C., U.S. With the new additions, Koch Fertilizer’s global dry bulk, liquid, and ammonia storage capacities will exceed 2 million mt.
“These new investments will complement our global marketing, distribution and production network and enhance our ability to efficiently serve customers and suppliers,” said Steve Packebush, president of Koch Fertilizer LLC. “Operating terminals in ports around the globe will allow Koch Fertilizer to offer liquidity to suppliers of all types of fertilizer and provide customers access to low-cost products and services. We will have the capability to handle large and small vessel shipments and provide diverse products to agricultural and industrial customers in a broad number of strategic locations.
“We believe our terminal distribution system is one of the largest and most diverse of its kind in the world,” Packebush added.
The company announces the following new or expanded facilities.
?Çó Sète, France: Koch Fertilizer Trading Sárl has an agreement with SEA-Invest Sète to expand the fertilizer import terminal in Sète, France, to serve markets in southern and eastern France and the Mediterranean. SEA-Invest Sète, S.A., will build and operate a 20,000 mt storage facility in Sète for use exclusively by Koch Fertilizer Trading Sárl. Construction is expected to be complete in fourth quarter 2010. Koch Fertilizer Products SAS will be able to market a wide variety of products from the terminal, including urea, calcium ammonium nitrate, ammonium sulfate, phosphates, and potash via barge, truck, and rail shipments, and will provide bagged product. Sales contacts are Hervé Defrancq, +33 (13) 9238106, Herve.Defrancq@kochind.com; Steve Nowicki, + 33 (68) 7719006, Nowickis@kochind.com; and Maxime Austruy, +33 (13) 9238103, Maxime.Austruy@kochind.com.
?Çó Avonmouth, U.K.: Koch Fertilizer Trading Sárl has entered into an agreement with Bristol Port Company to expand its existing storage space to add 25,000 mt of capacity, for a total of 35,000 mt. The expansion will feature new blending facilities coupled to electronic weighbridge systems and computerized product handling. Construction is expected to be complete by third quarter 2010. Sales contacts are John Ridd, +44 (1672) 518290, John.Ridd@kochind.com, and Simon Borthwick, +44 (1672) 518290, Simon.Borthwick@kochind.com.
?Çó Geelong and Melbourne, Australia: Koch Fertilizer Asia Pty Ltd has leased a 150,000 mt storage facility from GrainCorp Operations Ltd. at Geelong, Australia, and is working with GrainCorp to add capital investments to improve efficiencies for dry fertilizer loading for primary distribution in the states of Victoria and New South Wales. In addition, Koch Fertilizer Australia Pty Ltd has opened an office in Melbourne, Australia. The sales contact is Marc Sukkel, +61 (3) 98768800, Marc.Sukkel@kochind.com.
?Çó Topolobampo, Sinaloa, Mexico: Koch Fertilizer Trading Sárl and Terminal Transoceánica de Topolobampo have entered into an agreement to expand Terminal Transoceánica’s 30,000 mt urea storage facility to better serve customers in northwest Mexico. Construction is expected to be completed in the third quarter of 2010. Koch Fertilizer will have dedicated access to 25,000 mt of storage space for dry fertilizers. The sales contact is Reinaldo Bello, +1 (345) 946-6726, Bellor@kochind.com.
?Çó Charleston, South Carolina, U.S.: Koch Nitrogen Company LLC recently added 40,000 mt of storage at Kinder Morgan Terminals,
Agrium requests air permit modification
The Idaho Department of Environmental Quality (IDEQ) has received a request from Agrium’s Nu-West Conda Phosphate Operations near Soda Springs to modify its air quality permit. The modification would allow Agrium, which operates the complex as Nu-West Industries Inc., to replace its No. 2 absorbing tower at its east sulfuric acid plant with newer technology and install a cesium catalyst in a fourth converter bed, which is considered a best available control technology. It would use vanadium and potassium salts on a silica substrate. That sulfuric acid plant can produce up to 1,550 tons of 100 percent sulfuric acid per day, or 565,750 tons per year. Emissions would remain within legal limits, IDEQ officials said.
The brick-lined tower would be replaced with a new high silicon stainless steel tower, and the absorbing tower acid pumps and cooling system would be upgraded. To complete the project, the existing tower exhaust stack would need to be removed and reinstalled after the new tower is installed.
Agrium withdrew a prevention of significant deterioration application after company and IDEQ officials met several times in 2009 to discuss the project. Agrium officials decided a minor permit to construct application was appropriate. The modification, which is designed to reduce sulfur dioxide emissions by nearly 100 percent, is planned for this June, when the complex’s turnaround is scheduled.
Because it has insufficient capacity onsite to meet its needs, the company must routinely buy sulfuric acid from outside sources to meet production needs. Nu-West operates its east sulfuric acid plant to maximize yield and minimize product loss in the form of atmospheric emissions.
The operation or overall production capacity of downstream process units ?Çô such as the SPA plant, the phosphoric acid plant, fertilizer product storage, or load-out equipment – are not expected to be affected by the modifications.
Exhaust gases from the sulfuric acid plant are collected and emitted from a single, common exhaust stack. The plant’s emission limits include four pounds of sulfur dioxide per ton of sulfuric acid production. The complex’s existing operating permit imposes sulfur dioxide emission rate limits of 258 pounds per hour and 945 tons per any consecutive 12 months.
Nitrous oxide and particulate emissions are not expected to increase as a result of the proposed modifications.
Brazil considering national fertilizer company
Brazilian president Luiz Inácio Lula da Silva told local media last week that a final proposal to create a national fertilizer company would reach the Brazilian legislature by the end of the month. The plan under consideration would create a national company with the suggested name Fertilizers of Brazil – Febrasa – and would be under the control of the agriculture ministry.
Whether the company is a wholly-owned state enterprise or a joint venture with the private sector is still up in the air. If there were private sector involvement, reports said, the government would keep controlling interest.
According to O Estado de Sao Paulo, regardless of the legal structure, a board of directors and a supervisory council would run the company. How the board and council would be named was not spelled out.
Discussions regarding setting up a national fertilizer company started more than a year ago when global fertilizer prices were skyrocketing. Political leaders complained that private fertilizer companies did not do enough to force down prices.
One of the targets of the complaints was mining giant Vale. The Lula government was critical of Vale for not being more aggressive in exploiting its potash and phos rock holdings.
In the past 18 months, Vale has increased its holdings in the fertilizer sector. Last month’s purchase of select assets of Bunge and the Mosaic and Yara shares of Fosfertil moved Vale into the forefront of fertilizer production and distribution in the country. It is already a major player in the extraction of raw materials such as potash and phosphate rock, but Vale has not stepped up production to levels that would satisfy government critics.
The government argues that by increasing domestic production, Brazil would be less vulnerable to the global shifts in price. The agriculture minister told Estado that 10-30 percent savings on the price of fertilizers could be passed on to the end users in the country by breaking up what he called a cartel of fertilizer companies. Brazil currently imports 91 percent of its potash needs.
Vale expanded its potash production capacity in the past year with purchases of reserves in Argentina and Saskatchewan, Canada. It has one potash mine operating in Brazil. The firm is looking at more operations in the country and in Argentina.
Besides depending on imports for its potash needs, Brazil imports 49 percent of its phosphate and 75 percent of nitrogen-based fertilizers. The goal of the proposed national fertilizer company would be to regulate the industry and review taxes and royalties for the fertilizer and mining industries. The documents Lula will present to the legislature will include a call to make Brazil self-sufficient in fertilizers by 2020.
Some industry experts are critical of both the idea of a national fertilizer company and the call for self-sufficiency. The criticism against the national company is based more on political tendencies. The proposal strikes members of the private sector as another move by Lula and his party’s candidate for the presidency to strengthen the public sector at the expense of the private.
Analysis in the Brazilian media has also focused on the tendency of the Lula government to propose more state control of vital areas of the economy. Lula’s choice for president, Dilma Rousseff, is often described as having an even stronger tendency toward nationalization to deal with economic issues than Lula.
As for the issue of self-sufficiency, few in the industry see the 2020 deadline as realistic. “If we import today 65 percent of our total consumption of 24.5 million mt,” one analyst said, “that means 10 years from now we will be needing something close to 40 million mt of NPK. Please tell me, how will we achieve self-sufficiency in 2020? This is completely unrealistic.” She added that to fulfill the demand to be self sufficient, the Amazon rainforest region would be affected. “Do you believe it’s possible to put away part of the Amazon in the name of potash?”
Airgas rejects hostile bid from Air Products
While the fertilizer industry has been transfixed with merger news for the past year, a merger battle has also been brewing in the industrial gas and ammonia market. Industrial gas and ammonia provider Airgas on Feb. 22 rejected an unsolicited tender offer from Air Products and Chemicals Inc. Earlier in the month, Air Products offered to buy all outstanding Airgas shares for $60.00 per share in cash. The deal is valued at $5.1 billion. The tender offer will expire at 12:00 midnight New York City time on April 9, 2010.
“The Airgas board of directors is unanimous in its belief that the Air Products offer significantly undervalues Airgas and fails to reflect the value of our industry leading position and future growth prospects,” said Airgas Chairman and CEO Peter McCausland. “Since our IPO in 1986, Airgas has employed a disciplined approach to steadily growing revenue, EBITDA and shareholder equity, and Airgas stock has achieved total shareholder return over that period of more than seven times the returns of the S&P 500 Index. The Airgas board strongly urges stockholders to reject Air Products’s offer and not tender their shares.”
Airgas said that for every year since 2000 its stock price has consistently outperformed Air Products, with the exception of 2009. Airgas says the Air Products offer is simply an opportunistic attempt to buy Airgas at a bargain price, exploiting a brief anomaly in the equity markets between the two companies.
Air Products says it is offering a 38 percent premium over Airgas’s closing price on Feb. 4 and an 18 percent premium over its 52-week high. It says the $60.00 offer far exceeds Airgas financial projections for 2012-2014. Air Products says the Airgas claim that its shares have outperformed Air Products is neither accurate nor relevant. Air Products says what is relevant is whether Airgas can raise more value on a standalone basis. Air Products says Airgas has lowered its 2010 guidance and missed recent quarterly guidance.
Airgas bought LaRoche Industries Inc.’s industrial ammonia business in 2005 (GM May 2, 2005). Airgas Specialty Products (ASP) was formed at the time and added process chemicals and enhanced refrigeration capabilities with its January 2007 acquisition of CFC Refimax. The company also bought Continental Nitrogen & Resources’s Rosemount, Minn., aqua ammonia business in 2007 (GM May 28, 2007). ASP is a leading supplier of ammonia products and services in the U.S. for nitrogen oxide abatement (DeNOx), metal finishing, water treatment, chemical processing, and refrigeration. Airgas has also been moving into the new diesel exhaust fluid (DEF) market.
Air Products exited nitrogen fertilizer production back in December 2005 (GM Jan. 2, 2006), when it closed down ammonium nitrate prills, AN solutions, and nitric acid plants in Pace, Fla. It still has active nitric acid capacity of approximately 175,000 st/y at Pasadena, Texas, according to the International Fertilizer Development Center’s North American Fertilizer Capacity 2009.
According to Airgas, Air Products CEO John McGlade first made an unsolicited verbal proposal to Airgas CEO McCausland on Oct. 15, 2009, at $60 per share on an all-stock basis. This was followed up with a letter on Nov. 20, 2009. On Dec. 17, 2009, the offer adjusted to $62 per share, half stock/half cash. On Feb. 4, 2010, it went back to $60 per share, but all cash.
Airgas has annual revenues of $4.3 billion, with 14,000 employees. Air Products has revenues of $8.3 billion and 18,900 employees in over 40 countries.