Ottawa-Statistics Canada released its updated crop production forecast on Oct. 2, showing increases in grain and oilseed production over the August forecast due to warm September weather that spurred crop growth. Based on a Sept. 1-9 survey of some 14,000 Canadian farmers, the agency estimated the Canadian canola harvest at 10.27 million tons, up considerably from the 9.541 million tons forecast in August, but still well below last year’s record 12.642 million-ton crop. The largest volume and percentage decline from last year was reported in Alberta, where canola farmers expect to harvest 2.8 million tons, some 35.8 percent less than last year. All-wheat production in Canada was forecast at 24.581 million tons, also up from August’s forecasted 23.614 million tons, but well behind last year’s 28.611 million tons. The agency predicted a barley harvest of 9.17 million tons, up from the August estimate of 8.948 million tons, but 22.2 percent lower than last year’s 11.781 million tons. Flaxseed production was estimated at 965,000 tons, 50,000 tons higher than the August estimate and well above last year’s 861,100 tons. Canadian oat production was estimated at 2.9 million tons, down slightly from the August prediction of 2.967 million tons, and significantly lower than last year’s 4.272 million tons. Dry field pea production was estimated at 3.161 million tons, only slightly better than the August estimate, and some 11.5 percent lower than last year’s 3.571 million tons. Grain corn production was estimated at 9.739 million tons, up from the August estimate of 9.437 million tons, but below the 2008 production of 10.592 million tons. The soybean production estimate came in at 3.597 million tons, an improvement from August’s prediction and last year’s 3.336 million-ton production. Farmers in Quebec and Ontario reported increases in soybean production, the report noted, with soybean production in Quebec potentially reaching a new high of 610,000 tons. Statistics Canada will next estimate crop production on Dec. 3, and most analysts are expecting higher production figures based on the unseasonably warm weather and ideal late-summer growing conditions that blanketed the Canadian prairies during the second half of September.
All posts by traceybg@gmail.com
Encanto reports 2D seismic on First Nations lands
Vancouver-Encanto Potash Corp. said Oct. 7 that it has commenced a 2D seismic program on the Muskowekwan First Nations lands, which are located approximately 100 kilometers north of Regina, Sask. The lands consist of 43,000 acres of gently rolling plains. To date, six oil and gas wells surround the Muskowekwan Exploration Participation Agreement (EPA) lands, and have shown at least three potash beds are present in each of these wells. “We are pleased and excited to see Encanto commence potash exploration on our Muskowekwan First Nations lands,” said Muskowekwan Chief Reg Bellerose. “The economic potential and benefits resulting from a potash mine has our entire community excited. The exploration agreements the Muskowekwan have with Encanto and the planned exploration program fully respect our treaty rights and stewardship of our land. We look forward to working with Encanto and moving this project forward.” This is the seventh EPA that Encanto has signed with First Nations in Saskatchewan, totaling approximately 187,000 acres. This does not include the Spar Property that was recently purchased from Lion Energy Corp. (formerly Raytec Metals Corp.). As soon as the seismic survey is complete at the Muskowekwan lands, Encanto will begin another 2D seismic program at the nearby Daystar First Nations lands. Encanto has a fall 2009 budget of $6.5 million of flow-through money that is required to be spent by Dec. 31, 2009. These flow-through funds have been earmarked to include 2D and 3D seismic testing, as well as the drilling of several holes in the respective areas. “The Muskowekwan lands are in the heart of some of the best potash lands in the world and we are very excited to begin our 2D seismic work,” said Encanto CEO James Walchuck.
Market Watch
AMMONIA
U.S. Gulf/Tampa:Tampa appears to be settled for October at $345/mt DEL, with no new business reported for NOLA.
The one question in the market last week involved reports from the Trinidad press that the National Gas Co. had to reduce supplies to industrial customers due to a malfunction at an offshore gas facility. Reportedly, as of Tuesday, Oct. 6, NGC could only supply about 900 million cubic feet rather than the normal 2 billion cubic feet per day. However, the supplier – identified as BP Trinidad – was reportedly fixing the situation, and said its system had to be purged before returning to normal supplies.
Most sources said the disruption should only be minor, though some wondered if it might have an impact on Tampa if supplies do not quickly return to normal. PotashCorp has already been taking turnarounds at two of its Trinidad plants.
As of Oct. 8, Direct Hedge (DH) was calling the Tampa paper market at $335-$350/mt DEL for October, with lower prices for November at $310-$330/mt and December-March at $300-$320/mt.
Eastern Cornbelt: Anhydrous ammonia was pegged at $355-$370/st FOB regional terminals for spot tons to the dealer. One source said the low end of that range was the common number for fall prepay, but there has been little new spot business to test the cash market. Several sources said they remain optimistic that fall ammonia volumes will be decent if weather conditions and harvest progress provide a window of opportunity. Forward contract ammonia for November and December was referenced by one supplier at $360-$370/st FOB in the region, depending on location.
Western Cornbelt: On the spot market, ammonia pricing remained at $330-$360/st FOB in the region, with the low reported in Nebraska.
Northern Plains: Several sources said they are counting on a brisk fall ammonia run in the region if weather conditions cooperate. The cash ammonia market was quoted at $375-$380/st DEL in North Dakota, with the terminal market pegged at $350-$370/st FOB, depending on location and time of delivery.
Great Lakes: The anhydrous ammonia market was quoted at $360-$370/st FOB for prompt or forward tons in the region. A Wisconsin source pegged the dealer market at $365/st DEL or FOB the terminal for prompt or prepay tons.
Black Sea: After the deal done with Yara a couple of weeks ago, the Yuzhnyy market has gone quiet. Asian sources report material is flowing out from the few plants still open. A strengthening market could open more plants, but only if the increase in prices remains steady.
Middle East: Demand from India and East Asia continues to keep the Arab Gulf producers happy. Cargoes are moving out under long-term contracts for India, and swap deals for Asia continue.
No new spot business was recorded last week, so prices remain steady, say observers.
UREA
U.S. Gulf:Prices continued to erode last week, with barges ready to head upriver gaining a premium. Sources put those as high as $258/st FOB. However, others reported that barges that are still to load within the next week or so were going as low as $250/st FOB for granular.
As of Oct. 8, DH called the October paper market $250-$255/st, with November and December called $245-$252/st FOB. The paper market rebounds for first quarter 2010 to $260-$265/st FOB, then sinks again for April-May to $255-$260/st FOB.
Eastern Cornbelt: Granular urea pricing continued to slide, based on lower Gulf values and the desire to get some older tons out of the system before the upper Mississippi closes to barge traffic. Illinois sources pegged the market in the $295-$305/st FOB range to the dealer.
Western Cornbelt: The granular urea market was pegged at $295-$305/st FOB river terminals to the dealer, reflecting a drop from last report.
Northern Plains: North Dakota sources tagged the granular urea market at $310/st DEL and $305/st FOB Carrington. The Twin Cities dealer market was quoted at the $295/st level last week. Forward contract urea for November and December was posted by one regional supplier at $315/st FOB in Minnesota and $330/st DEL in North Dakota.
Great Lakes: Granular urea pricing was pegged at $325/st FOB Michigan terminals to the dealer, reflecting a drop from last report. The low end of the range was quoted at the $305/st FOB or DEL mark in southern Wisconsin.
Northeast: Granular urea was pegged at a nominal $305-$315/st FOB Philadelphia, down some $10/st from last report, but sources reported few new sales to test the market.
Pakistan: Last week was busy for TCP, and this week will be just as busy. The first three of seven tenders closed last week, with TCP taking 120,000 mt in the first two tenders. Talks were underway on the third tender as Green Markets went to press.
Industry observers said the first few tenders would be all about the price of material in Yuzhnyy and the freight costs. No Arab Gulf suppliers were expected to participate, and Chinese urea is too expensive until Nov. 1, when the export duty drops back to 10 percent.
The first tender for 150,000 mt closed Oct. 3. The tally from that tender is shown below.
| Company | Quantity (mt) | US$/mt CFR |
| Toepfer | 50,000 | 289.94 |
| Transfert | 50,000 | 292.00 |
| Helm | 25-35,000 | 292.75 |
| 25-35,000 (s/o) | ||
| 25-35,000 | 297.75 | |
| Keytrade | 50,000 | 299.00 |
| Transammonia | 50-70,000 | 299.87 |
| Bukhar International | 150,000 | 419.00 |
Sources report TCP rejected the Helm offer for technical reasons.
A late report indicated one trader – not Toepfer – had picked up a cargo at $229/mt FOB.
In the end, Toepfer got the award.
Sources peg the freight rate to Pakistan from Yuzhnyy at $60/mt FOB. At those levels, the Toepfer offer puts the Yuzhnyy price at $226-$227/mt FOB.
In the second tender that closed Oct. 6, Dreymoor sold 70,000 mt at $288.81/mt CFR. Sources report only four companies offered in that tender.
The lower price showed a continued softening. Sources put the Yuzhnyy netback another dollar down.
In the last tender of last week, six companies came in with offers. The tally follows.
TCP Tender for 150,000 mt urea October 8, 2009 |
||||
| Offering Company | Quantity (mt) | Origin | US$/mt CFR | Remarks |
| Transammonia | 50-70,000 Firm | Open | 283.77 | As per tender |
| 50-100,000 (S/O) | ||||
| Transfert | 50,000 | Open | 287.87 | As per tender |
| Key Trade | 50,000 | Open | 291.35 | As per tender |
| Multi Commerce | 50-70,000 | Open | 291.75 | As per tender |
| Helm | 50-70,000 Firm | Open | 294.35 | As per tender |
| 50-70,000 (S/O) | ||||
| Swiss Singapore | 50,000 M.T | Open | 296.40 | 1 or 2 lots S/O |
In this tender, observers speculate that Transammonia was offering tons from Oman and Transfert from Fertil. Sources say TCP is talking to both of these companies with an eye to lowering the price and securing as many tons as possible in one shot.
The freight rates between the UAE and Oman to Pakistan are pegged at $10-$15/mt, with only a few days of steaming time. The estimated netback for the two lowest offers puts the price firmly in the existing range for the Middle East.
The other offers are most likely based on Yuzhnyy material, for a netback range of $229-$234/mt FOB.
The remaining tenders close Oct. 10, 13, 15, and 17.
In the first two tenders, TCP took the lowest offer without any negotiations or attempts to get the also-rans to lower their prices. If TCP settles with Transammonia for the optional tons, the buyer will be almost at the halfway mark of its 600,000-mt goal.
India: The State Trading Co. of India closed its tender Oct. 8. Seventeen companies provided about 1.6 million mt of urea in firm offers and another 550,000 mt in optional tons.
Prices were higher than what STC had hoped.
Sources reported prior to the opening of the tender documents that STC was hoping to hold prices as close to $270/mt CFR as possible.
In the end, only a couple of firms offered in the $270s/mt CFR. The rest were in the $280s/mt and above. The tender tally follows.
STC urea tender October 8, 2009 |
||||||
| Supplier | Origin | Quantity (mt) | Shipment | US$/mt FOB | US$/mt CFR | Discharge Port |
| Qafco | Qatar | 30,000 | Oct-Nov (S/O) | 269.00 | ||
| PIC | Kuwait, Bahrain | 25-30,000 | End Nov | 268.00 Shoiba 269.00 Sitra |
||
| EFC | Egypt | 25-30,000 | Oct-Nov (S/O) | 264.00 | ||
| Toepfer | Open | 25-55,000 1-2 Lots |
Oct-Nov | 283.50 | Mundra, Kandla, Krishnapatam, Gangavaram, Vizag | |
| 25-55,000 (S/O) |
283.50 | Kandla, Mundra, Krishnapatam, Vizag, Gangavaram | ||||
| Keytrade | CIS, Indonesia | 50-60,000 Or | Oct-Nov | 277.00 | Mundra | |
| 40-50,000 (B/O) | 284.00 | Kandla | ||||
| 15-25,000 (B/O) | 286.00 | Vizag, Tuticorin, Paradip | ||||
| Fedcominvest | 100,000 | Oct-Nov-Dec | 281.75 283.75 285.75 |
Mundra, Kandla Pipavav, New Mangalore | ||
| 160,000 (S/O) | 285.75 286.75 287.75 |
Krishnapatam, Gangavaram, Vizag, Kakinada | ||||
| ETA | Dubai, China, CIS | 25,000 | Nov-Dec | 262.00 | 290.97 | Any Port |
| MidGulf | Open | 25-40,000 1 Lot |
Oct-Nov | 308.00 | Any west coast port | |
| MTPL | Open | 50-70,000 1-3 Lots |
283.75 | Mundra | ||
| 100-120,000 (S/O) 3-4 Lots |
283.75 285.25 |
Mundra, Vizag | ||||
| Transammonia | Open | 40-60,000 1-3 Lots |
2nd Half Oct-Nov | 279.77 | Kandla | |
| 80-100,000 2-4 Lots |
284.87 | Krishnapatam, Gangavaram | ||||
| Dreymoor | Open | 30-40,000 | End Nov | 287.87 288.81 |
Mundra Kandla |
|
| 30-40,000 (S/O) |
287.87 288.81 291.64 |
Mundra Kandla Vizag, Krishnapatam |
||||
| Ameropa | Open | 50,000 1-2 Lots |
Oct 15 – Nov | 287.43 | Gangavaram, Krishnapatam, Vizag | |
| 25-30,000 Opt 1-2 Lots |
Nov – Dec 15 | 287.43 | Gangavaram, Krishnapatam, Vizag | |||
| Swiss Singapore | Open | 20-25,000 | Nov-Dec | 275.60 | 285.60 | Kandla, Mundra |
| 20-25,000 | 277.40 | 287.40 | Vizag, Paradip | |||
| 20-50,000 (S/O) | 275.60 | 285.60 | Kandla, Mundra | |||
| 20-25,000 (S/O) | 277.40 | 287.40 | Vizag/Paradip | |||
| Gavilon | Open | 25-60,000 1-2 Lots |
Nov | 291.75 286.98 |
Mundra Vizag |
|
| Stirol | Ukraine, CIS | 30-40/45,000 | Oct-Nov | 245.00 | ||
| Amber | China, Indonesia, Malaysia |
45-50,000 | Oct-Nov | 279.75 | Gangavaram, Krishnapatam | |
| 25-30,000 (S/O) |
284.75 | Vizag | ||||
| Agora | Open | 50,000 2 Lots |
Oct-Nov | 288.79 | Kandla, Mundra | |
Fertil regretted.
STC immediately went into talks. By Friday evening India time, five companies altered their offers.
| Company | Quantity | Shipment | US$/mt FOB | US$/mt CFR | Discharge |
| PIC | 25-30,000 | 264.00 | |||
| Qafco | 25-30,000 | 264.00 | |||
| Stirol | 45,000 | 239.00 | |||
| Gavilon | 60,000 | 275.00 | Mundra | ||
| 278.00 (B/O) |
Krishnapatam | ||||
| Transammonia | 150-200,000 | November 30 | 276.00 | Kandla | |
| 277.00 | Pipavav | ||||
| 278.00 | Krishnapatam |
Talks with other offering companies continue.
Sources say the large number of offers that involve deliveries to the east coast of India in November indicates the potential for Chinese material to play a role.
At the same time, sources point to the aggressively high prices offered by three Middle East producers. One trader noted that often the producers would put in a high price in a tender such as this, and then lower it in subsequent negotiations. Sometimes this strategy works, and sometimes the Indian buyer will just move on to the traders and take Black Sea or Chinese tons.
In this case, the strategy seems to have paid off. By accepting a $264/mt FOB price, the two Arab Gulf producers forced EFT to either lower its price or drop out. Based on the reports received as Green Markets went to press, it appears the latter happened.
STC had not yet issued awards. Sources in India say they are waiting until they conclude talks with the other companies.
Even if STC were to stop with these five companies, it would be buying close to 365,000 mt in one shot.
Black Sea: Sources say the numbers offered in the TCP/Pakistan and STC/India tenders show that the price hasn’t moved.
The netbacks in the first two TCP tenders are estimated at $227-$229/mt FOB. One source said the price could be higher with favorable freight.
The Indian tender puts the netback for likely winners with Black Sea tons at $229-$231/mt FOB.
While the STC tender may look as if a lot of material was offered, one trader said the most likely scenario is that offers were made without tons in hand.
Based on the most recent round of tenders, sources say the market is running around $228-$232/mt FOB.
Middle East: Despite the aggressive offers made by three area producers in the STC/India tender, sources say the price has yet to break $260/mt FOB.
Sources speculate that Transammonia offered TCP tons from its Oman contract. If that is the case, the netback could be as high as $267/mt FOB or as low as $258/mt FOB, depending on freight.
Most Asian traders say the freight rate from Oman to Pakistan is about $15/mt, so the higher netback is possible.
The revised offers from PIC and Qafco seem to indicate a firm belief by producers that nothing under $260/mt FOB is possible.
If Trammo does get the award and if the material comes from Oman – sources say Yuzhnyy material would not work – then the area price will have received a bump of about $10/mt in one shot.
Producers have been arguing that the price should be in the $260s/mt FOB for a number of weeks. Until the TCP and STC tenders came along, however, there was no way to test their assessment.
As last week closed, traders are comfortable calling the market in the upper $250s/mt FOB. They add, however, that if TCP awards to Transammonia and sources confirm the material will come from Oman, then the price will rise dramatically.
Sources add that the tenders have not only confirmed the producers’ desire to move the price up smartly, but also that just about everyone has given up on the idea of two different prices for prilled and granular urea from the area.
China: Now that the Golden Week – that stretched into two weeks – celebrating the 60th anniversary of the founding of the People’s Republic of China is over, urea plants and selling agents are getting back to work.
Sources say the consensus is that producers want the prices to move into the $260s/mt FOB by the time the 110 percent export tariff is dropped to 10 percent Nov. 1.
The main deterrent to that goal, however, is an international market that is stagnant and a central government that appears to be ready to use its powers to control exports to ensure lower prices in the domestic market.
By making Chinese urea too expensive to export, the government can get lower prices for its winter-reserve buying program. Lower prices could mean lower subsidies to farmers and more money for the government to spend on other programs.
Indonesia: Kaltim has called another tender to sell 50,000 mt of granular. The tender will close Oct. 15.
Sources say PIM and Pusri are expected to come in as well with tenders to sell prilled urea.
The political climate in the country appears to have changed, said one trader. For the past several years, the government has been stingy with its export permits. The underlying reason has been to ensure that not only is the domestic market fully covered, but that it also looks as if it is covered.
In the past, even when more than enough tons were on hand for domestic consumption, local political leaders complained of the appearances of lower domestic reserves to cause trouble for the government. To ease the concerns of these politicians, the central government would restrict exports until the locally-perceived shortages were covered.
Indonesia has the capacity to export close to 1 million mt each year. While this is a drop in the bucket on a global scale, sources say that many tons flowing into the Southeast Asia region could disrupt sales patterns from China to the Middle East.
Bangladesh: The country plans to import 1.65 million mt of urea during 2009-10 (July-June). It has been estimated that about 2.75 million mt of urea are required. The state-owned Bangladesh Chemical Industries Corp. would supply the entire amount of urea after procuring part of that from Karnaphuli Fertliser company (KAFCO) and then through state-to-state procurement and international tender. In the case of state-to-state procurement, the government would buy Urea from Saudi Arabia, Qatar, and the UAE.
NITROGEN SOLUTIONS
U.S. Gulf: Most last week put the price range for barges between $125-$130/st FOB. Overall, these numbers are in the middle of what sources are talking for the next round of business. Some say there is nowhere to go with a barge of UAN, and they were calling the market for the next piece of business as low as $120/st FOB. By contrast, others say that sub-$130/st FOB barges can no longer be found, and that the next trades will be as high as $132-$135/st FOB. Some say that desperate sellers had to shed barges at the low numbers, and the market is now ready to adjust upward.
As of Oct. 8, DH called the paper market for October-December at $125-$135/st FOB. First quarter 2010 moved up to $145-$155/st FOB, with another boost in April-May to $150-$155/st.
Eastern Cornbelt: UAN was quoted in a broad range at $5.25-$5.94/unit FOB regional terminals, with the low reported out of spot river locations in Illinois. A source pegged the rail-delivered market in the region at $186-$189/st ($5.85-$5.90/unit), with reference prices as high as $6.15/unit FOB in the Ohio market. One supplier was reportedly referenced at the $5.80/unit mark FOB Cincinnati.
Western Cornbelt: The UAN-32 market remained at $165-$185/st ($5.16-$5.78/unit) FOB regional terminals to the dealer, depending on location, with the upper end reported in Missouri on a spot basis. In Iowa the market was pegged at $5.15-$5.60/unit FOB last week.
Northern Plains: UAN was pegged at $5.60-$5.95/unit FOB regional terminals, with delivered UAN-28 quoted at the $175/st ($6.25/unit) level in North Dakota. Forward contract UAN-32 FOB Pine Bend, Minn., was referenced at $6.10/unit for November and $6.15/unit FOB for December.
Great Lakes: The UAN market was tagged at $5.50-$6.25/unit FOB regional terminals, with the low in Wisconsin and the high in Michigan. Michigan sources quoted dealer pricing for UAN-28 in the $165-$175/st ($5.89-$6.25/unit) FOB range last week.
Northeast: UAN-30 was down from last report, with sources quoting the market at $157-$165/st ($5.23-$5.50/unit) FOB Baltimore. The low end was reported for limited tons pulled by December, but most sources quoted $160/st ($5.33/unit) FOB as the more common low end last week. In upstate New York, UAN-32 was pegged at $192/st ($6.00/unit) FOB and $198/st ($6.19/unit) DEL.
AMMONIUM NITRATE
U.S. Gulf: Barges continued to be called $200-$205/st FOB, and the market was quiet.
Western Cornbelt: Ammonium nitrate was unchanged at $255-$265/st FOB in the region.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was pegged at $170-$180/st FOB, reflecting a slight increase from September levels.
Western Cornbelt: Granular ammonium sulfate was quoted at $170-$180/st FOB or rail-DEL in the region.
Northern Plains: Minnesota sources quoted the granular ammonium sulfate market at $180/st FOB. One regional ammonium sulfate supplier remained referenced at $225/st DEL in the region, but was offering a short-term fill program at $195/st DEL for limited quantities.
Great Lakes: Granular ammonium sulfate pricing continued to cover a broad range in the region, depending on location and supplier. Wisconsin sources pegged the low end at $175/st FOB or rail-DEL last week, while Michigan sources quoted dealer pricing at the $220/st level FOB some locations. One Wisconsin dealer also quoted mid-grade ammonium sulfate at the $155/st FOB or DEL mark last week.
Northeast: The granular ammonium sulfate market was quoted at $163/st FOB Hopewell, Va., with delivered granular sulfate pegged at $185-$195/st in the Northeast region, depending on location. Those numbers were up slightly from last report.
PHOSPHATES
Central Florida: The fall season was at least a month late this year, and much of the business that has hesitated will be lost. If the season has any chance whatsoever, it will have to begin by the middle of this month, which is this week.
At White Springs, PotashCorp cut some 168 jobs, or about 20 percent of its workforce. That move did not indicate the company expected a boom in sales anytime soon.
Meanwhile, phosphate producers were in negotiations with their sulfur suppliers for new prices for the fourth quarter. Based on market conditions for both products, any change in price for Tampa molten probably will be minimal.
No new prompt railcar transactions were found last week. The Central Florida DAP price range was unchanged last week at a flat $275/st FOB. Both Mosaic and PCS Sales were charging $10/st FOB for MAP. Agrifos was charging $300/st FOB for DAP and $305/st FOB for MAP.
U.S. Gulf: Wet and colder weather was smothering much of the Midwest last week and will again this week, and that will not help farmers harvest their already late crops. The summer was cooler than normal this year, so the crops were slower to mature. Frost was likely to be a problem in some of the more northerly areas this week, and that, too, could cause damage. The bad news was the weather could cut into yields, but the good news would be that the reduction could push up prices for crops. Last week, the price of corn moved up to around $3.60/bushel for December and was over $4/bushel for December 2010.
One source noted that with the decline in the value of the U.S. dollar, hedge funds were investing more heavily in commodities. That money tends to be a bit fickle, and moves commodity prices in ways that do not always have a basis in the actual supply and demand.
Most on the supply side of the industry were hoping enough harvesting would be done to get farmers to start looking for fertilizer for fall application. The weather, of course, will be a major factor for buying to begin. Growers who fertilize in the fall for spring planting have a choice of buying now or waiting. Because the price of fertilizer has been extremely stable, many lack the motivation to act early.
“We’ve had a decent run (the past couple of months) compared to nothing,” one source said. “We are well below normal, normal like in ’06 and ’07.”
Early last week, NOLA DAP barge prices were close to the bottom of the range but moved up midweek, although the impact on the price range was minimal. Warehouse prices were soft on the Arkansas River system after CF dropped its price from $305/st FOB to $300/st FOB, and other terminals began to follow.
Very few barges were already on the water last week, and if buying and reordering takes off this week, NOLA DAP barge prices could begin to surge by $5-$10/st FOB.
The NOLA DAP barge price range last week changed a little, from $272-$275/st FOB the previous week to $272-$274/st FOB. Mosaic was seeking $295/st FOB. Both Mosaic and CF were charging a $10/st FOB premium for MAP.
Eastern Cornbelt: The DAP market was quoted at $305-$315/st FOB in the region, with MAP $10/st higher. 10-34-0 was down slightly as well, to $310-$320/st FOB regional shipping points. One Illinois source reported a little dry fertilizer moving out the door earlier in the week, but he said not enough of the harvest was complete, and wet weather as the week advanced wasn’t helping matters.
Western Cornbelt: The DAP market was reported at $305-$310/st FOB in the region, with most sources quoting the low end of the range as the common dealer price last week. MAP was $10/st higher than DAP. 10-34-0 was pegged at $305-$315/st FOB in the region, with several sources reporting the $310/st FOB level as the common dealer price.
Northern Plains: DAP was quoted at $310-$315/st FOB the Twin Cities, with MAP $10/st higher. Delivered green MAP in North Dakota was reported in the $345-$350/st range from western shipping points. The regional 10-34-0 market was tagged at $310-$320/st FOB and $315-$325/st DEL.
Great Lakes: One regional source said he anticipates some dry movement on wheat ground yet this fall, depending on weather conditions and how fast the harvest progresses. “We just need Mother Nature to cooperate,” he said.
The spot market for DAP was pegged at $315-$335/st FOB in the region, with the upper end reported in Michigan to the dealer. One Wisconsin source pegged delivered DAP in the $315-$323/st range last week. MAP was $10/st higher than DAP.
The 10-34-0 market was quoted at $310-$330/st FOB, with the low again in Wisconsin and the upper end in Michigan to the dealer.
Northeast: MAP was quoted at $335-$345/st FOB in the region, with the low in western Pennsylvania. DAP was $10/st less than MAP, where available. 10-34-0 remained at $320/st FOB the tank in upstate New York, with other sources quoting a $340/st DEL level in the New England market.
U.S. Export: No new U.S. export DAP deals were found last week, but India did buy a vessel load of phosphate from China, about 30,000 mt at $368-$370/mt, which would result in an FOB price here of about $313-$315/mt.
World markets were generally quiet last week, and prospects for immediate sales appeared slim. Exports to India continue under an existing contact with PhosChem.
The export price range was unchanged last week at $310-$312/mt FOB.
POTASH
Eastern Cornbelt: Dealer quotes for potash were reported in the $465-$490/st FOB range in the region, with the low reported for lower quality Russian tons out of spot river locations. Most sources put the common dealer market in the $475-$485/st FOB range last week
Western Cornbelt: The regional potash market was quoted at $465-$493/st FOB, with the low reported for Russian product on a spot basis, and the upper end quoted in Missouri for white granular Canadian tons.
While numerous sources said they expect usage cutbacks this fall, others were holding out hope for a brisk fall run. “If we can get in the field and get something done, I don’t expect much pushback from farmers based on current corn prices,” said one. “I think we’re in good shape actually.”
Northern Plains: Potash remained at $467-$480/st FOB Saskatchewan mines to U.S. customers, depending on grade. No current spot quotes were available out of regional warehouses or on a delivered basis in the region.
Great Lakes: Potash pricing was down from last report. Sources tagged the regional market at $479-$492/st FOB for Canadian tons, depending on grade and location. A Michigan source quoted the common dealer price in early October at $485/st FOB for red granular and $492/st FOB for white granular. He characterized new sales as “a truckload at a time,” however, and noted that buyers are waiting “until the last scoop before they buy another one.”
Northeast: Potash pricing continued to slip. Sources tagged the regional market as low as $480/st FOB in western Pennsylvania, with delivered potash pegged at $505-$515/st in the region, depending on grade, location, and supplier. Sources described the market as very quiet, and one said more pricing reductions are necessary to spur movement. “It’s not enough yet to bring potash back to normal consumption,” he said.
SULFUR
Tampa: Negotiations for fourth-quarter sulfur contract prices continued last week and will go on into this week.
There appeared to be little pressure to push prices upward by much, perhaps more because of the lack of need by phosphate producers than the supply of sulfur. Less sulfur has been produced due to reduced refinery activity, and the excess supply situation on the Gulf Coast seemed to be gone. At Beaumont, Martin’s prill facility was scheduled to load a couple of vessels this month, which will reduce its inventory to only 20,000-30,000 mt – far lower than its capacity of about 150,000 mt.
Still, phosphate producers were not making any moves to increase production, and the opposite was far more likely as PotashCorp cut 168 jobs at White Springs, a sign it did not expect an increase in demand in the near future.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 52.77 | 47.68 | 38.27 |
| CF Industries | CF | 89.56 | 84.20 | 57.31 |
| Intrepid Potash | IPI | 24.77 | 22.22 | 21.72 |
| Mosaic | MOS | 49.66 | 46.43 | 35.75 |
| PotashCorp | POT | 93.00 | 86.42 | 98.60 |
| Terra Industries | TRA | 35.61 | 34.85 | 19.91 |
| Terra Nitrogen | TNH | 104.44 | 103.55 | 69.89 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 35.65 | 34.50 | 30.10 |
| Deere & Co. | DE | 43.12 | 41.40 | 37.99 |
| Scotts | SMG | 43.04 | 41.58 | 21.65 |
SPOT BARGE PRICES
CF buys 7 percent of Terra, sends proposed merger agreement; Terra says no again
CF Industries Holdings Inc. said Sept. 28 that it has acquired approximately 7 percent of Terra Industries Inc. in the open market over the past two weeks. CF has purchased 6,985,048 shares out of 99,786,406 outstanding at a cost of $247 million and an approximate average price of $35.36 per share. Shares were purchased between Sept. 10-25 and ranged from $31.42 to $37.17. CF also announced that it has sent a merger agreement to Terra detailing the terms of its proposed business combination.
“Our proposal provides a very significant premium to Terra stockholders, which is above historical premiums for stock transactions,” said Stephen Wilson, CF chairman, president, and CEO. “Terra stockholders will have significant ownership in the combined company and share in real and substantial synergies. Our acquisition of 7 percent of Terra further demonstrates our commitment to the business combination. We are confident that Terra and CF Industries stockholders support this business combination and that both sets of stockholders recognize its strategic merits.”
The merger agreement is very similar to past proposals, with a few changes. The exchange ratio is still 0.465 of a share of CF for each share of Terra, a 35 percent premium. The 0.465 exchange ratio would be adjusted upon declaration by Terra of its announced $7.50 per share dividend, based on the average trading price of CF shares during a period prior to the closing. Five million Contingent Future Shares would be distributed to CF stockholders, which would convert based on CF stock trading above $125 a share, increased from $115 a share to reflect the overall increase in the market. Stockholder approvals from both Terra and CF would be required, unless Terra elects not to require CF stockholder approval by structuring the transaction to include CF preferred stock. There would not be any “break-up” fee. There would not be any condition relating to U.S. or Canadian antitrust regulatory approvals, since CF has satisfied these regulatory conditions regarding the combination.
Terra said Oct. 1 that its board of directors, with the assistance of its financial and legal advisors, has unanimously concluded that the Sept. 28 proposal is not in the best interests of Terra or Terra’s shareholders.
“Over the last nine months, our board has reviewed five proposals from CF – and each time the board has unanimously determined that a combination of our companies lacks compelling industrial logic and runs counter to Terra’s strategic objectives,” said Terra President and CEO Michael Bennett. “Terra has focused on building upon our considerable strengths as a ‘pure play’ nitrogen company. A combination with CF would threaten the value we believe we will deliver through the continued execution of our strategy.”
“We believe that CF’s proposal is not strategically attractive, and fails to appropriately value Terra either on an absolute or relative basis with CF,” said Henry Slack, Terra’s chairman of the board. “In addition, we believe that the pending offer from Agrium creates enormous uncertainty both as to how to value CF’s acquisition currency, which we believe is inflated as a result of Agrium’s premium bid to acquire CF, and because we believe that CF shareholders are likely to prefer an Agrium transaction if they are given a choice.”
Agrium Inc., which is seeking to buy CF, has a toe-hold in CF, having bought 2.57 percent of the company in February (GM March 30, p. 1).
Terra says none of the proposals that CF has made to the Terra board over the last nine months have shown any material improvement over the initial unsolicited offer that CF launched on Jan. 15, 2009. At the same time, Terra has maintained its emphasis on delivering shareholder value, returning 35 percent of net income to shareholders over the past three years. Last week, Terra also announced plans to pay a special cash dividend of $7.50 per share later this year (GM Sept. 28, p. 1). Terra noted that CF will adjust its price downward if Terra proceeds with this special cash dividend.
Terra reiterated that it has spent much of the last seven years developing its environmental services business in both stationary and automotive markets to diversify its customer base outside of core agricultural markets. It fears a combination of CF’s business with Terra may jeopardize the focus necessary to grow this business.
Terra said under the proposed deal, while it would contribute approximately 59 percent of the nitrogen results of the combined entity (based on full year 2008 results), Terra shareholders would receive only 48.5 percent of the equity pre-dividend, reduced to approximately 43.2 percent post-dividend (based on CF’s stock price at September 25th). It also says CF’s proposed Contingent Future Shares proposal has the sole purpose of clawing back consideration from Terra shareholders, and could result in an actual exchange ratio of only 0.4224 CF shares per Terra share, or 46.1 percent of the combined company (reduced to approximately 40.9 percent post-dividend, based on CF’s September 25 stock price). It says this is lower than CF’s original unsolicited bid in mid-January.
Terra also noted that CF has terminated its exchange offer for Terra, and its merger proposal is not a binding offer to Terra or its shareholders.
TFI, ARA join trade groups in urging Congress to remove provisions from chem security bill
The Fertilizer Institute and the Agricultural Retailers Association on Sept. 28 joined 26 other industry associations and the U.S. Chamber of Commerce in urging the House Energy and Commerce Committee to remove several contentious provisions from H.R. 2868, the Chemical Facility Anti-Terrorism Act of 2009.
The House committee was scheduled to hold a hearing on the bill on Oct. 1. H.R. 2868, which would reauthorize and expand regulatory powers given to the Department of Homeland Security (DHS) in 2007 with the Chemical Facility Anti-Terrorism Standards (CFATS), was reported out of the House Homeland Security Committee last June (GM June 29, p. 1) and then referred to the Energy and Commerce and Judiciary Committees. If passed out of the House, the Senate will likely take up the House-passed version in the Senate Homeland Security Committee.
In the Sept. 28 letter to Committee Chairman Henry Waxman (D-Calif.) and ranking member Joe Barton (R-Texas), the trade groups honed in once again on three provisions in the legislation: an “anti-preemption provision,” which would permit state and local governments to adopt or enforce standards more stringent than those required by federal law; a “citizen suit” provision, which would allow any person to bring suit against regulated facilities or the DHS to enforce compliance with the act; and an “inherently safer technologies” (IST) provision, which would require facilities to assess and possibly switch to safer chemicals if alternatives exist.
Regarding the first, the letter states the federal preemption is critical and that chemical facility security, just as other national security issues, should be regulated solely by the federal government. “Absent uniform national standards, businesses will be subject to a patchwork of differing and possibly conflicting regulations,” the letter says. “Such an approach would force facilities to sort through a dizzying maze of potentially contradictory regulations and could divert scarce resources to complying with disparate requirements that do not necessarily advance national security interests. This patchwork of state and federal regulation would breed confusion for the myriad companies operating in multiple states.”
As for the second, the letter says the current CFATS’ performance-based standards provide facilities the flexibility to decide which security measures or technologies to adopt. “Allowing layperson litigants rather than DHS security specialists to challenge a facility’s selection of security measures will not enhance security in any meaningful way,” the letter charges. “Furthermore, we share the DHS’s concerns that broad discovery rights in federal lawsuits could lead to public disclosure of classified or highly sensitive information that could assist terrorists.”
The third provision, the IST mandate, has long been a sore spot for TFI, ARA, and other chemical industry advocates. “This provision essentially provides DHS the authority to implement manufacturing process changes, an action that is unnecessary and potentially very disruptive to many chemical facilities,” the letter warns. “Mandating adoption of government-selected ISTs would gut the core of the CFATS without reducing real risks.”
The letter also addresses concerns that an IST provision “would be unduly burdensome” for smaller chemical facilities. “Smaller facilities that use or store relatively modest amounts of chemicals (rather than manufacturing them) would be required to retain expensive consultants and chemical safety engineers simply to assess the existence and feasibility of ISTs,” the letter says. “These operations, already suffering from the ongoing economic crisis, will have even fewer resources to dedicate to actual security enhancements if forced to conduct costly IST assessments.”
In a separate statement on Sept. 28, ARA warned that the IST mandate and the civil suits provisions could ultimately lead to the loss of crop production inputs such as ammonium nitrate and anhydrous ammonia. “It could also lead to the loss of other agricultural chemical products,” ARA said. “This would place additional supply demands on substitute products that may be more expensive and impact crop yields, which would result in increased costs for farmers.”
TFI, ARA, and a host of other industry trade groups have been lobbying Congress to simply extend the existing CFATS instead of passing new, broader legislation.
IRM to market Terra UAN in California
International Raw Materials Ltd. (IRM) has signed an agreement with Terra Industries Inc. whereby IRM will be the distributor of Terra’s TerraSol UAN-32 fertilizer to the California market. IRM will market and distribute the product from its 45,000 st terminal at the Port of Stockton. The deal was announced internally in late September.
Headquartered in Philadelphia, IRM has been in business for more than 30 years, marketing liquid and dry fertilizer products throughout the western U.S. and western Canada. According to its Web site, IRM sources its products from a variety of producers, including UAN-32 from Dyno Nobel and ammonium sulfate products from Canadian mining companies Teck Resources Ltd. and Sherritt International Corp.
The company has some 17 warehouse locations in the Pacific Northwest, along with seven throughout Western Canada. In addition to its Stockton location, IRM’s California terminals are located at Chico, Sacramento, Modesto, and Edison.
The inland, deepwater Port of Stockton is located in the state’s primary growing region, the San Joaquin Valley. The Port is served by two transcontinental railroads – Union Pacific and Burlington Northern Sante Fe – as well as some 200 truck companies, including all major transcontinental carriers.
Other companies with terminal space for liquid fertilizer at Stockton include the California Ammonia Co. (Calamco) and Yara North America Inc. Calamco’s Stockton operation has 40,000 st of ammonia storage, 40,000 tons of UAN storage (marketed by the J.R. Simplot Co.), and a 3,000-ton aqua ammonia tank, while Yara’s Stockton facility has capacity for 110,000 st, most of which is imported UAN and CAN-17.
Agrium is another UAN competitor in the California market and the only UAN producer there, with 20,000 st of UAN capacity and 40,000 st of ammonia capacity at their Port of Sacramento facility.
Terra’s annual UAN-32 production capacity includes 300,000 st at Woodward, Okla., 350,000 st at Courtright, Ont., 525,000 st at Yazoo City, Miss., 735,000 st at Port Neal, Iowa, and 2.05 million st at Verdigris, Okla.
Mississippi Phosphates refutes EPA pollution claim
Mississippi Phosphates Corp. is refuting the U.S. Environmental Protection Agency’s claim that ongoing releases of hazardous material from its Pascagoula, Miss., plant are causing “an imminent and substantial danger to human health and the environment.” EPA has ordered corrective measures be taken to protect public health and the environment in the surrounding community, citing the Resource Conservation and Recovery Act (RCRA).
In a Sept. 30 statement, Miss Phos responded that plant corrective actions were initiated immediately after an inspection detected surface and groundwater contamination within the plant, and that additional work is underway. “Surface water contamination within the plant has been mitigated and the company has confirmed through third-party testing that the groundwater contamination is localized, contained and that there has been no migration off site,” the company insisted. “Options to respond to groundwater contamination are under evaluation.”
EPA stated that the agency and the Mississippi Department of Environmental Quality conducted inspections of the plant on July 13 and 14 and collected sampling data on Aug. 11-12. According to EPA, the inspections discovered ongoing releases of hazardous waste or hazardous constituents to soil and surface water during the initial inspection, which triggered the return visit to collect samples of soil and groundwater to confirm their initial concerns.
EPA said it believes the imminent and substantial danger to human health and the environment at the plant is due to improper storage, inadequate worker safety equipment, and many leaks and spills of solid and liquid hazardous wastes. Some of the work required of Miss Phos in the RCRA Section 7003 Order includes immediate treatment and containment of releases of hazardous waste; submittal of plans and timetables for rapid remediation of contaminated media; identifying and repairing sources of leaks and spills of sulfuric acid, phosphoric acid, and acidic process wastewaters on-site; and submittal of plans and timetables for mitigating contaminant migration. Miss Phos is also required to provide all employees with chemical resistant clothing for use inside the plant.
EPA added that along with the state it will continue to work to oversee Miss Phos’s compliance with environmental laws, regulations, and permits. Miss Phos, which is owned by Phosphate Holdings Inc., produces DAP at the plant for both the domestic and U.S. markets.
Viterra buys Lakeside Fertilizer
Viterra Inc. and XL Foods Inc. said Sept. 25 that they have entered into an agreement in which Viterra will acquire the assets of Lakeside Fertilizer, a division of XL Foods and southern Alberta’s largest independent retailer of fertilizer and agricultural chemicals.
The transaction, which closed Sept. 25, includes six retail outlets in Bow Island, Brooks, Claresholm, Medicine Hat, Taber, and Vauxhall, AB.
“This acquisition allows us to further leverage our logistics and distribution network, ensuring that our customers in southern Alberta have the right products at the right time,” said Doug Wonnacott, Viterra’s Agri-products senior vice president. “It is also consistent with our overall strategy to optimize our retail footprint in Western Canada and increase our market share.”
Viterra said the new locations are strategically located in a prime growing region of Alberta and will allow Viterra to sell inputs for traditional crops, as well as high input specialty crops such as sugar beets and potatoes. It said customers will have access to a full range of agri-products including Viterra’s exclusive line-up of proprietary seed and private label crop protection products, along with a variety of custom services.
“We would like to thank the employees, customers and suppliers that have supported the Lakeside Fertilizer business over the years,” said Brian Nilsson, Co-CEO of XL Foods Inc.
Wonnacott said that Lakeside employees, as part of the Viterra team, will continue to provide area customers with expert advice and quality service.
The acquisition will increase Viterra’s total number of retail sites to 259 across Western Canada.
Rabobank International acted as exclusive financial advisor to XL Foods.