Washington-The Agricultural Retailers Association on Jan. 12 released a final version of its model fertilizer contract confirmation, which was first unveiled in November and discussed in detail at the ARA 2009 Conference and Expo in early December (GM Dec. 14, 2009). ARA said the contract confirmation is meant to serve as a voluntary tool to help companies better manage their risks, have more accountability, and provide the industry with common and consistent terms and conditions when dealing with suppliers or customers. The ARA Board of Directors initially approved the contract at the ARA Conference and Expo in Florida. Conference attendees and ARA members were requested to provide additional input to ARA in order to improve the document to meet the needs of the agricultural retail-distribution industry. The contract confirmation was developed by ARA’s Fertilizer Contract Task Force in response to “the extreme volatility that has occurred with fertilizer prices and supplies over the past few years.” A copy of the final fertilizer contract confirmation is available at the ARA website at www.aradc.org.
All posts by traceybg@gmail.com
Wisconsin ban in effect on asphalt loading pads
Madison, Wisc.-Ag operators and mixers, loaders, and applicators are being reminded that asphalt mixing and loading pads can no longer be used. Revisions to Wisconsin’s fertilizer and bulk storage rules required the pads to be taken out of service by Dec. 31, 2009, according to officials with the Wisconsin Department of Agriculture, Trade and Consumer Protection. The department found that asphalt is too porous to effectively contain spills of liquid pesticides or fertilizers. “We’ve also found that some liquid pesticides will corrode the surface of the asphalt pad, which increases the risk of product seeping through the pad into the ground,” explained Mathew Laak, containment specialist with the department. If the asphalt pad is being taken out of service, Laak said, the area under and around the pad will need to be checked for environmental contamination at some point. This means samples of soil and groundwater must be taken and analyzed by an environmental lab to check for the presence and amounts of pesticides or fertilizers. If the laboratory analysis shows contamination under the asphalt pad, then the soil must be removed as part of an environmental cleanup. If a site cleanup is required, certain costs are eligible for reimbursement under the Agrichemical Cleanup Program. “We understand that many ag dealerships and facilities are affected by this difficult economy, so they may choose to leave the asphalt pads in-place but out-of-service,” Laak said. “Just be aware that if a pad is out of service for five years, a facility will still need to do an environmental assessment of the area under and around the pad to check for possible contamination.” A facility might be able to delay the costs of the environmental assessment right now, but they will still need to complete the environmental assessment in the future, Laak said. Another option for facilities with asphalt pads is to replace them with Portland cement concrete pads. Design plans for a new concrete pad must be submitted to the department, with written certification by a professional engineer, at least 21 days prior to construction.
Management Briefs
CHS Inc. cut several jobs in its crop nutrient division Jan. 12, with the top victim being Tim Chrislip, director, product management and business development. CHS told Green Markets that fewer than 25 positions were eliminated, with those coming from the Minneapolis office and outlying area. No Tampa jobs were cut.
The move was made to refocus crop nutrients more toward the customer and drive accountability to the regions. CHS said the move had nothing to do with the recent sale of Agriliance LLC retail outlets.
Jeff Greseth, a 30-year veteran of the CHS cooperative system, will now become the director of sales and supply, adding supply to his previous title. He will report to Cheryl Schmura, vice president, crop nutrients, who has held the position for the past few years (GM Aug. 6 and Sept. 3, 2007). She in turn reports to Mark Palmquist, executive vice president and chief operating officer of the Ag Business.
CHS crop nutrient employees remaining in place include Cathy Eckman, director, operations, and David Klima, director of facilities.
Joe Myhra continues at industrial sales, and Frank Edwards at retail, both reporting to Schmura.
Truth Chemical announces the hiring of Alan Pitts as fertilizer sales representative for Texas and Oklahoma. Most recently he was with Timac Agro USA, but has sales history with Agriliance, Helena Chemical, and DeBruce. Alan resides in Abernathy, Texas. His office phone number is 806-298-2088; cell 806-773-5588; and email apitts@truthind.com.
The Tennessee Farmers Cooperative has given Allen Pogue, 81, retired assistant manager of TFC’s crops division and long-time manager of the fertilizer department, the James B. Walker Cooperative Spirit Award. It is TFC’s highest individual honor. Pogue, who began his career in 1951, retired in 1993 to his Maury County farm.
Market Watch
AMMONIA
U.S. Gulf/Tampa: The markets remained quiet last week, with Tampa still at $300/mt DEL and new business still a week or so away.
According to the U.S. Department of Commerce (DOC), U.S. anhydrous ammonia imports in November were off only 2 percent, to 499,059 st from the year-ago 511,834 st. For the July-November period, however, they were off 14 percent, to 2.72 million st from 3.16 million st.
Black Sea: Ukrainian producers are about to face another shock. Media reports say the price of natural gas from Russia will be $305.60/thousand cubic meters for the first quarter of this year, compared to $208.12/thousand cubic meters in the last quarter of 2009.
The move means that the current price level of ammonia is well below the cost of inputs.
Ukrainian producers were closed or running at diminished capacity for the better part of last year because of soft ammonia prices. This latest gas deal will almost certainly ensure the plants will stay closed until the ammonia price recovers, said one trader.
The new price is part of an ongoing series of talks between the governments of Russia and Ukraine.
Last year, Ukraine paid $360/thousand cubic meters for Russian gas. This price represented a 20 percent discount on the market value.
At the time, a dispute between Russia and Ukraine led to a three-week disruption of gas supplies to Ukraine and the rest of Europe.
The new Russian price began a year-long process of ammonia plant closures after 2008 contracted tons were shipped.
Ammonia prices opened last year at $190/mt FOB. Producers in the area were able to delay final closure by moving out cargoes agreed to when the price was much higher. The average fourth quarter 2008 price was $416/mt FOB. The average first quarter 2009 price was $217/mt FOB.
By the end of the first quarter last year, the writing was on the wall that production would cease or be curtailed. While prices began to move up in the last semester, sources said confidence was weak that the selling price of ammonia would remain above the cost of inputs.
Sources report Nitrochem is having problems loading vessels. One source said either mechanical problems or weather-related difficulties are preventing the proper loading of storage tanks in Yuzhnyy. Ships that load from those tanks are sitting on the side waiting for the material.
Eastern Cornbelt: Anhydrous ammonia was quoted in a broad range at $385-$430/st FOB regional terminals, with the low for prompt tons on a spot basis. Spring prepay offers were pegged in the $425-$430/st FOB range.
Western Cornbelt: The ammonia market was quoted in a broad range at $360-$420/st FOB, depending on location, with the low reported in Nebraska and the upper end in the Iowa and Missouri markets for spring prepay tons. There were reports of spot pricing as low as $330/st FOB in Nebraska, but that was not confirmed.
Southern Plains: Anhydrous ammonia was tagged at $300-$330/st FOB for spot tons to the dealer, with the low end quoted out of regional production points. Sources reported few prepay offers still on the table. Koch’s Dec. 30 ammonia postings included $315/st FOB Dodge City, Kan., and $325/st FOB Conway and Clay Center, Kan., with first-quarter spring prepay offered at $335/st FOB Dodge City, $345/st FOB Conway and $350/st FOB Clay Center, and second-quarter spring prepay offered at $345/st FOB Dodge City, $350/st FOB Conway and $355/st FOB Clay Center.
South Central: Anhydrous ammonia pricing was quoted at $375-$425/st FOB regional terminals for spring prepay, with the low confirmed out of the Memphis market.
Middle East: Sources report that bids at $300/mt FOB are being rejected outright.
Producers are bullish on strong demand from Asia and expectations of a stronger U.S. market.
Sources say $310/mt FOB is where the offers are now starting.
No one has settled beyond that level yet, said one source, but it could happen any day now.
Besides the stronger demand, sources say rotating turnarounds from the area producers are keeping the lid on supply.
Some of the suppliers that traditionally participate in Indian tenders, such as Qafco, are now in talks with FACT/India for a long-term contract. Reportedly, FACT is looking to book 50,000 mt under an annual pricing agreement rather than constantly calling public tenders.
Until a new deal comes along that confirms the reports of higher prices, sources say the market is still hovering in the low $300s/mt FOB.
India: FACT is in talks with Middle East producers about securing guarantees for 50,000 mt this year on a formula priced basis.
In the past, FACT has called tenders for its tonnage. Each time, one or two Middle East producers would offer tons and set new prices for the region. In recent discussions, Indian buyers have been finding the Middle East suppliers much more bullish on pricing than the buyers expected.
Sources say FACT appears to be hoping that by nailing down its annual import requirements of ammonia early, it can also secure better pricing than what it got under previous tenders.
Asia: With the Namhae demand back up and no sign of slacking off by other major buyers in the area, prices are moving up.
Mitsubishi bought an Australian cargo from Yara for a Korean buyer. The delivered price is pegged at $365/mt CFR.
The price of delivered material into Asia is moving up at a steady pace. One trader said that by the end of the month $365/mt CFR would look cheap.
UREA
U.S. Gulf: New granular business last week was reported within the $318-$323/st FOB range. Prices appeared to drop early in the week to $318/st, spurred by lower corn prices, according to sources; however, they rebounded as the week progressed, with sources citing a firm international market. Sources said the market was treading water, with conflicting signals – lower corn prices versus strong international urea market. Regardless of lower corn prices, most sources continue to predict a considerable acreage this spring. As for the supply and demand scenario, they can cite current imports figures to help back them up.
According to DOC, U.S. urea imports were off 38 percent in November, to 337,578 st from the year-ago 541,578 st. Imports are off 28 percent for the July-November span, to 1.74 million st from the year-ago 2.4 million st.
Eastern Cornbelt: Granular urea was steady at $355-$365/st FOB to the dealer, with the low out of river locations and the upper numbers inland. Sources put the Cincinnati, Ohio, market in the $355-$360/st FOB level last week.
Western Cornbelt: The granular urea market remained at $350-$360/st FOB in the region at mid-month.
Southern Plains: Granular urea was quoted at $345-$350/st FOB in Oklahoma, with the low reported in Enid, Okla. Koch moved its Enid urea price up to the $345/st FOB level on Dec. 31.
South Central: The granular urea market was quoted at $345-$350/st FOB regional terminals to the dealer.
Southeast: Granular urea was tagged at $355-$360/st FOB port terminals to the dealer, with the upper end reflecting the list price FOB Brunswick, Ga. Sources also reported dealer postings as high as $370/st FOB Norfolk, Va.
China: With just a few days to go before the export duty jumps to 100 percent, sources say a number of trading houses have picked up cargoes. One source said as much as 100,000 mt was purchased in the past few weeks for export from China.
The big issue is not buying the tons or even getting them to the bonded warehouses. The issue is getting the material out of the country at the current 7 percent duty after the end of the month.
One observer wondered whether some of the buyers have already received assurances from local port custom authorities that if the urea is in a bonded warehouse and if a vessel is nominated by the end of the month, loading could take place in early February and the higher duty would not be charged.
Sources say each port authority has limited discretion to determine how it will handle exports. Some authorities are reportedly holding to the letter of the law. They say any cargo not loaded on a vessel by 23:59 Jan. 31 will be assessed the higher duty.
Other customs officers are willing to be more lenient and allow the lower tax rate for tons already in a bonded warehouse.
The price of granular urea continues to be strong. Sources say granular is solidly in the $320s/mt FOB.
One trader suggested that many of the tons recently purchased may be destined for the U.S. if industry rumors of strong demand in the spring are believed.
Middle East: Even though the global urea market remains quiet – except for speculation out of China – sources say the producers in the Middle East remain comfortable.
The combination of steady contracted business and rotating turnarounds is helping keep supply and demand in balance.
At least, so argue the producers.
The lack of any major buyers in the market, said one trader, could start putting pressure on producers to lower their prices soon.
The deal between Saudi Arabia and Pakistan, along with contract sales to the U.S., will ensure Sabic will not need to look for buyers.
Other area producers have also lined up long-term contracts for most of their production.
Until Indian buyers come back into the market, sources don’t expect to see a major move on prices.
Black Sea: With the prill market quiet in general, sources say the lack of movement out of the Black Sea is not surprising.
The main business people are watching are the cargoes Agora will reportedly need to satisfy its commitment to IPL/India and the cargoes Fedcominvest has booked for Pakistan.
Reportedly, these houses are behind in their deliveries.
The conventional wisdom puts the market in the low $270s/mt FOB; however, traders are pointing to paper trades and rumors rather than final end-user deals. Without any new business from the area, observers say the last bit of public business in the upper $260s/mt FOB is a fair market assessment.
India: The market is looking for action from India to move it out of the doldrums. Rumors continue to circulate that a tender could be called by the end of the month.
At the same time, however, some in the industry say Indian buyers might hold off until the beginning of the new fiscal year, which begins April 1.
NITROGEN SOLUTIONS
U.S. Gulf: The market remained quiet, with price ideas remaining within the previous range – $178-$185/st FOB. Some bulls were expecting the next round of business to hit $190/st FOB.
U.S. UAN imports were off 82 percent in November, to 33,977 st from the year-ago 184,988 st. July-November imports are off 60 percent, to 345,431 st from 873,718 st.
Eastern Cornbelt: UAN was pegged at the $7.21-$7.50/unit level FOB Cincinnati for cash or prepay. The upper end of the UAN-28 range was reported at $217/st ($7.75/unit) FOB E. Liverpool, Ohio, for prompt tons last week.
Western Cornbelt: UAN-32 remained in the $225-$240/st ($7.03-$7.50/unit) FOB range, depending on location and time of delivery, with the upper end reflecting dealer reference pricing for prompt tons. One source put the dealer market in his location at $230/st ($7.19/unit) FOB for prompt or prepay tons last week.
Southern Plains: The UAN-32 market was tagged at $220-$230/st ($6.88-$7.19/unit) FOB regional production points. Effective Jan. 11, Koch’s UAN postings FOB Enid moved to $235/st ($7.34/unit) for UAN-32 and $205.63/st ($7.34/unit) for UAN-28. There has been no word on the status of LSB Industries Inc.’s Pryor, Okla., UAN plant, which was last expected to come up in December. Koch Nitrogen is to market that product.
South Central: UAN-32 out of regional terminals was quoted in the $195-$210/st ($6.09-$6.56/unit) FOB range last week.
Southeast: The UAN-30 market was reported in the $182-$185/st ($6.07-$6.17/unit) FOB level out of port terminals last week. Georgia sources pegged the UAN-32 market at $200.64-$205/st ($6.27-$6.41/unit) FOB terminals and/or production points in the state. The import vessel market for UAN-32 was quoted at the $215/mt CF R level at mid-month.
AMMONIUM NITRATE
U.S.Gulf: Barges continued to be called $215-$220/st FOB. Terra was reportedly posted at $245/st FOB Yazoo City.
While U.S. imports were up 5 percent in November, to 50,265 st from the year-ago 47,988 st, for the fertilizer year-to-date (July-November) they remain off 39 percent, to 173,821 st from 283,224 st.
Western Cornbelt: Ammonium nitrate was steady at $270-$285/st FOB in the region, with the upper end in Iowa and the low reported out of Missouri shipping points on a spot basis.
Southern Plains: Ammonium nitrate pricing had reportedly firmed to $265-$268/st FOB the Tulsa market.
South Central: Ammonium nitrate was quoted at $245-$275/st FOB, with the low reportedly reflecting reference pricing out of Yazoo City, Miss., and the upper end to the dealer FOB Memphis. Sources quoted the El Dorado, Ark., market at the $255/st FOB level.
Southeast: The Tampa ammonium nitrate market remained at $270-$280/st FOB.
AMMONIUM SULFATE
Eastern Cornbelt: Ammonium sulfate was quoted at $195-$215/st FOB. The market FOB E. Liverpool was tagged at $205/st FOB for granular tons.
Western Cornbelt: Granular ammonium sulfate was pegged at $195-$215/st FOB in the region.
Southern Plains: Effective Jan. 4, American Plant Food Corp.’s ammonium sulfate postings in Texas firmed $20/st, bringing granular ammonium sulfate list prices to $195/st FOB Freeport, $205/st FOB Galena Park, $220/st FOB Fort Worth, and $235/st FOB Littlefield. APF’s postings for coarse grade ammonium sulfate firmed on that date to $185/st Freeport, $195/st FOB Galena Park, $210/st FOB Fort Worth, and $225/st FOB Littlefield, while standard grade ammonium sulfate postings moved to $180/st FOB Freeport and $220/st FOB Littlefield. The company’s N-Pac Compacted price firmed on Jan. 4 to $210/st FOB Galena Park.
Ammonium sulfate postings FOB Plainview, Texas, also firmed on Jan. 4, to $235/st for granular, $225/st for coarse, and $220/st for standard.
South Central: The granular ammonium sulfate market was generally quoted in the $190-$210/st FOB range in the region, with the low reported in Arkansas on a spot basis. American Plant Food Corp.’s granular ammonium sulfate posting at Mermentau, La., moved on Jan. 4 to $225/st FOB.
Southeast: Granular ammonium sulfate was pegged at $175-$190/st FOB, with the upper end reflecting DSM Chemicals’ list price FOB Augusta, Ga., which took effect Jan. 4. DSM’s new postings for standard grade was $145/st FOB Augusta, while the company’s delivered pricing to Florida moved on Jan. 4 to $173/st for standard grade and $230/st for granular.
U.S. Imports: November imports were off 8 percent, to 26,334 st from the year-ago 28,492 st. July-November imports were off 11 percent, to 122,278 st from 136,884 st.
PHOSPHATES
Central Florida: A hard freeze damaged an estimated 30 percent of crops in Florida last week, even though farmers pumped and sprayed water during the entire period in an effort to reduce damage. The heavy pumping dropped the Floridan Aquifer by approximately 60 feet, and that created other problems for farmers and their neighbors. Central Florida sits on limestone rock, which is supported by water. When the aquifer fell, so did the ground in at least 22 spots. There were multiple reports of houses and mobile homes sinking, as well as portions of roadways – including parts of Interstate 4 – swallowed by sinkholes. In addition, the low water levels caused well pumps to burn out, and many were left without drinking water. Farmers said the heavy water use was necessary to save their crops, but home owners and businesses complained bitterly. Farmers could face legal action from the damage they caused. The extended cold spell in the state was highly unusual, and some areas saw small snow flurries and sleet. Temperatures were returning to normal by late last week, but prices for citrus, strawberries, tomatoes, and other produce will likely rise at grocery stores as a result.
With inventories extremely low, traders said it was difficult, if not impossible, to obtain product from producers without a position, but prices increased as a result.
PotashCorp was still conducting a turnaround at its Aurora plant in North Carolina, but that was expected to come back online on Jan. 18-19, when production from there will resume. The company was producing at its White Springs facility in North Florida at a rate to meet market demand.
Last week a trader obtained the highest prices for both truckloads and railcars at $385-$390/st FOB, and Mosaic made a sale at its list price of $380/st FOB. The Central Florida range last week was $380-$390/st FOB, compared to $365-$370/st FOB the previous week. PCS sales was charging “market prices,” and has not had a Central Florida reference price for about a year. CF was said to have nothing available for prompt delivery, but had a posted price of $380/st FOB. Agrifos was selling truckloads at $420/st FOB for DAP and $430/st FOB for MAP, and its railcar price was about $5/st FOB less than for trucks.
Late in the week there were unconfirmed reports that PCS republished phosphates at Lee Creek to $425/st for DAP and $430/st for MAP, with White Springs at $400/st for MAP.
U.S Gulf: Business on the Gulf’s river system slowed last week, as NOLA DAP barges became more difficult to find. Still, prices rose. Most transactions were done from terminals, but a few sources said they were seeing some resistance to higher prices from dealers and farmers. A source said he believed phosphate producers were attempting to hold down prices, but it was likely the cost of DAP would easily exceed $400/st FOB, which was about the top of the range this week.
Prices at terminals were rising last week, and ranged from as low as $420/st FOB to $450/st FOB, with the highest prices being charged in the closed river areas. Several sources reported they had run out of both DAP and MAP, but demand was still relatively strong. MAP was virtually impossible to find.
Another factor in slowing the market’s activity last week occurred after the USDA issued its crop estimate, which said yields would be above what had been expected. The price of corn initially plunged, then recovered somewhat and trickled downward later in the week. However, prices for the next season remained strong, and that was likely to have more of an impact on phosphate sales than the price for the current crop.
Sales of potash were significantly up after the recent price decline, and sources said that was helping to push the sale of phosphate.
The NOLA DAP barge price last week increased from $385-$395/st FOB in the previous range to $392-$400/st FOB, and prices for MAP were running $10-$20/st FOB higher. MAP was extremely scarce. Due to low inventories, buyers should expect prices to continue to rise this week.
Eastern Cornbelt: DAP was quoted in the $435-$445/st FOB range out of most regional warehouses, with the low end out of port river locations in Illinois. In Ohio, sources pegged the DAP market at $445/st FOB Maumee and $440/st FOB Cincinnati. MAP was quoted at a $10-$15/st premium to DAP, depending on location, and was in very tight supply.
The 10-34-0 market was quoted at $350-$365/st FOB in the region, reflecting another increase from last report.
Western Cornbelt: The DAP market was quoted at $430-$445/st FOB regional warehouses, reflecting another increase from last report. MAP was $10-$15/st higher than DAP, and in particularly tight supply. While some characterized inventories as “virtually impossible to find,” others said spot tons were available “if you’ve got alliances with suppliers. If not, you’re screwed.”
10-34-0 was quoted at $345-$355/st FOB in the region, with one supplier referencing a solid $350/st FOB to the dealer.
Southern Plains: Firming phosphate markets and weakening potash continued to dominate fertilizer activity last week. Sources quoted the Tulsa, Okla., DAP market at $420-$425/st FOB. MAP, which was in particularly tight supply, was reportedly trading a significant premium to DAP. Sources put the MAP market at $445-$455/st FOB, and one said he had to make seven phone calls before finding a seller with available tons.
The 10-34-0 market was pegged at $315-$325/st FOB in the region, indicating an increase from last report. Effective Jan. 1, Agrium’s list price for super phosphoric acid (SPA) and merchant grade acid (MGA) moved to $690/st rail-DEL in Colorado, Kansas, New Mexico, Oklahoma, and Texas.
South Central: The DAP market had firmed to $410-$425/st FOB regional warehouses to the dealer, with MAP at a $10-$15/st premium. TSP was pegged at $385-$400/st FOB where available.
U.S. Export: The export DAP market was attempting to move toward equilibrium with the domestic markets last week. PhosChem made four sales as the price rose $20/mt FOB during the week. The first sale was for 10,000 mt into South America at $415/mt FOB. Next was the sale of 20,000 mt into New Zealand and Australia at $425/mt FOB. The third was another 10,000 mt into South America at $426/mt FOB, and the fourth was a deal for 7,000 mt into Central America at $435/mt FOB. The last price would be equal to a point somewhere between prices on the river system and Central Florida.
Based on PhosChem’s most recent sales, the export DAP price range last week moved from $390-$405/mt in the previous range to $415-$435/mt FOB. The price was likely to increase for the next sale.
No new information was available on the fate of the Greek ship Navios Appollon, which was seized by Somali pirates on Dec. 28 carrying phosphate owned by PhosChem destined for India.
Asia: Sources report U.S. DAP is being re-exported from China at $490-$500/mt FOB. Sources say at that level, the Chinese sellers are making a nice profit. Some of the DAP sold to China by PhosChem was originally sold from the U.S. in the low $300s/mt FOB.
Demand in the Asia-Pacific region remains strong. Prices into the area have been edging up. Sources report that an Australian buyer took a PhosChem cargo at $425/mt FOB last week.
One Asian source noted that the price in Asia is moving up as rapidly as it is because buyers kept waiting for the price to bottom out while they drew down their reserves last year. One trader noted that late last year buyers noticed at the same time they were just about out of material, and the price was beginning to edge up. Suddenly, he said, everyone started chasing the same tons and drove the price up.
POTASH
U.S. Gulf: The NOLA barge market was being cited as $360/st FOB.
Eastern Cornbelt: Potash was steady at $390-$397/st FOB and $400/st DEL in the region, based on January pricing levels from producers. One source put the red granular potash market at the $390/st FOB level with some volume discounts, and said he had booked 100 percent of his anticipated spring needs. “I definitely feel the floor has been reached and we need to put product in position,” he said. “Most dealers have ordered a large portion of their needs.”
Western Cornbelt: Potash was quoted at $390-$397/st FOB, with the upper end for white granular tons on a spot basis. Postings for red granular potash were at the $390/st FOB and $400/st rail-DEL level in the region, with a $30/st increase slated for March 1. One source quoted direct-transferred Russian potash trading for as low as $370-$375/st dockside at spot river locations.
Several contacts mentioned that the lower potash prices were sparking business, particularly after the usage cutbacks experienced in 2009.
Southern Plains: Potash FOB Carlsbad, N.M., was quoted at $360/st for 60 percent red granular, $362/st for 62 percent white standard, $365/st for 62 percent fine standard, and $368/st for 62 percent white granular. Out of regional warehouses, sources pegged the dealer market at $385-$390/st FOB. Sources said sales are being made at these levels. One said some soybeans in his trade area in 2009 showed signs of yellowing due to potash deficiencies, so potash will be applied for the 2010 crop.
Agrium’s 60 percent red premium potash postings dropped on Jan. 5 to $400/st rail-DEL in Kansas and Oklahoma, with a $30/st increase slated for March 1.
South Central: Dealers reported some interest in potash as lower prices took effect early in the month. Potash pricing had reportedly dropped to $385-$395/st FOB regional warehouses, depending on grade and location. There were reports of Russian potash barges at the $360/st level at the Gulf. Agrium’s 60 percent red premium potash postings dropped on Jan. 5 to $410/st rail-DEL in Kentucky and Tennessee, with a $30/st increase slated for March 1.
Southeast: One Carolina source quoted delivered potash at $410-$415/st, and said he planned to book new tons at those levels. “We can’t start the spring with nothing,” he added.
Agrium’s 60 percent red premium potash postings moved on Jan. 5 to $410/st rail-DEL in Alabama, Georgia, Florida, Virginia, and the Carolinas. Out of regional warehouses, Agrium’s Jan. 5 potash postings included $400/st FOB Wilmington, N.C., and Georgia locations at Americus, Bainbridge, Savannah, and Tifton. A $30/st increase is slated for all price points on March 1.
PCS Sales’ Jan. 4 granular potash postings included $410/st rail-DEL in Alabama, Georgia, Virginia, and the Carolinas, and $397/st FOB Chesapeake, Va. A $30/st increase will take effect March 1.
Western U.S.: Effective Jan. 5, Agrium’s 60 percent red premium potash postings moved to $415/st rail-DEL and $405/st FOB the warehouse in southern Idaho, Utah, and Oregon’s Malheur County; $420/st rail-DEL and $410/st FOB in Washington, the Idaho Panhandle, and Oregon excluding Malheur County and the Willamette Valley; and $425/st rail-DEL and $415/st FOB in Oregon’s Willamette Valley. A $30/st increase is scheduled for all price points March 1.
U.S. Imports: Muriate of potash imports were off 33 percent in November, to 569,038 st from the year-ago 855,553 st. July-November imports, however, are off 46 percent, to 2.21 million st from 4.12 million st.
China: So far there has been no news about other producers stepping in to match the $350/mt CFR price negotiated by BPC. In the meantime, there are reports that producers, including Canpotex, have inked deals for other destinations – Japan, Taiwan, and other Southeast Asia locations – for $385-$400/mt CFR. However, those locations traditionally pay higher values than China.
SULFUR
Tampa: Last week, Mosaic began settling with its major suppliers at $70/lt for molten sulfur delivered to Tampa for the first quarter, which was a $40/lt increase over the fourth quarter of 2009. However, Mosaic had not completed contracts with all of its major suppliers, and PotashCorp had not begun late last week and was still negotiating.
Supply will be an even bigger problem for phosphate producers, who have seen a sharp increase in orders for DAP and MAP. Mosaic will have enough to produce even at near full capacity, if the market demand exists, because it still has sulfur blocked at both Galveston and in Canada. The status of PCS was less clear.
Last week refineries were shutting down for a variety of reasons, from scheduled turnarounds to breakdowns, and sweet crude was still the rule – both of which mean reduced supplies. Refinery margins were down, and demand for gasoline will not increase until the economy and the employment picture improves.
Because prices had not been finalized with all major suppliers of both Mosaic and PotashCorp, the index will not be changed this week. However, it appeared probable that will occur next week.
AccuWeather.com reports oil production in the Gulf of Mexico could be affected this weekend (Jan. 15-16) by a storm with potential for conditions similar to a minimal tropical storm. “An El Nino-based rogue storm for the Gulf states occurring Friday afternoon into Saturday will produce gales up to 50 mph and 10-15 ft. waves,” said AccuWeather.com Senior Expert Meteorologist and Expert Long-Range Forecaster Joe Bastardi.
“Normal oil and gas production processes could be disrupted this weekend, like the disruptions that happen when a weak hurricane strikes,” said Bastardi.
While oil prices dropped last week due in part to warmer weather, the firm expects cold temperatures to return by the end of the month.
U.S. Imports: Sulfur imports were off 50 percent in November, to 70,850 st from the year-ago 141,288 st. July November imports are off 51 percent, to 524,278 st from 1.07 million st.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 65.32 | 66.99 | 30.90 |
| CF Industries | CF | 93.19 | 96.24 | 44.25 |
| Intrepid Potash | IPI | 31.33 | 33.33 | 18.56 |
| Mosaic | MOS | 60.84 | 65.76 | 33.21 |
| PotashCorp | POT | 115.31 | 124.77 | 70.52 |
| Terra Industries | TRA | 32.66 | 35.78 | 12.24 |
| Terra Nitrogen | TNH | 107.04 | 108.40 | 95.26 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 26.51 | 25.99 | 14.50 |
| Deere & Co. | DE | 58.35 | 56.10 | 39.50 |
| Scotts | SMG | 40.06 | 39.72 | 30.09 |
SPOT BARGE PRICES
P&K demand rebounding, says Mosaic; sees big turnaround in 2010
Mosaic Co. sees a rebound for phosphate and potash in 2010. “We are pleased to see nutrient markets beginning to rebound worldwide,” said Jim Prokopanko, Mosaic president and CEO. “The demand for phosphate is growing, and we are confident potash demand will emerge as well as farmers increase nutrient applications. As we come out of this downturn, we are confident in the long-term nutrient demand outlook.”
These comments were made as the company released results from the second quarter ending Nov. 30, 2009.
Second-quarter net income was $107.8 million ($.24 per diluted share) on sales of $1.71 billion, compared to the year-ago $959.8 million ($2.15 per share) and $3.0 billion, respectively. Operating earnings were $200.1 million versus the year-ago $682 million. However, year-ago results included a pretax gain on the sale of its interest in Saskferco of $673.4 million, or $1.03 per share.
As for phosphates, Mosaic said the decline in operating earnings was primarily due to the effects of lower selling prices, partially offset by higher sales volumes and lower raw material costs. “Phosphate sales volumes have returned to more normal levels,” said Prokopanko. “We look for improved gross margins in calendar 2010, though margin expansion may be constrained by higher raw material costs and the normal lag between our average realized prices and prevailing market prices.”
Mosaic said the phosphate market began to recover during the second quarter, especially in Asia and the Americas, as distributors purchased crop nutrients to meet farmer demand. Since the end of the second quarter, it said the average DAP price has continued to strengthen, with the early January Tampa price at $380/mt FOB – up from around $280/mt back in early November.
Mosaic expects its phosphate sales volumes to range from 2.2-2.6 million mt in the third quarter ending Feb. 28, 2010. The estimated Mosaic realized price for the quarter is $310-$350/mt FOB.
As for potash, second-quarter results were impacted by a sharp decline in sales volumes, a decrease in the average MOP selling price, and the effects of significantly lower production levels, partially offset by lower Canadian resource taxes and royalties.
Mosaic said potash is gaining traction, what with the settling of the China contract and recent increased potash application in the Americas driven by depleted soils and strong grain and oilseed prices.
Mosaic Vice President of Market Analysis and Strategic Planning Dr. Michael Rahm gave analysts several reasons for a strong demand recovery in 2010. First, he cited strong commodity prices for corn, soybeans, and other products such as palm oil and sugar. Analysts have noted that corn and soy prices may increase further once a better assessment of crop loss due to late harvest is made.
Second, Rahm said that after a wet October, ideal weather in November allowed most farmers to complete their harvest and salvage the fall application season. He said P&K shipments during November were the largest so far during the fertilizer year, and nearly equal to the three-year average. Rahm added that the combination of increased shipments and lower production resulted in a sharp drawdown in Mosaic phosphate inventories, to 420,000 mt at the end of December. He said this was the lowest month-end total in the five-year history of Mosaic.
Third, Rahm said there have been consistent reports of a recovery in P&K application rates throughout most of North America.
Fourth, he said the biggest surprise was that China came into the market in November and bought 600,000 mt of DAP.
Finally, he said buyers around the world are positioning phosphate for next spring. “We shipped 15 unit trains from Central Florida to customers throughout North America in December, and as of today we are scheduled to ship a total of 28 unit trains in January and February.”
Rahm said suppliers of dry fertilizers, particularly urea and potash, will need to supply near-record tonnage during the first half of 2010 in order to meet even a moderate rebound in demand. He said the phosphate market is expected to remain tight, especially during the first half of 2010. He said producer stocks are extremely low, and reports indicate that many producers have committed production for the next 60-90 days. “The Northern Hemisphere demand is still ahead of us, and a strong uptake in Southern Hemisphere buying is expected to follow by midyear.
“The potash market is projected to come into balance during the first half of 2010,” Rahm continued. “We expect that the recent decline in potash prices will unleash large pent-up demand from all corners of the globe. In particular, we forecast that global potash shipments will increase to 47-50 million mt in 2010, compared to about 32 million mt in 2009.” As a result, he expects North American inventories to drop to average or even below-average levels by midyear.
Mosaic said it expects to have $1-$1.2 billion in capital spending for fiscal 2010. It continues to execute against its multi-year potash expansion plan and invest substantial funds to further improve operating performance of its existing plants and mines. Mosaic said a new greenfield potash project would require $600-a-ton potash in perpetuity to get a return on investment, while a brownfield would require $300-a-ton.
Mosaic told analysts that it has spent just over $35 million in the second quarter in response to an elevated brine inflow at its Esterhazy potash mine. The company expects this expense to remain flat over the next few quarters. This was up from the first quarter’s $28 million. CFO Larry Stranghoener said these higher levels of brine inflow occur from time to time. “It’s something that we have proved to be able to manage effectively….”
Mosaic six-month net earnings were $208.4 million ($.47 per share) on sales of $3.17 billion, versus the year-ago $2.14 billion ($4.81 per share) and $7.33 billion. Operating earnings were $334.3 million versus the year-ago $2.23 billion.
| Net Sales $/M | 2Q-09 | 2Q-08 | 6M-09 | 6M-08 |
| Phosphate | 1,328.0 | 2,022.6 | 2,522.5 | 5,351.0 |
| Potash | 414.3 | 973.2 | 747.6 | 1,949.6 |
| Other | (32.6) | 10.7 | (103.2) | 28.4 |
| Total | 1,709.7 | 3,006.5 | 3,166.9 | 7,329.0 |
| Operating Earnings | ||||
| Phosphate | 29.0 | 135.9 | 75.5 | 1,193.1 |
| Potash | 150.6 | 547.5 | 249.9 | 1,025.3 |
| Other | 20.5 | (1.4) | 8.9 | 12.5 |
| Total | 200.1 | 682.0 | 334.3 | 2,230.3 |
| Sales Volumes mt | 2Q-09 | 2Q-08 | 6M-09 | 6M-08 |
| Phosphate Crop Nutrients | ||||
| North America | 559 | 366 | 1,242 | 1,145 |
| International | 1,646 | 602 | 2,807 | 1,696 |
| Crop Nutrient Blends | 692 | 406 | 1,394 | 1,137 |
| Feed Phosphates | 161 | 125 | 311 | 311 |
| Other | 279 | 254 | 473 | 535 |
| Total | 3,337 | 1,753 | 6,227 | 4,824 |
| Potash Crop Nutrients | ||||
| North America | 299 | 524 | 408 | 1,070 |
| International | 524 | 921 | 1,032 | 2,011 |
| Non-Ag | 207 | 277 | 385 | 538 |
| Total | 1,030 | 1,722 | 1,825 | 3,619 |
| Sales Volumes mt | 2Q-09 | 2Q-08 | 6M-09 | 6M-08 |
| Avg Selling Prices | ||||
| DAP mt | $287 | $1,086 | $283 | $1,049 |
| Blends mt | $405 | $711 | $403 | $794 |
| MOP mt | $370 | $529 | $363 | $508 |
| Avg Raw Material Prices | ||||
| Ammonia CFL mt | $313 | $810 | $274 | $669 |
| Sulfur N. America lt | $57 | $532 | $50 | $552 |
| * Periods are for quarters and six months ending November 2009 and 2008. | ||||
Canpotex will not match China potash price; producers out with new North American postings
Canpotex member Mosaic Co. told investors Jan. 6 that the Canadian potash export group will not follow BPC’s recent contract with Chinese buyers, which was agreed to at $350/mt CFR (GM Jan., 4, p. 1).
“We are not prepared to do business with the Chinese at the current price expectations and the current history of what’s been negotiated with other suppliers, so I just don’t see the price being reflective of what’s going to happen in the New Year,” said Mosaic President and CEO Jim Prokopanko. He said Chinese demand is not what it used to be, and he does not see it as being influential on world pricing going forward.
Prokopanko said that potash is a strong and tightening market. He said that in the past the Chinese deserved a discount due to large quantities and a predictable shipping schedule ?Çô but those are no longer the case. BPC said that China is expected to use 8 million mt of potash in 2010, with 5 million mt being domestic production, 1-1.2 million mt coming from BPC, and the remainder coming from other global sources (GM Jan. 4, p. 1).
Prokopanko cited good demand from other large buyers such as Brazil and India. Mosaic said Brazil’s potash inventories are about as empty (400-600,000 mt) as anyone has seen. India is expected back in the market toward the end of the first quarter.
Prokopanko said Canpotex is able to find customers willing to pay higher prices and there is no point in lower prices for the Chinese business, particularly as small as it potentially is this year. “We’ve made some sales as recently as yesterday in North America at prices higher than that, and we find international customers willing to pay more than what the Chinese negotiated.” The company noted that Brazil is a willing buyer at $400/mt CFR.
Prokopanko did note that producers still have large inventories and that they will find a market clearing price, which will still be handsome versus the numbers of a few years ago. He said Mosaic issued North American potash prices earlier this week. PotashCorp issued new North American numbers soon after the China/BPC deal (GM Jan. 4, pp. 1, 8, 9). Likewise, Agrium Inc. has also issued new North American postings. So far, postings from the three Saskatchewan producers appear to be in the same ball park (see Market Watch, Potash, in this issue).
Prokopanko said that people are just starting to get back to work in the New Year, that the company is getting calls, and that people are prepared to make decisions about their potash pricing and their orders for the spring season. He said that the company is still reluctant to give more guidance on potash. “We just haven’t had the sort of solid book of orders show up just yet.” However, he expects them to come in over the next few weeks.
Tanner, trucking firm cited in S.C. release
The South Carolina Office of Occupational Safety and Health came down hard on Tanner Industries for the July 15 anhydrous ammonia release at its Swansea, S.C., terminal. The release, which amounted to more than 10,000 pounds, killed a woman driving to work (GM July 20, 2009, Aug. 3, 2009), sent others to the hospital, and blackened bushes and grass in a wide area. The state OSHA declared that the release was caused by a ruptured hose and assessed a fine of more than $23,000 for seven serious violations, and also handed the carrier, Werner Transportation Services Inc. of Omaha, Neb., a fine of more than $5,000 for four violations. Tanner responded that it is continuing to cooperate with authorities.
The state OSHA reported that “Through onsite observations, employee interviews and comments it was determined that approximately 10,600 pounds of anhydrous ammonia were leaked from the storage tank at the facility during a transfer. The leak was a result of a hose rupture. Three Tanner employees and two carrier truck drivers were exposed to anhydrous ammonia.” Tanner was cited for failure to provide an alarm system to notify employees to evacuate, failure of a transfer hose to conform with AAI-RMA specifications for anhydrous, failure to have a shutoff or backflow valve installed to prevent a release in the event of a rupture, failure to have a process analysis for transfer, failure to require self-contained breathing apparatus for the two employees responding to the release, and failure to train the responders at hazardous technical material level. Two additional items involved documentation.
Werner was cited for four violations, including a non-conforming transfer hose, not developing a written respiratory program, and not providing a medical evaluation or respiratory protection training for the responders.
“All employers are required to provide employees with a safe and healthy work site,” declared State OSHA spokesman Jim Knight. “Therefore, our inspection focused on the safety of employees working for Tanner Industries and Werner Transportation at the time of the anhydrous ammonia release. As a result, safety violations related to anhydrous ammonia and employee safety were cited at both employers. Both companies were given 20 days to decide whether they will correct the violations and pay the penalties or file a formal protest with the South Carolina Administrative Law Court and seek a hearing in the matter.”
Meanwhile, the National Transportation Safety Board said it continues to investigate the incident to determine why the hose burst.
TFI task force unveils upgraded storage tank guidelines
The Fertilizer Institute (TFI) announced on Jan. 6 that it has completed a review of its guidelines for aboveground liquid fertilizer storage, and is recommending that the updated guidelines be incorporated into contracts with third parties for the storage of these products.
“These guidelines represent an important voluntary initiative that the broad agriculture community can adopt,” said TFI President Ford B. West. “We urge all of our members and affiliated associations to help distribute these recommended mechanical integrity practices to their suppliers, members and customers.”
The review was prompted by the U.S. Chemical Safety and Hazard Investigation Board’s (CSB) investigation into the Nov. 12, 2008, failure of a two million gallon UAN tank at Allied Terminals Inc. in Chesapeake, Va. (GM Nov. 17, 2008). The CSB issued a report in May detailing the results of its investigation (GM June 1, 2009), in which it recommended that TFI do more outreach to encourage the use of its guidelines and to encourage its members who contract for liquid fertilizer storage to incorporate use of the TFI guidelines in contracts.
TFI originally issued its aboveground storage tank guidelines in 2001 following a series of costly tank failures in the 1990s. At the direction of TFI’s executive committee, a Tank Integrity Work Group was established in September 2000 to review the issue of inspection and maintenance of large non-pressurized liquid fertilizer tanks. The guidelines represented the consensus of the Tank Integrity Working Group, setting forth suggested, uniform industry inspection and maintenance guidelines.
Following the Allied Terminal tank collapse and the CSB recommendations that resulted, a UAN Working Group was convened by TFI in 2009 to review, and where appropriate, update the guidelines. The updated guidelines can be downloaded from the homepage of TFI’s Web site at www.tfi.org.
“We encourage everyone to make sure that when distributing the guidelines, they are handing out the updated version dated ‘December 2009’ on the cover,” said West.
The Allied Terminal tank collapse resulted in the release of 2 million gallons of liquid urea ammonia nitrate, seriously injuring two workers and spreading fertilizer on a nearby neighborhood. Part of the spill also reached the Elizabeth River and possibly flowed into the Chesapeake Bay. CSB investigators found that welds performed on the tanks were substandard and post-welding inspections were not conducted prior to filling at the site.
In addition to its recommendations to TFI, CSB recommended that Virginia regulate, or authorize local jurisdictions to regulate, the design, construction, maintenance, and inspection of large fertilizer storage tanks located on the Elizabeth River. CSB also recommended that Allied Terminals select an independent engineering firm to evaluate the specified tanks. The independent report resulted in Allied Terminals significantly reducing the maximum liquid levels of the remaining tanks.