Sioux City-Terra Nitrogen Co. LP (TNCLP) reported net income of $43.3 million ($1.49 per common unit) on revenues of $165.3 million for the first quarter ending March 31, 2009, versus the year-ago $81.6 million ($3.93 per unit) and $174.5 million, respectively. TNCLP said earnings were down due to lower ammonia selling prices and UAN sales volumes, partially offset by higher ammonia sales volumes and lower natural gas prices. The lower ammonia prices were in part due to decreased industrial demand in light of the economic slowdown. UAN volumes were off due to growers having delayed their purchasing commitments. First-quarter ammonia sales volumes were 105,000 st with an average unit price of $437/st, versus the year-ago 38,000 st and $519/st, respectively. First-quarter UAN volumes were 367,000 st with an average price of $289/st, compared to the year-ago 502,000 st and $281/st, respectively. The average gas cost was $7.07/mmBtu versus the year-ago $7.16/mmBtu. TNCLP also announced a cash distribution for the quarter of $2.10 per common limited partnership unit payable May 27, 2009, to holders of record as of May 5, 2009.
All posts by traceybg@gmail.com
Transloading eases ammonia scare
Fredericktown, Ohio-While emergency responders took precautions April 20, the owners of a tanker truck that slid off the road and overturned, transloaded more than 41,000 pounds of anhydrous ammonia to another tanker without losing a drop. Some 300 residents were evacuated from 200 nearby homes after the driver lost control and the truck ended up on its side. Officials at McIlvaine Trucking wouldn’t talk about it, but they brought in a pumper truck and another tanker to make the transfer. Knox County EMA Brian Hess called McIlvaine’s quick action, along with efforts by the Mt. Vernon and Fredericktown fire departments, a smooth operation. He said the tanker was pretty full and heading through town when the driver hit a soft shoulder and over-corrected. Ohio 13 and the Ohio 95 bypass were closed temporarily, and a computer-assisted emergency management system was used to develop a worst-case scenario. Residents spent about five hours away from home, some of them in two Red Cross shelters. They were allowed to return home around 11:30 p.m. The tanker driver was treated for minor injuries at the Knox Community Hospital and may face charges of failure to control the vehicle.
Frontier cleanup gets $5 M stimulus grant
Davis, Calif.-The U.S. Environmental Protection Agency is getting an extra $5 million from the Obama administration’s federal stimulus funds to fast-track the cleanup of pesticide- and fertilizer-contaminated soils and groundwater at the old Frontier Fertilizer plant here. EPA told Green Markets that the latest technology will be deployed, which will shorten the cleanup effort at the Superfund site from nine to 12 months as compared with traditional pump and treat approaches, which generally take years. The EPA officials stressed that the extra $5 million will accelerate the cleanup at the site, while also adding jobs in the Davis area. Barber and Rowland Co. ran a pesticide and fertilizer factory at the eight-acre site between 1972-1982, which was followed by the Frontier Fertilizer Co. until 1987.
CHS moves up to number 72 on Fortune 500
St. Paul-CHS Inc. reports that it is now the 72nd largest U.S. company according to the Fortune 500 ranking for 2009. Based on fiscal 2008 revenues of $32.2 billion, CHS jumped 73 spots from its 2008 position at 145. ExxonMobil, with revenues of $442.8 billion, ranked number one, followed by Wal-Mart stores. Fortune magazine has ranked the nation’s largest publicly-traded companies since 1955. While CHS is predominately owned by farmers, ranchers, and member cooperatives, its fixed rate preferred stock – which trades on the NASDAQ exchange – qualifies it for inclusion in the Fortune listing.
Viterra adds ShadowTM to herbicide portfolio
Regina, Sask.-Viterra Inc. on April 13 announced the launch of ShadowTM RTM, a Group 1 herbicide that provides post-emergence control of grassy weeds in several broadleaf crops, including field peas, flax, canola, lentils, and soybeans. Shadow is the newest addition to the company’s line of Viterra-branded crop protection products, and is designed to protect against an array of common weeds such as wild oats, green and yellow foxtail, Persian darnel, barnyard grass, and volunteer barley, oats, wheat, and canary seed.
Management Briefs
Garrett Lofto has been named president of the J.R. Simplot Co.’s AgriBusiness Group. Lofto succeeds Bill Whitacre, who in February of this year was named CEO-elect of the J.R. Simplot Co. Lofto joined Simplot in 1992 as a crop advisor for the Morris, Manitoba area. He has held numerous leadership positions in the AgriBusiness Group, including his most recent role as vice president of wholesale sales.
Lofto holds a bachelor of science degree in agriculture from the University of Manitoba, Canada, and an MBA from the University of Phoenix.
Effective Aug. 1, 2009, Intrepid Potash Inc. will be relocating the sales and marketing division from Arlington, Texas, to Denver, Colo. R.L. Moore will continue in his role as senior vice president of the division and will relocate to Denver. Scott Johnson has been promoted to director of sales and marketing for New Mexico, and will be responsible for both potash and Trio products. Ken Heisel will continue in his role as director of Utah sales and marketing.
CVR Energy Inc. reports that Edward Morgan will become its chief financial officer during the week beginning May 11, 2009. He replaces Tim Rens, who announced his resignation earlier this year.
Morgan has spent the past seven years at Delek U.S. Holdings Inc., Brentwood, Tenn., having been the CFO for its operating segments for the past five years. Prior to Delek, Morgan was director of treasury operations with American Homepatient Inc. From 1993 to 1997, Morgan worked for Deloitte & Touche on various industrial and service company client engagements. Morgan holds a bachelor’s degree in accounting from Mississippi State University and a master’s degree in accounting from the University of Tennessee. Morgan will be located at CVR Energy’s headquarters in Sugar Land, Texas.
Incitec Pivot said April 22 that Managing Director and CEO Justin Segal has tendered his resignation for family reasons and will be taking a position in Sydney. He will leave the company May 8.
James Fazzino, finance director and CFO, will be acting CEO while the company searches for a replacement for Segal.
Segal will be joining oil refiner Caltex Australia Ltd. as its new CEO, replacing Des King, who will be returning to the U.S. when his current contract expires June 30 after approximately three years with the company.
Hanfeng Evergreen Inc., Toronto, on April 20 announced the resignation of Tony Busseri as executive vice president of the company. Busseri has been an officer of Hanfeng since January 2009, and plans to pursue other interests. “I would like to express my sincere thanks to Tony for his contribution to Hanfeng, and we wish him the very best in his future endeavors,” said Xinduo Yu, Hanfeng president and CEO.
Correction: In the Green Markets dated April 20, page 11, The Fertilizer Institute’s Vice President, Scientific Programs, should have been identified as William C. (Bill) Herz, MPH.
Market Watch
AMMONIA
U.S. Gulf/Tampa: Negotiations are underway for the May Tampa business. Buyers are pounding the market for new business, citing the potential for additional ammonia from Trinidad from the new plant coming up. Price ideas are certainly sub-$300/mt DEL.
Eastern Cornbelt: Although preplant ammonia was moving to the field in some parts of the Midwest, activity remained spotty at best in the Eastern Cornbelt due to wet fields. Spot pricing was under some pressure, with sources quoting the dealer market out of Illinois River terminals at $410-$420/st FOB last week. Illinois sources also talked of dealers bartering long prepay tons for as low as $400/st FOB. The upper end of the regional range was quoted at $440-$450/st FOB in Indiana and Ohio.
Western Cornbelt: With preplant ammonia moving at a fairly brisk pace, sources quoted the spot ammonia market last week at $375-$405/st FOB regional terminals. One Iowa source reported a $390/st FOB terminal price at midweek, but said dealer-to-dealer trades of excess prepay were taking place at the $375/st FOB level.
Northern Plains: Sources reported a little preplant ammonia movement in northwestern North Dakota and parts of Minnesota last week, but demand was still very light. Dakota Gasification’s Beulah, N.D., ammonia plant remained down until the spring season begins in earnest. Cash market ammonia was reported in the low-$400s/st FOB Minnesota terminals, while delivered ammonia was reported in the $535-$585/st range in the Dakotas, with the low in eastern North Dakota.
Great Lakes: The anhydrous ammonia market was pegged at $400-$450/st FOB in the region, down from last report, with the low reported by southern Wisconsin sources and the high by Michigan dealers FOB Courtright, Ont. One Wisconsin source also reported dealer-to-dealer trades of excess prepay taking place at the $400/st FOB level in late April.
Black Sea: The absence of American buyers is keeping the Black Sea price down. Asian sources say most of the plants in the area remain shut down. Observers talk about prices below $240/mt FOB, but were unable to point to specific business to back up this talk. The problem, said one source, is there has been so little business in the area that it is hard to nail down any price.
A consensus seems to exist that the area prices are indeed in the $240s/mt FOB.
Producers are facing a difficult time. A number of plants are closed because the current market is below the estimated production cost of $320/mt. With demand from Europe and the U.S. off, sources say there are few incentives for a price increase and thus the re-opening of the facilities.
Middle East: While the Black Sea producers suffer through a soft market, producers in the Arab Gulf are finding ready buyers in India and Asia.
Indian demand for ammonia remains strong for its phosphate plants. The latest set of shipments to India under negotiated contracted tons now puts the netback just under $280/mt FOB.
Producers still have their eyes on $300/mt FOB and are doing all they can to justify that price. Buyers, however, also have their eyes set on slowing price increases.
For now, the Middle East remains the main source of ammonia for the Indian DAP producers. What threatens the steady rise in the ammonia price is the possibility that in the third quarter India may opt to import more DAP instead of making its own.
Sources say the Indian buyers will continue to argue for much lower phos acid prices. Acid suppliers are said to be reluctant to drop the price further.
If the two sides cannot come to an agreement on acid pricing, sources say India may decide to start buying more DAP on the international market. Reportedly, some Chinese producers have already been approached for June shipments.
Also helping hold up the price – for the time being – are purchases in Asia. Industrial buyers continue to seem anxious to keep their ammonia tanks full. While many of the tons do come from Asian sources such as Indonesia and Malaysia, there are times when Middle East tons are needed to fill in gaps or to supply extra material as needed.
Asia: Production in Indonesia at KPI and KPA remains strong. Sources say production is running at full capacity.
Mitco in Malaysia is also doing well. Reportedly, the company worked out a swap deal with Sabic to ensure a customer is covered on time. Middle East sources say Sabic and Mitco regularly engage in swap arrangements.
The main source of buying is coming from the industrial sector. Sources say most fertilizer companies in the area are buying just the ammonia they need and no more. The industrial buyers, however, are anxious to guarantee that their storage tanks do not run low.
UREA
U.S.Gulf: Barges were generally put between $265-$272/st FOB. Sellers were seeking $270-$272/st FOB, with buyers at $260-$265/st FOB.
Eastern Cornbelt: Granular urea was pegged at $315-$340/st FOB in the region, reflecting another drop from last report. The low was reported in Illinois out of spot river locations, with the upper numbers in Ohio to the dealer.
Western Cornbelt: The granular urea market was reported at $310-$330/st FOB in the region, reflecting another slight drop from last report. In the Southern Plains market, sources said Oklahoma terminal pricing had dropped to $305/st FOB and was trending down to the $300/st mark.
Northern Plains: Granular urea was pegged at $335-$340/st FOB the Twin Cities, with delivered urea in North Dakota pegged at $390-$400/st last week. Both ranges reflected a drop from last report.
Great Lakes: Sources pegged the granular urea market in a broad range at $320-$375/st FOB, with the upper end out of Michigan terminals to the dealer and the low reported by southern Wisconsin sources out of river locations. One Wisconsin dealer pegged delivered urea at the $340/st mark to his location last week. Those levels reflect a decrease from last report.
Northeast: Granular urea was pegged at $340-$350/st FOB in the region. Delivered urea was quoted at $345-$358/st, with the upper end in southern Pennsylvania.
Pakistan: TCP closed a tender last week for 25,000 mt. The award went to Transfert to deliver 30,000 mt at $282/mt CFR. The award was issued within 36 hours of the closing of the tender. Sources said this indicated that TCP needed the tons right away.
Eight companies participated in the tender. Sources said the Transfert offer was aggressive, but within the ballpark of current market conditions.
Tender results follow.
| Offering Company | Quantity (mt) | Origin | US$/mt CFR |
| Transfert | 25,000 – 30,000 | Open (S/O) | 282.00 |
| Template Sea | 25,000 – 30,000 | 286.00 | |
| Transammonia | 25,000 | Open (S/O) | 288.71 |
| Keytrade | 25,000 – 30,000 | 296.49 | |
| Helm | 25,000 – 30,000 | 296.75 | |
| MultiCommerce | 25,000 – 30,000 | CIS/Russia (B/O) | 299.50 |
| 295.50 | |||
| Mid Link General | 25,000 | Ukraine/CIS | 307.50 |
| Swiss Singapore | 25,000 – 30,000 | 326.00 |
Sources expect Transfert to gets its urea from the Middle East. The trading house has had a long relationship with Fertil, said one source.
If the tender is satisfied from the Middle East, the estimated netback is in the $260s/mt FOB.
TCP still has a tender outstanding for 260,000 mt that closes May 9.
Conventional wisdom says that the Middle East producers will be aggressive in that tender. The idea is to grab a large order – such as most of the 260,000 mt in the tender – at a low price to rapidly draw down stockpiles. Any subsequent bidders would face higher prices and limited quantities.
Some Asian sources point out that the upcoming tender may be in danger. Sources are reporting there may be some financial restraints on the purchases.
For most in the urea industry, however, the TCP tender is the major focus. Some are looking to India, but most say nothing will happen from that buyer until late May or early June.
India: People are waiting to see what India will do. In general, industry observers say Indian buyers will need to enter the market by June. For producers, however, that will only mean softer prices. For traders, it means another month of speculation and fear of taking a position with product, only to find the market shift the wrong way.
Voting in the national elections is scheduled to end this week. Once the ballots are counted, sources say the government agencies can get to work figuring out how much money will be available for imports.
Industry sources are speculating that agents of the buying houses will fan out in early May. By the time of the IFA conference in Shanghai at the end of the month, the buyers will have a good idea of how many tons are available. Discussions with suppliers and traders will most likely take place in Shanghai, and soon after the conference closes a tender will be called.
Sources speculate that the Indians will not be looking to nail down pre-tender deals with specific prices as they have in the past. One trader said the majority of buyers would most likely look to make general promises of quantities for purchase.
One trader described a scenario where buyers would give producers and traders a sense of how many tons are needed in a given time. Then, as the tender approaches, the buyers will look at the trend in the market. If the price is moving up, the tender documents may include a small window for loading and delivery. If the market is stable or softening, the window for shipping may be relaxed.
Another argument for waiting until after the IFA gathering to call the tender, said one source, is that beginning July 1 Chinese urea will be available with only a 10 percent export duty instead of the current 110 percent duty.
Sources say the buyers are looking at $260-$270/mt CFR for their purchases. Others argue the target is closer to $225/mt CFR. Either way, the price will have to fall significantly to achieve either price.
Middle East: Sources in the industry assume Transfert will be getting material to cover its award from the Arab Gulf. Freight from AG producers to Pakistan is pegged at $20/mt at the high end and $15/mt at the low end. Sources say the lower price is the one most likely to be paid to settle the Transfert-TCP deal.
The Transfert offer was at $282/mt CFR. With $15/mt for freight and incidentals, sources say the netback lands in the upper $260s/mt FOB.
Sources say the upper $260s/mt FOB will look good to the producers by the time TCP closes its tender May 9.
Granular producers are currently living off their long-term contracts, say sources. By next semester, the new Oman plant will come on line and pump an additional 40-60,000 mt into the spot market.
The prilled market is moribund. The main buyers are India and Pakistan. Sources say Middle East producers will be aggressive in their pricing in the upcoming TCP tender.
Aggressive pricing in the past has led to dramatic drops in prices – $10-$20/mt – just so the producers can clear out their reserves. Such a wholesale commitment of their tonnage will also allow the producers to raise their prices to any subsequent buyers.
Chinese urea is expected to be offered in the TCP tender. Depending on how desperate the Chinese producers are to sell off shore, the Middle East producers could face a serious challenge to their offers.
Black Sea: Producers continue to say they will not accept any bids under $240/mt FOB. Unfortunately, sources report $238/mt FOB was done last week. In addition, rumors circulated at the end of the week that $235/mt FOB was done.
Traders are convinced the price will be at $230/mt FOB by the end of the month.
Buying is way off. Sources say the usual orders from Latin America are not coming in.
The next big tender from India will most likely include offers from Chinese and Middle East producers anxious to sell.
Pirates around the Horn of Africa are increasing the cost of shipping east of Suez, and the only major markets left for the producers are east of Suez.
All in all, say sources, there is little reason for joy amongst the producers.
Prices from the area are now pegged at $235-$240/mt FOB.
China: Urea producers are already talking to traders about having material ready for the May 9 TCP/Pakistan tender and any possible upcoming Indian tenders.
Right now, say sources, producers are looking at $250/mt FOB before export taxes. Sources say this price is too high to do business as the current market stands, but that some accommodations might be worked out. One trader said that translates into: “The producers will have to lower their prices if they want to be competitive.”
The export duty on urea drops from the current 110 percent to 10 percent July 1. Industry observers fully expect to see Chinese material appear as part of the TCP and Indian tenders.
With TCP, the deal will have to include loadings after July 1. If the price is right, said one trader, TCP might be willing to wait.
Indian buyers are not expected back into the market until after the IFA conference the end of next month. If those expectations are realized, the tender could easily include Chinese tons.
Indonesia: PIM is gearing up for another selling tender. Sources report as much as 30,000 mt might be offered for sale by the middle of May. Whether PIM issues a tender is largely dependent on the government. If the appropriate ministries are convinced the local markets are fully stocked, the ministries will issue a permit to offer the tons.
The government is also concerned that PIM achieve top dollar in the sale. Traders say the recent $284/mt FOB paid to PIM for 53,000 mt may not be repeatable.
The slide in the global market is expected to affect bids in any PIM tender.
Sources say the Indonesian government and producers are willing to walk away from the tender if the bids are not to their liking.
NITROGEN SOLUTIONS
Eastern Cornbelt: UAN pricing remained in a broad range at $7.15-$8.00/unit FOB in the region, with the low reported in Illinois and the upper numbers out of inland tanks in Indiana and Ohio.
Western Cornbelt: UAN pricing remained in a broad range at $7.00-$7.80/unit FOB regional terminals, with most dealer quotes reported in the $7.15-$7.80/unit FOB range, depending on location.
Northern Plains: UAN pricing was also down from last report. Sources tagged the market at $7.60-$8.20/unit FOB Minnesota terminals, with the upper level reflecting dealer reference pricing from some suppliers. Delivered UAN-28 in central North Dakota continued to be quoted as high as $275-$280/st ($9.82-$10.00/unit), but sources reported no new business at that level.
Great Lakes: UAN pricing continued to cover a wide range in the region. Southern Wisconsin sources pegged the market as low as $7.15/unit FOB river terminals for spot tons to the dealer, while dealer postings out of terminals in central Wisconsin were quoted at the $8.20/unit FOB level. In Michigan, dealer reference prices for UAN-28 were pegged as high $255-$260/st ($9.11-$9.29/unit) FOB. Sources reported few new orders taking place and a fair amount of prepay orders to ship.
Northeast: Sources reported some spot market weakness due to fieldwork delays and inactivity. The UAN-30 market was reported at $215-$222/st ($7.17-$7.40/unit) FOB, with the low at Baltimore from at least one supplier and the upper end to the dealer FOB Philadelphia. A Pennsylvania dealer quoted delivered UAN-30 at the $234/st ($7.80/unit) level to his location.
The UAN-32 market was pegged at $250-$256/st ($7.81-$8.00/unit) FOB elsewhere in the region, with the upper end reflecting dealer pricing out of terminals in upstate New York.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate was steady at $270-$275/st FOB in the region.
Great Lakes: No market was reported for ammonium nitrate in the region, but Michigan sources pegged the CAN-27 market at $350/st FOB to the dealer.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $235-$245/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate remained at $225-$245/st FOB in the region.
Northern Plains: The granular ammonium sulfate market was quoted at $255/st DEL in the region and in tight supply. Sources said one regional supplier quit taking orders as the week advanced due to limited inventory and difficulty keeping up with demand. Dakota Gasification’s posted price to Manitoba and Saskatchewan was $264/st DEL.
Great Lakes: Granular ammonium sulfate pricing was up from last report at $245-$275/st FOB regional terminals, with the upper end in Michigan and the low in Wisconsin. Product was described as tight. One Wisconsin source also reported mid-grade ammonium sulfate pricing last week at $235/st FOB and $250/st DEL to his location.
Northeast: Delivered ammonium sulfate was pegged at $253-$265/st in the region, depending on location, with the low reported in Pennsylvania and the upper end in New England. No current FOB prices were reported in the region.
PHOSPHATES
Central Florida: Prompt railcar sales out of Central Florida were absent last week, as CF dropped its price – at least until the end of last week. High rail rates were said to be a part of the problem. However, truck sales into Georgia were doing well by late last week, and traders made many of the deals.
Late last week, Mosaic was able to reach an agreement with one of its primary sulfur suppliers for first quarter prices at $5/lt up from the previous quarter. A source said the sulfur industry recognized phosphate producers were facing a very difficult period with a depressed export market and a nonexistent domestic spring season, and were likely to curtail production relatively soon.
The spring season will be over in a matter of weeks, and that means there will not be enough time for new railcar shipments to reach the Corn Belt to help fill empty spots. Most dealers have indicated they plan to let their bins go bare and wait until sometime near the fall season starts before they refill. The problem was much of the country was still too wet for farmers to get into their fields to prepare the land for planting, and time was running out.
The Central Florida DAP price range dropped last week from the previous week’s $310-$320/st FOB to $300-$315/st FOB. PCS Sales had no published price. Mosaic’s price was $315/st FOB for DAP and $325/st FOB for MAP. CF was at $300/st FOB for DAP and MAP was $10/st higher. The price from Agrifos remained at $350/st FOB for trucks and $340/st FOB for rail shipments.
U.S. Gulf: After a short spate of desperation sales the previous week took a big bite out of NOLA DAP barge prices, the coming end of the spring season was having the opposite effect last week. Far too few phosphate barges were in position to help fill any empty bins that will probably result when farmers start hitting their fields and the local dealers during the next few couple of weeks. Some areas were beginning to dry out after snow and rain well above normal levels during the past few months, and farmers were beginning to make moves in those regions. The Corn Belt was the big question, but the situation there should become clearer this week – hopefully. Those with NOLA DAP barges in position will have the option of re-supplying their own warehouses or getting a somewhat better price than the current market for reselling their barges.
Late last week, the price of corn was still over $4/bushel for December 2009, and that should be enough to prod growers into action. That is, if they have enough time to fertilize and plant. Most likely there will be a reduction in application rates, but phosphates will still be applied.
The most optimistic in the industry said the lackluster fall season last year and the horrible spring season this year means fall has to be good – really good. The rosy projections were based on empty bins, but reordering may be delayed as buyers wait to see if prices will deteriorate. A price depression will probably happen until the logjam breaks and supplies cannot keep up with demand.
Late the previous week, sales of NOLA DAP barges were made at $290/st FOB, and many traders balked at making sales at that lower price. Late last week, the opposite happened – Mosaic made a DAP barge sale at a surprisingly higher price, $300/st FOB. The barge was near the customer’s destination, but the reported price was determined after freight cost was removed.
Last week CF lowered its Central Florida prices to $300/st FOB for DAP and $310/st FOB for MAP, but it issued no new current price for NOLA DAP barges. In part, the lack of a new river price was because the company has low inventories there. However, it posted a price of $300/st FOB for May.
The NOLA DAP barge price range last week moved up from a flat $290/st FOB the previous week to another plateau of $300/st FOB. Mosaic has a $10/st FOB additional charge for MAP, while CF’s MAP was also $10/st FOB higher than its DAP price.
Eastern Cornbelt: DAP was quoted at $340-$360/st FOB regional warehouses to the dealer, down slightly from last report, with MAP $10/st higher. One supplier was referencing DAP at midweek at $345/st FOB Peoria, Ill., and Cincinnati, Ohio, for a limited order and shipping period.
10-34-0 remained in a broad range at $625-$725/st FOB in the region, with the low in Illinois and the upper end in Ohio.
Western Cornbelt: The DAP market was reported at $340-$355/st FOB regional warehouses to the dealer, with MAP roughly $10/st higher. One supplier was referencing DAP at midweek at $340/st FOB St. Louis and Inola, Okla., with MAP at $350/st FOB Inola. 10-34-0 remained at $575-$675/st FOB in the region.
Northern Plains: DAP was tagged at $345-$360/st FOB regional warehouses, with MAP $10/st higher. The Pine Bend DAP market was quoted at the low end of the range at midweek for orders placed and shipped April 22-24, with MAP posted at $355/st FOB for that period. One Dakota dealer reported delivered MAP at $415-$440/st, subject to the availability of trucks.
The 10-34-0 market was pegged at $650/st FOB in Minnesota, and $600-$625/st DEL in North Dakota.
Great Lakes: DAP was pegged in a broad range at $345-$415/st FOB regional warehouse, with the low again reported in southern Wisconsin and the high to dealers in Michigan. One Wisconsin source quoted delivered DAP at the $345/st level as well. MAP was $10/st higher than DAP.
10-34-0 pricing was down significantly from last report. The regional range was reported at $650-$725/st FOB, with the low in Wisconsin and the high in Michigan.
Northeast: The DAP market was reported at $375-$390/st FOB, with MAP $10/st higher. Delivered MAP to southern Pennsylvania was pegged at the $405/st level, down some $20/st from last report. 10-34-0 was pegged at $850-$875/st FOB in the region, reflecting a sizable drop from last report. One source pegged the delivered market as low as $800/st to his location last week, which he said was down some $200/st from the previous level.
U.S. Export: Phosphate exports continued to remain on the slow track last week, but a couple of deals were done. Keytrade was said to have made a sale of about 40,000 mt of DAP produced by CF into India at $367/mt delivered, which would work out to about $337/mt FOB Tampa. In addition, PhosChem sold 30,000 mt of phosphates, said to include 25,000 mt of DAP and 5,000 mt of MAP, at $339/mt FOB.
With world phosphate sales continuing a prolonged slump, production in the U.S. was likely to be curtailed in the near future, at least until sales begin to pick up. Expect prices to decline in the meantime, say sources.
Based on sales last week, the export DAP price range last week drifted south from $340/mt FOB to $337-$339/mt FOB.
India: Sources report Chinese agents have been talking to Indian companies about starting exports as soon as the export duty drops. The duty on DAP is currently at 110 percent. The rate drops to 10 percent July 1. Sources say the talks with China may be the reason talks with Russian suppliers have not started. The bottom line, said traders, is that India may be more anxious to import DAP in a declining market than to keep producing it.
POTASH
Eastern Cornbelt: Potash prices continued to crumble on the secondary market, even though producers were holding the line at higher postings. Sources quoted potash at $645-$675/st FOB warehouses on the low end, with the upper end of the market reported at the $700/st FOB level from brokers or resellers. Producer postings remained at $800/st FOB or higher in the region.
“The current market today is primarily being driven by the Russian imports and the folks that have bought those tons,” said PotashCorp CEO and President Bill Doyle at the company’s first quarter earnings conference call on April 23. “They have taken that market from $825 to probably $650-$700 on a terminal basis.” Doyle added that PotashCorp has opted not to participate at those lower levels.
Western Cornbelt: Potash was pegged at $630-$700/st FOB warehouses to the dealer, depending on grade and location. The low end of the range reflected another drop from brokers or resellers.
Northern Plains: Potash FOB Saskatchewan mines remained at reference levels of $767/st FOB for standard, $780/st FOB for soluble, $772/st FOB for granular, and $780/st FOB for white granular. Delivered potash in the region was steady at $800-$830/st, depending on location.
Great Lakes: Potash pricing covered a wide range in the region last week. Wisconsin dealers pegged the market at $650-$675/st FOB from brokers or resellers, while Michigan sources quoted red granular potash at the $815/st FOB mark based on producer replacement costs. One Michigan source noted some secondary suppliers as low as $765/st FOB to the dealer, however.
Northeast: Sources quoted a wide range of potash prices, depending on supplier. Dealer quotes from producers remained as high as $865/st DEL in the region, but sources said spot tons for coarse potash could be had from brokers, resellers or other dealers for as low as $750-$768/st DEL. Some said they anticipate still lower pricing as the season continues, particularly if usage and demand remain low.
Vancouver: PotashCorp said last week that Canpotex has concluded new business to Thailand and Taiwan at the $750/mt DEL equivalent.
Pakistan: The government is expected to approve Rs 1.5 billion (US$ 22.06 million) as a subsidy for the import of potash fertilizers (SOP and MOP) during 2009, according to market sources. The National Fertilizer Development Centre (NFDC) has estimated that Pakistan would require 30,480 mt of potash during 2008-09, with a growth rate of 13.2 percent against last year’s consumption of 26,924 mt.
SULFUR
Tampa: Last week, Mosaic reached a settlement agreement for second-quarter sulfur contract prices with one of its largest suppliers at $5/lt higher than the previous quarter. The increase would bump the Tampa sulfur price up to $5/lt, which is still considerably below the cost of delivery. However, it did spell some relief for sulfur producers. Other producers will likely sign similar agreements before the end of the month, or sooner.
Although sulfur has been moving at a rate much closer to demand recently, that has been based on higher production levels for phosphate producers, but is unlikely to continue. The export phosphate market has struggled to find a home for its product, and the domestic spring season never got started. With only a matter of a few weeks left to prepare fields and plant corn, the possibility of a season that would reduce inventories appeared highly improbable.
Sulfur prill operations were humming along last week, and plenty of material was still coming from refineries, which were working full steam to meet demand from China. However, supplies were building at Chinese ports, and new purchases will be reduced.
Mosaic will start melting tons from its sulfur blocked at Galveston sometime this week, and that will help reduce the demand for sulfur from refineries. The company has little choice, because some of its contracts require it to take product regardless of need, and room for storage must be created. In addition, Mosaic must also begin taking sulfur from blocks it contracted for in Canada last year, when the market was tight.
PotashCorp must also complete its contracts before the price changes in Green Markets Price Scan.
Merger mania intensifies as CF shareholder meeting nears; Terra maneuver turns the tables on CF director bid
The quick-paced actions of the three fertilizer industry merger parties – Agrium Inc., CF Industries Holdings Inc., and Terra Industries Inc. (the “triad,” as one player referred to them) – were difficult to keep up with as they rapidly shot letters back and forth last week. CF’s impending April 21 shareholder meeting helped heighten the intensity.
Agrium Inc., in an April 15 letter to CF shareholders, urged them to vote the green proxy card and withhold votes for the three CF director nominees. Agrium stressed that it is fully committed to acquiring CF, and that CF in turn is trying to buy Terra Industries Inc. at a premium without allowing CF shareholders the opportunity to vote.
CF quickly responded to Agrium on April 15, and in a possible nod to prom season said that if Agrium really cared about buying CF, it would have called or contacted CF. “We believe that Agrium is more interested in interfering with our business combination with Terra Industries, than in acquiring CF Industries at anything other than a bargain price,” said CF Chairman, President and CEO Stephen Wilson. “If Agrium were serious about acquiring CF Industries, it would have made a credible offer. If Agrium were serious about acquiring CF Industries, it would have at least tried to engage with us. The fact is that Agrium and its financial advisors have not contacted or attempted to contact CF Industries in well over a month. The CEO of Agrium called on March 6, 2009, to ask if we needed additional information and he has not called since then.”
Wilson added that CF’s stock has been the best performing stock in its peer group ?Çô Agrium is by far the worst performing stock. Wilson said Agrium’s offer is grossly inadequate and nothing Agrium says changes that.
On April 16, Agrium President and CEO Michael Wilson responded to CF saying it was 100 percent committed to acquiring CF. “CF has repeatedly alleged that Agrium is not serious about acquiring CF and that we made our offer in an attempt to interfere with CF’s proposed acquisition of Terra,” said Michael Wilson. “Let me assure both you and the CF stockholders that nothing could be further from the truth. To avoid any future confusion on your part, Agrium is 100 percent committed to acquiring CF. Our offer represented a premium of over 30 percent on the date it was announced and we have since raised the cash component of our offer by 10 percent. Furthermore, we have repeatedly indicated our willingness to pay more if CF would only meet with us and demonstrate additional value.
“Given this context, I was quite surprised by your recent letter to Terra questioning why Terra is not interested in ‘negotiating a merger agreement’ with CF, and stating that you do not understand Terra’s ‘reluctance to explore’ a deal with CF. Based on unaffected stock prices, Agrium is offering a multiple for CF that is 37 percent greater than that proposed by CF for Terra. How can you on the one hand, question why Terra won’t engage in merger discussions with CF, while on the other hand, you refuse even to discuss our higher premium offer?
“We fail to understand how your stated ‘commitment to stockholder value’ is consistent with this blanket refusal or with your decision to restructure your offer for Terra to eliminate a CF stockholder vote.
“Contrary to your assertions, and as you well know, we have attempted to engage you and your board in discussions and each time we were rebuffed or ignored.
“Again, to be abundantly clear, we reiterate that the full Agrium team and our advisors remain ready to meet with you and your advisors immediately – and at a location of your choice – to negotiate a mutually beneficial transaction between our two companies.”
There was also Agrium/CF back-and-forth over the advice of proxy advisory firms. On April 13, CF touted that RiskMetrics Groups ISS Governance Services (RMG) was in support of CF shareholders voting for its three board members April 21, as was KPMG LLP, CF’s independent accounting firm. Ironically, Agrium had earlier quoted RiskMetrics itself for having called CF’s decision to restructure the Terra offer to avoid a shareholder vote as “somewhat absurd.” On April 16, CF reported that it had also lined up Proxy Governance Inc. in support of its three board members and accounting firm.
With all these Agrium CF goings on, Terra was not to be left out. On April 14, CF sent a letter to Terra noting that Terra had bought 100 shares of CF stock and was demanding CF provide Terra with a list of shareholders. It also noted that Terra was supposed to call a shareholders meeting by May 15. CF is trying to put three of its candidates on Terra’s board.
Terra’s board, however, turned the tables on CF, changing the company’s bylaws so that it no longer had to call a meeting between April 15-May 15. According to a filing with the Securities Exchange Commission, on April 13, the board adopted new bylaws that the meeting is to be held on such a day as shall be designated by the board. The board said it believes the status of the Agrium offer for CF will be a significant factor to be considered by Terra shareholders at the next annual meeting. It said the change allows flexibility so shareholders will have the benefit of all relevant information at the time of the meeting.
Poll results show dealer/wholesaler opposition to mergers, concerns about further consolidation
More than 140 respondents visited the Green Markets website April 10-15 to register their opinions in a brief survey about the proposed mergers between Agrium Inc. and CF Industries Inc., and CF and Terra Industries Inc. Those who voted represented all links in the distribution chain, from producers to wholesalers and retailers, and also included financial analysts, bankers, and industry consultants.
Green Markets opened the poll on April 10, asking participants to answer five questions about which of the proposed mergers they thought would happen – if any – and whether they supported or opposed any of the business combinations. Respondents then had an opportunity for brief comments, which produced some candid observations about the companies and the likely impacts of the mergers on the North American fertilizer industry. The survey was closed at midday on April 15.
By far the most responses came from fertilizer dealers, who represented 46.9 percent of respondents. Those identifying themselves as wholesalers or traders made up 19.6 percent of the survey, while fertilizer producers represented 13.3 percent. The remaining 20.3 percent of respondents represented a varied group under the heading “other,” which including consultants, analysts, bankers, investors, and fertilizer consumers.
Overall, 59.9 percent of respondents said they opposed the Agrium/CF merger, 42.3 percent said they opposed the CF/Terra merger, and 29.6 percent said they were not opposed to either merger. Among those identifying themselves as fertilizer producers, 21.1 percent stood in opposition to Agrium/CF and an identical number said they were opposed to CF/Terra, with 68.4 percent saying they opposed neither combination.
In the fertilizer wholesaler and trader category, however, fully 89.3 percent said they were opposed to Agrium/CF, 53.6 percent said they were opposed to CF/Terra, and only 7.1 percent said they were not opposed to either merger. Those identifying themselves as fertilizer dealers showed similar if not as pronounced results, with 68.2 percent saying they were opposed to Agrium/CF, 48.5 percent registering opposition to CF/Terra, and 19.7 percent saying they opposed neither combination.
Of those respondents who fell in the “other” category, 37.9 percent said they opposed Agrium/CF, 31 percent said they opposed CF/Terra, and 48.3 percent said they didn’t oppose either merger.
Even if the Agrium/CF combination sparked the greatest opposition from respondents, many also believed it has the greatest chance for success. As to what they thought would ultimately happen, 43.7 percent of respondents said they believed the Agrium/CF deal would be realized, while 23.2 percent said they thought CF would acquire Terra. Overall, 34.5 percent of respondents said they thought neither merger would occur.
Among those identifying themselves as fertilizer producers, the results were more lopsided. Of these, 63.2 percent said they thought Agrium would merge with CF, 36.8 percent said neither merger would occur, and none believed CF would conclude its deal with Terra.
In the wholesaler/trader group, and perhaps reflecting a case of wishful thinking, a 59.3 percent majority said they believed neither merger would occur, while 25.9 percent said Agrium and CF would merge, and only 18.5 percent said the CF/Terra deal would occur. Among fertilizer dealers, more than 68 percent of whom had said they opposed an Agrium/CF combination, fully 40.3 percent thought the Agrium/CF merger was inevitable, while 31.3 percent said they believed CF and Terra would reach an agreement. The remaining 29.9 percent of dealer respondents said neither deal would be realized.
The votes from those who fell in the “other” category showed that 55.2 percent believed Agrium would conclude its acquisition of CF, 24.1 percent said CF would acquire Terra, and 20.7 percent said neither combination was likely to occur.
The preponderance of comments registered by respondents showed rather strident opposition to any of the mergers, with many expressing fears about the loss of competition in the North American fertilizer market. “I am VERY skeptical of continued fertilizer production/distribution consolidation in the U.S.,” wrote one who identified himself as a fertilizer dealer. “So far, all it has led to are skyrocketing grower prices, ‘strong arm’ tactics being used on the retail chain to better fertilizer producer cash flow, and unreasonable pricing vulnerability being jammed down the throat of (the) retail chain. These mergers are not good for American growers!”
“I think that fertilizer production is already controlled by too few companies,” wrote another fertilizer dealer. “Maybe that is just progress – but fewer companies means fewer choices – and fewer choices means less competition and potentially higher prices and little if any negotiation power.”
“Retailers fear consolidation will squeeze them out due to supply restrictions, especially among independents who do not (have) preferential contracts with Agrium, and I tend to side with them,” wrote one who identified himself as a consultant.
Another respondent who identified himself as a fertilizer producer expressed doubts about the touted advantages of the mergers. “There is no real value created by the mergers of these companies,” he wrote. “The projected savings in administration and sales are offset by the increase in complexity of managing previously focused companies. The merger ideas were born during the irrational exuberance created by historically high fertilizer prices. As the commodity market rationalizes, the profitability of all these entities will decrease to historic levels because the product price will be based on manufacturing cost, not product worth.”
“While synergies are extolled, I do not believe there is any benefit to the buyer to consolidate materials in fewer hands,” wrote a trader/wholesaler. “One has to question if CF is big enough to handle a Terra and if Agrium will decide to favor their own retail supply chain over other retailers.”
Several respondents spoke on behalf of farmers in their opposition to the mergers. “I would like to see the farm groups get involved and weigh in on this issue,” wrote one dealer. “The end user will be the one most affected by any additional mergers. I as a retailer am opposed to any mergers in the fertilizer industry. Just look at what prices have done the past two years!” Added another dealer, “At what point is ‘big’ big enough? Growers should also have a voice in this discussion.”
On the plus side, one respondent wrote that “a consolidation of North American producers is necessary to effectively compete in the global market.” Added another, “The merger of CF and Terra would put the new company on a more even level with PCS, Mosaic and Agrium to compete long term. The Agrium merger would strengthen Agrium’s nitrogen and phosphate business and could test some domestic market share challenges. Your picture of the different size fishes told the whole story!”
As one producer respondent wrote, “Consolidation (is) unavoidable in the fertilizer industry.”
PCS announces layoffs at Aurora, blames recent permit delay by EPA
PCS Phosphate announced April 10 that, due to continued permit delays, the Aurora, N.C., facility’s mining operations will idle one of its two bucket wheel excavators, effective April 20. The decision will affect 24 positions, which include 12 PCS Phosphate employees who will be reassigned to other parts of the site, and 12 contractors whose positions will be eliminated.
“Our mining operations are quickly approaching the end of our existing permit boundary,” said Steve Beckel, general manager of the PCS Phosphate Aurora facility. “We began the permitting process more than eight years ago in hopes of avoiding this situation.”
PCS said in 2008 that the area currently being mined has about four more years of use (GM Archives).
Recently, the U.S. Environmental Protection Agency requested that the Assistant Secretary of the Army review the U.S. Army Corps of Engineers’ decision to issue the necessary wetlands permit that will allow the company to continue mining (GM March 30, p. 12). PCS said this request will result in additional delays in the mine continuation permitting process.
“This has been a very difficult decision that impacts employees and contractors who have performed well,” Beckel said. “In an attempt to avoid additional negative impacts, we continue to diligently work with the appropriate state and federal officials, with the goal of ensuring all permits and authorizations are issued as soon as possible.”
Calling it a “rare decision,” by the EPA regional office, the Southern Environmental Law Center applauded the EPA action. “EPA’s concerns are merited since PCS Phosphate’s current proposal would do irreversible and long-term damage to the environment, fisheries and public health,” said Geoff Gisler, SELC attorney. “As EPA points out, alternatives for mining can be found that wouldn’t wreak the destruction currently sought by PCS Phosphate.”
EPA’s Region Four director, based in Atlanta, had sent a letter to the U.S. Army Corps of Engineers in Wilmington, N.C., saying that it should put a hold on any expansion permit for PCS Phosphates’ Aurora, N.C., phosphate rock mine. This came after the Corps notified the EPA office of its plans to proceed on the permit.
The Atlanta office said it requested a review of the permit by EPA’s Office of Water and the Assistant Secretary of the Army for Civil Works. During this review, the permit should be held in abeyance pending completion of the review process, according to the letter from Acting Regional Administrator A. Stanley Meiburg.
“EPA remains concerned that the proposed project will result in unacceptable adverse impacts to aquatic resources of national importance, including direct and indirect impacts to waters of the U.S. which support the Albemarle Pamlico National Estuary Program area,” said Meiburg. He said EPA believes there are less environmentally damaging practicable alternatives for mining the project site that would avoid and minimize impacts to important wetland and stream resources. He said there are also concerns regarding the adequacy of the proposed compensatory mitigation to offset any authorized impacts.
Meiburg said he recognized the need for a timely decision. He added, however, that critical issues remain unresolved and his office does not support issuance of a permit for the project as currently proposed.
PotashCorp, the parent of PCS Phosphates, said it remains hopeful that the permit will be issued by the end of the second quarter. Back in January, the company had been hoping for a final Corps decision by the end of April (GM Jan. 29, 2009).
The N.C. Division of Water Quality issued a permit in January to allow the company to mine about 11,000 acres adjacent to its current mine. Several environmental groups had just announced earlier this month that they would appeal that decision to a state administrative court. That appeal was made by the Southern Environmental Law Center, the Environmental Defense Fund, the North Carolina Coastal Federation, the Pamlico-Tar River Foundation, and the North Carolina Sierra Club. The groups say the expansion impacts 4.8 miles of streams and more than 3,900 acres of wetlands, representing the largest destruction of wetlands ever permitted in the state.