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Risk management webinar draws big audience

News

A large audience tuned in Nov. 18 for A Year after the Crash ?Çô Managing Risk in a Volatile Fertilizer Market, a 90-minute interactive audio conference sponsored by Green Markets. The event allowed registrants to listen via telephone as three risk management experts discussed a range of techniques to mitigate pricing and supply risks, and also to ask questions in a live format at the conclusion of the panel discussion.

The speakers assembled by Green Markets included Bruce Vernon, vice president, fertilizer, for Viterra Inc. AgriProducts Group; Alexey Paliy, director of fertilizer derivatives for FIS Investor Services; and Ryan Sherwood, price risk management consultant for FCStone. Topics included in-depth looks at hedging strategies, cash settled swaps, and option contracts, as well as strategies to offset high input costs at points further down the distribution chain.

“Risk and volatility go hand-in-hand,” said Paliy during his presentation, noting the wide swings in fertilizer pricing observed over the last 18 months. Sherwood used examples to illustrate inventory and forward sale hedges, and also discussed option contracts and the risks that accompany them.

Vernon talked of a “return to normalcy” in recent pricing activity, but detailed as well the significant decline in application rates that accompanied the earlier spike in fertilizer prices. “Farmers will react to higher prices by considering alternatives,” he said. Vernon also talked of forward contracts to provide farmers and retailers with risk management options.

An audio recording of this event is available on CD-Rom for $199. This and past Green Markets Webinars can be ordered by visiting http://www.pf.com/events.asp.

Agrium to shed Rentech tons, terminals, if it buys CF

News

Agrium Inc. will cancel its agreement to take certain nitrogen products from Rentech Inc.’s East Dubuque, Ill., nitrogen plant should its bid to buy CF Industries Holdings, Inc. be successful. In addition, the company told Green Markets that it would sell two terminals to Terra Industries Inc. ?Çô one currently owned by CF, another by Agrium.

Agrium announced Nov. 17 that it has signed a proposed consent agreement with the staff of the U.S. Federal Trade Commission relating to an Agrium-CF deal. Agrium said the remedies in the agreement are not material to the proposed transaction. The agreement will now be forwarded to the Commission for its review and approval.

Agrium President and CEO Mike Wilson said the agreement illustrates that Agrium has a clear path to completing the CF acquisition. Agrium had already received approval from Canadian regulatory authorities and has agreed to sell a one-half stake in its Carseland, Alberta, nitrogen plant to Terra should the CF deal be concluded (GM October 26, 2009). In addition, Agrium says it has entered into a conditional supply arrangement with Terra for a long-term, competitively priced supply of approximately 175,000 mt of nitrogen products from Terra’s facilities. Agrium will also supply a minimum of 60,000 mt of urea per year to Terra for five years.

The Rentech distribution agreement dates back to April 26, 2006 (GM May 1, 2006). Royster-Clark, which once owned the East Dubuque plant, was in the process of selling it to Rentech when Agrium acquired Royster-Clark. Agrium has exclusive distributor rights to the ammonia, UAN, nitric acid, and granular urea made at the facility. Capacity levels at East Dubuque include 332,000 st/y of anhydrous ammonia, 146,000 st/y of urea, 350,000 st/y of UAN, 170,000 st/y of ammonium nitrate, and 144,000 st/y of nitric acid, according to the International Fertilizer Development Center.

Rentech says its Rentech Energy Midwest Corp. (REMC) marketing team, which currently works in conjunction with Agrium in marketing existing REMC product sales, is confident that there will be no material impact on the sales, timing, and pricing of products in the event the exclusive distribution arrangement is terminated. Prior to entering into the distribution agreement with Agrium, REMC’s marketing team was responsible for all sales and distribution of REMC product sales.

In the past, Rentech has touted its relationship with Agrium (GM Dec. 22, 2008), saying that it was not worried about getting the money on its forward contracts; that most of it would be through Agrium, its major buyer; and that it is take or pay, with customers putting down at least 25 percent up front. “To the extent that there is credit risk in the contract it falls at the Agrium level,” said Rentech CEO Hunt Ramsbottom at the time. “It doesn’t go through to the distributor or the farmer.” In a response to questions, Rentech said it does not have account receivables insurance and did not know if Agrium does. Agrium declined to comment on the insurance, but a spokesman said Agrium was probably Rentech’s strongest customer financially. Rentech said Agrium purchased approximately 81 percent of its nitrogen production in fiscal 2008.

“Looking ahead at REMC, we have already entered into significant prepaid sales agreements for a significant portion of production for fiscal 2009,” Rentech CFO Dan Cohrs told analysts in December 2008. “For ammonia, 60 percent of our projected shipments for fiscal 2009 have already been contracted at an average sales price of $816/st. For UAN, 40 percent of our projected shipments for next year have been contracted already at an average sales price of $396/st. On all of those forward sales we’ve locked in gross margins through purchases of natural gas.”

REMC’s East Dubuque facility has been a money maker for Rentech, which has used the cash flow to develop its alternative energy technologies. The company says some 600,000 st/y of its nitrogen products are sold into the Midwest each year. It currently projects FY 2009 EBITDA of $65 million, up from FY 08’s $55.2 million and FY 07’s $20 million.

One killed due to ammonia release at CF facility; two officers hailed as heroes

Ammonia, News

Two Rosemount, Minn., area law officers are being hailed as the heroes of a tragic anhydrous ammonia release at a CF Industries Holdings, Inc. fertilizer terminal that killed a driver and critically injured another in the late afternoon of Nov. 16. Investigators say the Rosemount police officer and Dakota County sheriff’s deputy risked serious exposure to ammonia while pulling the survivor to safety. The officers, along with another unidentified tanker driver, pulled the victim about 35 feet so he could be more safely treated. He remains in critical condition after being airlifted to a hospital, while both officers were checked over at the same hospital.

Attempts by Green Markets to reach the officers by phone were unsuccessful, but the local press quoted Rosemount Police Chief Gary Kalstabakken and Dakota County Chief Sheriff’s Deputy Dave Bellows as praising the two. “This was one of those situations where seconds really matter, and they made a snap decision and put their lives in peril to save someone,” Bellows said. “Simply put, they’re heroes.”

Rosemount Officer Scott Sandell, a three-year department veteran, was more modest about his actions. “It was definitely a difficult situation … and we reacted to our training and basically did what we had to do, which is to help,” he said. The other officer was identified as Dakota County Sheriff’s Deputy Matt Schuster. Both were treated at the hospital for exposure to the ammonia and released in the evening to go back to work the next day. Their exposure was believed to have occurred from the residue on the victims’ clothing and the surrounding area.

The anhydrous ammonia release occurred at the semi-tanker loading area of CF’s Pine Bend facility. Both victims were loading their tankers, but apparently one noticed a connection problem and attempted to correct the situation. That is apparently when the break occurred in the connection, releasing an undetermined amount of ammonia before an emergency shutoff was activated to shut down the loading system.

There were several other semi-tankers at the facility waiting to be loaded. Drivers of those tankers and employees of CF witnessed the incident and attempted to aid the victims, but the ammonia kept rescuers away. One driver died at the scene, while the other was decontaminated with water before being airlifted to the hospital in St. Paul. The truck driver who was killed was identified as Robert Shue, 31, of Kingfisher, Okla. The injured man is Roy Thomas Taylor, 56, of Moore, Okla. There was no other impact from the ammonia release outside the CF facility area.

CF’s website carried a statement confirming that a fatal release of anhydrous ammonia occurred during loading operations at its ammonia terminal at Pine Bend, adding that released ammonia had dissipated and did not present a hazard to the community. Company personnel were said to be cooperating with local officials and beginning their own investigation. There was also this message from Brian Spencer, general manager of distribution facilities for CF: “Tragically, one truck driver was injured fatally and another was taken to an area hospital with undetermined injuries. Our thoughts are with the injured driver and the affected families.” Spokesman Terry Huch said there would be no additional information from the company at this time.

The cause of the hazardous materials release is now under investigation by Minnesota OSHA, which dispatched a team to the scene the next morning.

Helm, Millard to build new UAN terminal

News Briefs, Tampa

Tampa-Helm Fertilizer Corp. has announced that it has entered into a long-term lease agreement with Millard Refrigerated Services Inc., to construct a 30,000 st capacity UAN solution terminal in Theodore, Ala. Construction is planned for completion in fall 2010. The Theodore location will be accessible by ocean-going vessels and will be serviced by the CSX railroad. Helm said the new terminal, combined with its existing network of owned and leased terminals, will enable it to provide reliable and consistent service to barge, rail, and truck customers in key UAN markets.

Tri-State Plant Food ceases production

News Briefs

Dothan, Ala.-Tri-State Plant Food, which can trace its beginnings back to 1897, has ceased production and laid off most of its employees, but still isn’t calling it quits – at least for now. General Manager Bill Harrison wouldn’t return several calls, but he told the local press that “all I can say is we’re ceasing production for now.” Harrison explained, “It was the economy, basically. We’re not in production, but we’ve got some inventory we have to handle, liquidate. We’ve got a skeleton crew, the bare minimum it takes to do that.” The locals claim Tri-State came into being just eight years after the city’s oldest business, Porter Hardware, opened its doors. That puts Tri-State in operation for more than a century, dating back to 1897. It took over its present location in 1985, and has been in production continually since then. Before Harrison’s Nov. 13 announcement the plant had employed 38 people, but the economic downturn of the last few years probably was the final blow. Harrison said the skeleton crew will continue to work, and that no timeframe has been established for how long the facility will stay open.

IPL buys majority stake in Quantum Fertilisers

Australia, News Briefs

Melbourne-Incitec Pivot Ltd. (IPL) said Nov. 16 that it has purchased a majority share of Quantum Fertilisers for an undisclosed sum. IPL is an Australian-based manufacturer and distributor of fertilizer and commercial explosives in Asia, the Pacific, and North America. Quantum is a Hong Kong-based enterprise established to trade in fertilizer and fertilizer-related products. The new enterprise begins trading Dec. 1, 2009, from offices in Hong Kong. It is intended that the network of offices will grow to include other parts of Asia, Europe, and the Americas. “The acquisition brings together IPL’s financial strength with Quantum’s skills, experience and contacts throughout the world,” said IPL General Manager Supply Chain and Trading James Whiteside, who will assume the role of Quantum CEO, based in Melbourne. He said Quantum will continue to deal with a range of international suppliers and purchasers, as well as facilitate the export of IPL fertilizer and the import of selected fertilizers and raw materials for IPL. However, IPL is not precluded from procuring directly. “For IPL this is another step in growing our international sales and trading business as well as supporting the IPL corporate strategy of linking to the industrialization and growth of Asia, particularly China and India,” said Whiteside. IPL provides inputs into agriculture and mining through its Incitec Pivot Fertilisers and Dyno Nobel businesses, and has significant fertilizer and ammonium nitrate manufacturing assets in Australia and North America.

OCI signs distribution jv in Brazil

Egypt, News Briefs

Cairo-Orascom Construction Industries (OCI) and FITCO International S.A. have decided to expand their existing strategic alliance by establishing a joint venture in Brazil to trade and distribute fertilizer products supplied by the OCI Fertilizer Group. FITCO is a leading fertilizer trading company, with a strong market position in the Brazilian market and a growing presence in several South American markets. In March 2009, OCI and FITCO signed an agreement for the supply and import of urea into Brazil. Year-to-date, OCI and FITCO have supplied a substantial share of nitrogen fertilizer needs in Brazil. OCI says the new jv is a major part of its strategy to establish long-term partnerships with key distributors in strategic import markets and to implement its direct sales into the Brazilian market. “The strategic alliance agreement announced earlier this year for the supply of granular urea fertilizer to the Brazilian market has been very successful,” said OCI CEO Nassef Sawiris. “By creating this new jointly owned trade and distribution business, we have strengthened our partnership with FITCO, which will enable OCI to have a permanent presence in Brazil.” FITCO Managing Director Marcelo Simionato said the new jv will provide a platform for further growth in Brazil and potentially other South American markets.

Indiana troopers join ammonia theft hunt

Ammonia, News Briefs

Indianapolis-Local law enforcement is getting a big helping hand from the Indiana State Police in curbing thefts of anhydrous ammonia, which authorities described as a problem that’s been around for years and won’t easily go away. ISP spokesman Todd Ringle told Green Markets that state troopers have been involved in several ammonia theft cases and will continue to work this area. In Knox County earlier this month, Ringle reported, troopers arrested a couple after a property owner reported finding a suspicious LP tank in his yard, which turned out to contain a large amount of anhydrous ammonia. He provided the license plate number and a description of a vehicle he had seen parked near the tank. Troopers traced it to the home of a man and a woman who were subsequently arrested and who are now being held without bond on various drug charges. Ringle said the tank was destroyed in the field, but he doesn’t know its origin or from where the ammonia was stolen. Ringle couldn’t say if a stakeout led to the arrests in the second case, but a teenager and another male in his late 30s were caught by troopers while trying to steal anhydrous ammonia from the Spencer County Co-op at 5 a.m. on Nov. 12. Troopers later arrested another teen suspected of driving the getaway car. All three are now in Spencer County jail. Ringle said stakeouts in these cases are not the norm. “It’s difficult to sit on every anhydrous ammonia tank. They are all over the place,” he explained. “Better yet,” he added, “farmers are doing the right thing putting on alarm systems and moving their tanks closer in on their properties. We have gone out numerous times to set up stakeouts and made a number of arrests. But it’s very time-consuming having to have several officers out on one of these sites and sit out several nights or more just to make one arrest. Unfortunately, because they are very time-consuming we don’t do this very often. Most of the stakeouts we do are at the co-ops where there is a large volume [of chemical] and they do a lot of this business.”

Acid release causes mild injuries for 5

News Briefs

Burnaugh, Ky.-Five workers who apparently inhaled sulfuric acid fumes just after midnight Nov. 16 at the Special Metals plant here were treated and released at a nearby medical facility. According to a Special Metals spokesman, all five were back to work that same day. Tom Dearing with King’s Daughters Medical Center, only 10 to 15 minutes away from the scene, said that those who were transported by Boyd County emergency responders were treated for mild-to-moderate injuries from inhalation of fumes. Special Metals’ Dwight Weber, located in Portland, Ore., told Green Markets that the incident was not an acid spill, as was initially reported. He said in the process of turning the vents on and off at the plant, some acid fumes got into the air. Weber did not explain exactly how that occurred, but said “there was a problem with the response to the water levels in one area of the plant.” He said plant officials will be looking into the way the exhaust fans are recycled. According to the company’s website, the Burnaugh facility provides support for Special Metal’s principal production site in Huntington, W.Va.

Judge prods EPA to set Florida runoff limits

Florida, News Briefs

Tallahassee-U.S. Judge Robert Hinkle has approved a consent decree requiring the U.S. Environmental Protection Agency (EPA) to set the legal limits for the nutrient runoff that environmentalists claim is fouling the waters by causing growth of harmful algae blooms. The ruling sides with five environmental groups suing to require EPA to start moving quicker to establish legal runoff limits. “Over the last 10 years, Florida has invested thousands of staff hours and millions of dollars in development of numeric nutrient criteria, and throughout the last year we have moved aggressively to analyze the massive amount of nutrient and biological data available for Florida waters,” responded Florida Department of Environmental Protection spokeswoman DeeAnn Miller. “Alone.” Miller insisted, “Florida accounts for 30 percent of the national water quality dataset, far surpassing any other state in the nation. Our efforts have focused on appropriately addressing the complexity of Florida’s ecosystems and coinciding with the intent, schedule and guidance provided from EPA.” Florida Agriculture Commissioner Charles Bronson, the Florida Pulp and Paper Association, four of the state’s five water management districts, sewage plant operators, the Florida Farm Bureau, and others had sought a delay in the court’s order. “Florida is one step closer to having the tools it needs to adequately address the threats that nutrient pollution pose to our quality of life and our tourist economy,” claimed Frank Jackalone of the Sierra Club, one of the plaintiffs. Much of that, according to Miller, is already underway. She reported that Florida has made a tremendous investment to collect and analyze the data necessary to define how nutrient enrichment affects the biological health of the state’s surface waters. “To ensure that there is no duplication of work,” she added, “we will continue to work with EPA in the same manner they have worked with us as they develop the criteria. We look forward to EPA presenting its criteria to both DEP and the stakeholders of Florida.”