Boston-Converted Organics Inc. has stepped up its entry into the turf and garden market by shipping over 14 tons of its all-natural Lawn & Turf 8-1-4 and Flower & Garden 4-1-8 fertilizers to Baltimore-based distributor Commerce Corp., a member of Gro Group’s North American network of lawn and garden distributors. Gro Group distributors service over 90 percent of the independent lawn and garden retailers in the U.S. and Canada. “Converted Organics’ network of distributors and, by extension, our entry into the retail lawn and garden center market, continues to grow,” said Converted Organics Pres. Edward Gildea. “Commerce Corp. is a premier Gro Group distributor and we are pleased to be shipping both our Lawn & Turf and Flower & Garden fertilizers to them. The Gro Group network is an important group of independent retailers with an extensive customer base, and Converted Organics looks forward to supplying our products to other Gro Group distributors.”
All posts by traceybg@gmail.com
Rentech spotlights synthetic fuel gains
Los Angeles-Rentech Inc has launched a new corporate website (www.rentechinc.com) providing extensive information on the company’s clean synthetic fuels technology, commercialization and licensing opportunities of the Rentech Process and on its wholly-owned nitrogen fertilizer facility, as well as corporate and financial news. “We recognize the importance of communicating effectively with all of our stakeholders,” said Rentech Pres. and CEO D. Hunt Ramsbottom. “Our new site will be a dynamic tool for us to convey to the public progress on the deployment of our synthetic fuels technology, the positive environmental benefits of products produced using the Rentech Process, information on our profitable fertilizer business, developments in the synthetic fuels industry and financial information on the company.”
Management Briefs
Mississippi Phosphates Corp. has announced that James Perkins has been appointed vice president of sales and marketing. Perkins previously served as vice president and general manager of the Pascagoula, Miss., production facility. “During a career spanning more than 30 years, Jim Perkins has gained significant experience in all aspects of the fertilizer business,” said Robert Jones, Mississippi Phosphates CEO. “We are confident that he will do an outstanding job as head of our sales and marketing functions.”
Perkins replaces Stephen Wehmann, who has elected to transition towards retirement. “Steve Wehmann has done an excellent job as head of sales and we will certainly miss the benefits of his many talents. We wish him well in his future endeavors,” said Jones.
Thomas McKiernon, a long-time Mississippi Phosphates employee, will assume the role of general manager of the Pascagoula plant. John Sparks, currently production manager at the facility, has been promoted to assistant general manager. The transition process, which the company expects to be complete by June, has begun.
Matt Carstens with United Suppliers fertilizer division has announced the addition of Monty Summa as business development manager. Summa will be working with the division’s management team in various aspects of their business. United Suppliers Inc. is headquartered in Eldora, Iowa. Summa retired from CF Industries Holdings Inc. as vice president, sales, on Jan. 1, 2009. He has also worked in senior posts for Terra Industries Inc.
Yara International ASA’s board of directors proposes Bernt Reitan as a new board member, replacing Ole Jørgen Haslestad, who resigned from the board October 31, 2008, when he was appointed the new president and CEO of Yara. Reitan is a member of Alcoa’s executive council and has the management responsibility for Alcoa’s global primary products group.
Michelle Hummel has joined the Agricultural Retailers Association as director of marketing and communications. Hummel will lead efforts to raise awareness of the organization and its accomplishments among influential groups within the agriculture industry, and will also work to ensure that legislative and regulatory issues of importance to ARA members are reported to key audiences in a timely manner. Hummel has more than 10 years of marketing and communications experience in the agriculture industry, having previously served on the account service and public relations teams at Osborn & Barr Communications in St. Louis, Mo. In that role, Hummel managed a variety of campaigns and projects for several companies and organizations, including Monsanto Company, the United Soybean Board, the Propane Education and Research Council, and the Environmental Protection Agency. Hummel has also received awards for her work from the National Agri-Marketing Association and the Business Marketing Association. She is a graduate of the University of Missouri, Columbia, and holds a B.A. in Business Administration with an emphasis in marketing.
BASF Turf & Ornamentals has added four new employees to its team. Effective immediately, Missi Koenig has been appointed product manager, David Schell and Brian McCaffrey as sales specialists, and David Maubach as senior sales specialist. Koenig will be based in St. Louis and joins BASF from the former Whitmire Micro-Gen organization, which BASF recently acquired. McCaffrey and Schell also come to BASF from Whitmire Micro-Gen, where McCaffrey served as horticulture national sales manager, Schell as horticulture regional technical specialist for the mid-south and west coast, and Koenig as product manger covering specialty markets. In his new position at BASF, McCaffrey will be covering south Florida, and Schell’s territory will include Pennsylvania and northern New Jersey. Maubach is transitioning from the BASF Pest Control business, where he was a Midwest sales specialist. He also spent more than 20 years with the crop protection business at BASF. His new territory for BASF Turf & Ornamentals includes Minnesota, Iowa, Missouri, Nebraska, Kansas, Wyoming, Colorado, and North and South Dakota.
The ServiceMaster Co. recently announced Stephen Donly has joined the company as president and chief operating officer of TruGreen LawnCare. Prior to joining TruGreen, Donly was president and CEO of Enterprise Media Networks Inc., a San Diego-based technology company. He also spent six years as president of Aramark Uniform Services Inc. (AUS), a division of the Fortune 100 company Aramark. In addition, Donly spent 27 years with Ryder System Inc. in a variety of management positions, including senior vice president of sales and marketing and senior vice president of operations for the largest business unit within Ryder.
Eastman Chemical Co. has announced that Richard Johnson has been appointed an executive officer of the company, effective May 7. In addition, responsibilities of executives Ronald Lindsay and Mark Costa will be expanded.
As a senior vice president, Johnson, 59, will continue to be responsible for the company’s fibers segment. He will also be responsible for the supply chain function, acetyl stream operations, and management of regions outside the U.S.
Lindsay, 50, will become an executive vice president effective May 7, with continuing responsibility for the company’s industrial gasification strategy and the Beaumont, Texas, gasification project. In addition, he will be responsible for the performance chemicals and intermediates segment and for the performance polymers segment. He will also oversee the management of olefins stream operations, and will be responsible for engineering and construction.
Costa, 43, will continue as an executive vice president and retain responsibility for the company’s specialty plastics segment, polyester stream operations, and corporate marketing. New responsibilities for Costa will include the coatings, adhesives, specialty polymers and inks (CASPI) segment, sales, pricing, marketing development and innovation, and sustainability functions.
James Rogers, 58, was recently named CEO-designate at the company. Already president of the company and head of the chemicals and fibers group, he will become Eastman’s president and CEO following the annual meeting of stockholders on May 7. J. Brian Ferguson continues to serve as chairman and CEO through the annual meeting, after which he will serve as executive chairman of the board.
The Scotts Miracle-Gro Co. has announced that Alan Barry has been named to its board of directors effective April 8, 2009. His appointment fills one of the two current vacancies on the board. Barry was with Masco Corp. until January 31, 2008, serving as president and chief operating officer until December 31, 2007. During his more than 30-year tenure at Masco, his leadership was key in developing strong relationships with the wholesale, homebuilder, and retail channels. Barry lives in Michigan and Arizona and is a graduate of the University of Toledo. He will serve on the audit and compensation and organization committees of the board with a term that expires in 2012.
Market Watch
AMMONIA
U.S. Gulf/Tampa: Speculation last week was that the next round of Tampa imports will see low prices. However, nothing new and firm was reported last week, leaving the price point at $318/mt DEL for Tampa and $285/st FOB for NOLA.
February imports into the U.S. were off 44 percent, according to the U.S. Department of Commerce, to 375,303 st from the year-ago 672,146 st. July-February imports are down 23 percent, to 4.4 million st from 5.7 million st.
Eastern Cornbelt: Ammonia pricing continued to be quoted in the $435-$470/st FOB range in the region for spot tons to the dealer, with the lower end out of Illinois River terminals.
Parts of the region saw brisk field activities last week, but planting was still spotty and very limited. While steady preplant ammonia movement was reported in northern Illinois, southern and central locations in the state continued to battle frequent showers, which slowed fieldwork. Some sources said growers in particularly wet areas were starting to talk of UAN as an alternative to ammonia in the coming weeks.
Western Cornbelt: The ammonia spot market remained in the $375-$410/st FOB range out of regional terminals, with postings reportedly as high as $440/st FOB at some locations. Delivered ammonia in the region was reported in the $400-$440/st range from southern production points.
Wet conditions continued to slow planting in many parts of the region last week, but there were pockets of activity. One source said his trade area had seen fairly steady movement of preplant ammonia, but usage has still not been up to the standards of previous years. “Overall the general attitude is good,” he said. “You’ll hear rumblings of things being late, but overall it’s at a healthy pace right now.”
That was not the attitude conveyed by all, however. “There is lots of disappointment in sales right now,” said another source at midweek. “Guys aren’t moving stuff. We’ve got a lot of stuff to ship on prepay, and we’re just not seeing the movement.”
California: Anhydrous ammonia pricing was unchanged from last report at $495-$540/st DEL in the state, with the low for trucked tons and the high for rail. Aqua ammonia remained at posted levels of $135/st FOB in California. While movement of dry blends for rice was still a week away in some parts of the Central Valley, ammonia movement was already underway in more northerly locations.
Pacific Northwest: The anhydrous ammonia market remained at $425-$465/st DEL in the Pacific Northwest, with the low for railed tons and the upper end for the truck-delivered product. Out of terminals in eastern Washington, the dealer market was pegged at $425/st FOB. Although some locations saw good-enough weather to allow field activities early in the week, many areas were getting a taste of winter as the week advanced. Heavy snow was reported in parts of Montana and Idaho, while freezing temperatures were expected in sections of Washington and Oregon from the same storm.
Western Canada: Anhydrous ammonia was steady at $844-$889/mt DEL in Western Canada. Cool temperatures, combined with wetter-than-normal weather, have caused some concern about seeding delays in Western Canada. Some analysts last week said many areas were at least a week behind schedule.
Black Sea: Asian sources report the market remains quiet in the area. A large number of plants remain closed because the netback price is below production costs.
Reportedly, people are waiting to see what happens in the U.S. Even with demand strong in East Asia, sources say product from Yuzhnyy and other Black Sea facilities cannot go there because buyers are putting up a firm stand against the kind of price increase that would allow Black Sea product to enter the area. At the same time, European demand is not strong enough to move up prices. In the end, say sources, any serious movement in the Black Sea price will have to come from the U.S. For now, prices have stagnated in the $270s/mt FOB.
Middle East: Producers continue to tell anyone who will listen that they are comfortable. Asian sources tend to agree with the producers, but only because of the steady business based on contracts with India and other buyers east of the Suez.
One Asian trader noted that business west of the Suez is so weak that the Arab Gulf producers should be thankful for the strong markets in India and East Asia.
Producers claim the new going price is $300/mt FOB, but that has been their position for almost a month now. Sources report the real market is still at least $25/mt away from the asking price.
The last bit of business reported out of the area that affected the price was a few weeks ago. That deal was a contract cargo to India. At that time, the estimated netback put the price in the low $270s/mt FOB. And, say sources, that is where it remains.
Asia: Sources say major buyers are now looking for June cargoes. Queries from Taiwan and South Korea for more deliveries into June were heartening to traders and producers.
No one was willing to say the market had fully rebounded. People seem to be taking everything just a few weeks at a time. One trader noted that the tons being requested still look as if the buyers are just buying enough to ensure the storage tanks don’t end up dry. No one seems to be buying extra material for reserves.
UREA
U.S. Gulf: Business has been slow enough for some sellers to cut prices, according to industry players last week. As a result, new trades were reported over a broad range at $267.50-$279/st FOB. The higher prices were recorded earlier in the week, with buyers hammering the market as the week progressed. Buyers were aggressively bidding $265/st FOB toward the end of the week.
Some players said the price drop was too bad, as the weather is improving and demand should speed up quickly. They predicted prices may soon rebound as a result.
Urea imports were off 23 percent in February, to 589,923 st from the year-ago 767,576 st. July-February imports were off 20 percent, to 4 million st from 5 million st.
Eastern Cornbelt: Granular urea was pegged at $325-$345/st FOB in the region, down slightly from last report, with the low reported in Illinois and the upper end in the Indiana and Ohio market.
Western Cornbelt: The granular urea market continued to inch downward, with sources quoting the dealer price last week at $315-$330/st FOB regional terminals. One Iowa source pegged the market at the $320/st FOB level in his location.
California: Granular urea was steady at $425-$450/st FOB in California, with delivered urea pegged at the $450/st level.
Pacific Northwest: Granular urea was unchanged at $395-$440/st DEL in the region, depending on location.
Western Canada: Granular urea was pegged at $575-$600/mt DEL in Western Canada.
Bangladesh: With no other activity in the market until the TCP/Pakistan tender closes this week, all eyes were on the BCIC tender for 100,000 mt each of prills and granular urea. The tender closed April 15.
The tender results offered the first new look at what Middle East producers are willing to accept. The results are not good for producers. The tender called for bagged urea on an FOB and CFR basis. The following granular offers are slated for delivery to the port of Mongla.
| SUPPLIER | ORIGIN | QTY MT | US$/mt FOB | US$/mt CFR |
| DESH Trading | China – Egypt – Iran – Oman – Malaysia | 50,000 | 291.22 | 323.22 |
| Bulk Trade | China – Egypt – Oman | 12,500 | 291.85 | 323.35 |
| Hydrocarbon | China – Egypt – Iran – Oman – Malaysia | 50,000 | 290.77 | 323.47 |
| Liven | China – Malaysia | 25,000 | 287.87 | 323.87 |
| Gavilon | Egypt | 25,000 | 298.60 | 336.60 |
| Helm | Iran | 25,000 | 322.95 | 337.95 |
| Wilson International | China – Malaysia – Turkey – Ukraine – Egypt | 25,000 | 310.00 | 339.00 |
| Toepfer | Egypt | 25,000 | 322.45 | 365.75 |
| Ameropa | China – Egypt | 12,500 | 320.50 | 371.00 |
The following prilled offers are for delivery to Chittagong.
| SUPPLIER | ORIGIN | QTY MT | US$/mt FOB | US$/mt CFR |
| Agora | China | 25,000 | 261.42 | 296.92 |
| Bulk Trade | Saudi Arabia | 25,000 | 285.00 | 313.65 |
| DESH Trading | China – Indonesia – Russia – Ukraine | 50,000 | 280.00 | 314.30 |
| Hydrocarbon | China – Indonesia – Russia – Ukraine | 50,000 | 279.35 | 314.35 |
| Liven | China – Indonesia | 50,000 | 285.87 | 316.87 |
| Blue DWBAJ | Russia | 25,000 | 297.00 | 317.50 |
| Wilson International | China – Indonesia – Turkey – Ukraine | 25,000 | 291.87 | 317.87 |
| Gavilon | UAE | 37,500 | 297.89 | 328.89 |
| Toepfer | Qatar | 37,500 | 301.95 | 332.25 |
| Ameropa | China – Indonesia – Russia | 12,500 | 308.93 | 349.43 |
Sources say Bangladesh needs the tons. The only delay may come from making sure paperwork is processed quickly enough by the government agencies involved.
The offers from the Middle East confirmed the view of many in the industry that urea was well below the $300/mt FOB the producers were claiming as the basement.
Middle East: Offers from producers through traders to BCIC/Bangladesh offered the first public glimpse at where the real prices for prills and granular urea sit. Offers to BCIC were for bagged material. Industry observers usually discount $10/mt to cover the bags and bagging cost. Once that is done, the BCIC numbers reflect a price of $275-$285/mt FOB for prills and $280-$290/mt FOB for granular.
Producers have been arguing the last offer to Pakistan – $300/mt FOB – was the lowest price that would be considered for any spot tons. Sources in Asia, however, said the stockpiles were growing in the area, with few real opportunities for sales.
Producers were extending turnarounds and reducing output to prevent their warehouses from being filled to the roof. At the same time, say sources, producers are engaging in warehouse-to-warehouse trades to give the impression of movement.
Sources say producers will have an opportunity this week to reduce their inventories and possibly move the price up when the TCP/Pakistan tender closes.
One Asian trader said the producers appear to be shifting their emphasis on how to deal with the market. Once, he said, the producers tried to move the price up dramatically with minimal offers. Now, the producers seem to be more anxious to move stock. In some cases this means offering lower prices in the tenders.
If a low offer for a large order is accepted, sources say a producer can then offer at higher prices to any spot buyer, with the argument that the tender award took all the available tons.
One observer noted that this was a reasonable practice before the bottom fell out of the market. Now, say sources, increased production capacity, combined with a global economic slowdown, has nullified that strategy.
Sources add, however, they expect to see the Middle East producers be very aggressive in the TCP tender. Pakistan is a market they want to protect as their own. In previous years, producers have shown a willingness to sacrifice price for market share, especially in Pakistan.
One Asian trader said the BCIC tender might be one of the last tenders that reflects a higher price for granular material out of the area. The new plant in Oman has come online, and its annual output of 1.4 million mt will provide buyers plenty of available material.
Indonesia: PIM closed a selling tender April 15. Originally, the state-owned producer was going to offer six lots of 4,000 mt each. In the end, the company sold 53,000 mt. Bids in the tender follow.
| Company | Quantity (mt) | US$/mt FOB | Shipment |
| Toepfer | 15,000 | 258 | End Apr. |
| Ameropa | 6,000 | 266 | |
| 6,000 | 264 | ||
| 6,000 | 262 | ||
| 6,000 | 260 | ||
| Swiss Singapore | 2×6,000 | 263 | Last half April |
| Liven | 6,000 | 265 | First week May |
| Limardi | 6,000 | 270 | First week May |
| Indevco | 6,000 | 272 | Second week May |
| Unitrada | 10-12,000 | 275 | End April-Early May |
| Universal Harvest | 6,000 | 278 | Third week April |
| Profeta | 6,000 | 279 | First half May |
| DIVA | 6,000 | 282 | First half May |
| BBSC | 10,000 | 283 | End Apr – Early May |
| Youngwoo | 2×6,000 | 284 | End April-Early May |
Awards were issued to the following companies at $284/mt FOB.
| Company | Quantity (mt) |
| Youngwoo | 3×6,000 |
| BBSC | 10,000 | Diva | 6,000 |
| Swiss Singapore | 9,000 |
Sources said material could just as easily go to buyers for agricultural or industrial use. Indonesian material has always been able to draw a premium because of its quality and convenience to major Southeast Asian markets.
Black Sea: Most traders in Asia were describing the market last week with just one phrase: “Nothing happening.”
But as Friday approached, reports of deals done in the $240s/mt FOB circulated. With the close of business in Asia on Friday, people were pretty well convinced the market moved into the low $240s/mt FOB, with some thinking $235/mt FOB was likely Monday morning.
Sources expected the drop in prices, but many thought it would come after the TCP/Pakistan tender this week.
Nominations for vessels are down compared to last year at the same time.
Middle East prices are softening. Observers fully expected to see the Yuzhnyy price drop as well. The reduction in price at this time could mean more Black Sea material will be offered in the upcoming TCP tender.
Even once the TCP tender is done, however, and even if Black Sea material dominates the offers, sources say the awards will not be enough to turn the market around.
The only other major buyer still to come is India, and sources say no one should expect any tender calls or buying interest until the elections are over in late May.
For now, sources are pegging the market at $240-$245/mt FOB.
Pakistan: The TCP tender for 260,000 mt will close April 20. Sources say offers should show a significant weakness in the global market. Industry watchers are convinced that TCP will award from this tender. Sources say the country still needs urea right away. TCP is not known as a buyer that will take cargoes that cannot find ready buyers on the domestic front.
India: Balloting in the national elections started late last week and will last until May 16. Industry sources say there is little chance any of the major buyers will call a tender until after results are in. The absence of Indian buyers until late May is expected to keep the urea market in the doldrums.
NITROGEN SOLUTIONS
U.S. Gulf: Sources say there is a great deal of pressure on prices to go down in light of lower forward paper numbers.
February imports were off 64 percent, to 104,307 st from the year-ago 292,967 st. July-February imports were off 52 percent, to 1.15 million st versus the year-ago 2.4 million st.
Eastern Cornbelt: UAN pricing remained in a broad range at $7.20-$8.13/unit FOB in the region, with the low reported in Illinois. One Indiana source pegged the dealer market for UAN-32 in the $250-$260/st ($7.81-$8.13/unit) range last week for spot tons.
Western Cornbelt: UAN was steady at $7.00-$8.13/unit FOB regional terminals, with most dealer quotes reported in the $235-$256/st ($7.34-$8.00/unit) FOB range.
California: The UAN market remained in disarray, according to one source, due to Midwest railcars available at considerably lower levels than the truck market. The bottom of the range was reported in the low-$250s/st ($7.90/unit) for railed tons, while the truck-delivered market was pegged in a broad range at $280-$310/st ($8.75-$9.69/unit), with the upper end reflecting posted prices from some suppliers.
Pacific Northwest: Sources tagged the regional UAN-32 market at $255-$280/st ($7.97-$8.75/unit) DEL, with the low for railed tons from Midwest suppliers and the upper end for truck-delivered material.
Western Canada: UAN-28 pricing was quoted at $362-$378/mt ($12.93-$13.50/unit) DEL in the region last week.
AMMONIUM NITRATE
U.S. Gulf: The market remains quiet and under pressure. February imports were off 36 percent to 73,168 st, according to DOC, versus the year-ago 114,016 st. July-February imports were off 43 percent, to 462,210 st from the year-ago 805,032 st.
Western Cornbelt: Ammonium nitrate pricing remained at $270-$275/st FOB regional terminals to the dealer.
California: No market was reported for ammonium nitrate in the state. CAN-17 pricing, however, was unchanged at $255-$285/st FOB.
Pacific Northwest: Ammonium nitrate was steady at $353-$361/st DEL in the Pacific Northwest, with the upper end reported in Idaho. CAN-17 pricing remained at $250-$255/st FOB and $260-$265/st DEL in eastern Washington and northern Idaho.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $225-$245/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate remained at $225-$245/st FOB to the dealer.
California: The ammonium sulfate market was tagged at $250-$290/st FOB, with the low FOB Sacramento and the upper end in desert locations in the state. The Lathrop market continued to be quoted at the $255/st FOB level in mid-April. One supplier was referencing fluid grade ammonium sulfate as of April 6 at $260-$265/st FOB California terminals, with regular grade at $275/st FOB.
Pacific Northwest: The granular ammonium sulfate market was quoted at $225-$230/st DEL in the region. Reference prices were as high as $250-$255/st DEL, but sources reported no business at that level. One supplier was also posting fluid grade ammonium sulfate at $190/st DEL in Washington, Oregon, Idaho, and Montana, and $185/st FOB warehouses in Oregon, Washington, and northern Idaho.
Western Canada: Granular ammonium sulfate was quoted at $380-$385/mt DEL in the region, up $10/mt from last report.
U.S. Imports: Imports were off 28 percent in February, to 34,218 st from the year-ago 47,439 st. July-February imports were off 18 percent, to 220,186 st from 268,029 st.
PHOSPHATES
Central Florida: As the clock on planting time continued to tick down, and with wet and cold weather still blocking farmers from hitting their fields, the shakier the stability of phosphate pricing became last week. With the exception of Florida, where rain finally arrived to help ease a long-running drought, most of the country was simply too wet to work. Truckload sales into some spotty parts of the Deep South and some areas of Texas accounted for most of the sales activity. High rail rates have contributed to lower sales volumes out of Central Florida.
Faced with a shorter season, one trader last week began selling below the market level that has stood for a month or more, about $5/st FOB below the previous price range. Producers, such as Mosaic, however, were still shipping under contract terms.
Areas normally served by rail from Central Florida, from eastern Ohio, and the Northeast down to Virginia, were running out of time to order new product to meet the hoped-for demand. While planting for the most distant northern areas could wait until early June, most need to have their crops in the ground by early-to-mid May, which was a month or less away last week.
Although phosphate inventories fell a tiny amount in March – about 25,000 st, according TFI – the dismal spring season will probably lead to cuts in production relatively soon.
The Central Florida DAP price range fell last week from the previous week’s $315-$320/st FOB to $310-$320/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 $315/st FOB for DAP and $20/st FOB higher for MAP. The price from Agrifos remained at $350/st FOB for trucks and $340/st FOB for rail shipments, but truck sales showed some improvement.
U.S. Gulf: The spring season was beginning to wane last week and traders were getting nervous, as dealers were hoping to see supplies they stocked earlier begin to deplete. So far, dealers have been disappointed, and that has caused traders to begin considering deals they would not have thought of a couple of weeks earlier. Late last week, the price of NOLA DAP barges on the Gulf river system fell – a lot.
“Almost everyone wants to see their bins empty at the end of the spring season,” a trader commented. He added that NOLA DAP barges were not in position to re-supply Corn Belt areas, so shortages of phosphates were probable.
Areas of Texas, Oklahoma, Missouri, and Kansas received rain, which most of them badly needed, and some fields were being fertilized – row crops, mostly. An increase in activity was found in Iowa and Nebraska. However, the big bucks are in corn, and the Corn Belt was still at the starting line, waiting for the whistle to blow. The shorter the season, the less fertilizer will be sold. A trader pointed out that in order to get maximum yields corn should be planted by the beginning of May, and a sharp drop-off occurs starting around the middle of the month. If the crop is not in the ground by the first of June many farmers will plant soybeans, which do not require massive applications of phosphate.
Normally, June and July is the time to refill bins in preparation for the fall season, but a source said he did not expect that to begin to occur until after the Southwest Conference, sometime in August or September.
Optimists pointed out that fall applications were down last year, and not as much as normal was going down in the spring, so farmers will have little choice but to buy and use more this coming fall. The negative side said the same reasoning was used to predict a healthy spring season.
Assuming the USDA’s prediction of 85 million acres of corn holds up (and it may not, if soybeans are substituted), and yields are down due to late planting, the already solid price of corn will improve. That will make farmers happy and more willing to spend for the following season.
Prices at warehouses were stabilizing between $345/st FOB and $350/st FOB last week.
Early last week, most offers to buy were as high as $300/st FOB, but as activity dragged, a deal was cut for a “handful” of NOLA DAP barges at $290/st FOB. Another buyer said he was attempting to purchase barges below that price.
The NOLA DAP barge price range last week dropped from $304-$308/st FOB the previous week to a flat $290/st FOB, and could drift even farther south this week. However, do not expect large price reductions to occur. Mosaic has a $10/st FOB additional charge for MAP, while CF’s MAP was $20/st FOB higher than its DAP price.
Correction: The DAP barge price for the Green Markets dated April 13 was $304-$308/st FOB as it appears on the Price Scan on Page 4 and in the text on Page 7. The U.S. Export price of $340-$350/mt was incorrectly placed in the box on the front page.
Eastern Cornbelt: DAP pricing continued to be quoted at $360-$375/st FOB regional warehouses to the dealer, with MAP $10/st higher. The Central Florida DAP price was quoted at $310-$320/st FOB last week, reflecting a slight drop from the previous week. DAP barges were tagged as low as $290/st FOB the U.S. Gulf.
10-34-0 was quoted at $625-$750/st FOB in the region, with the low in Illinois and the upper end in Ohio.
Western Cornbelt: The DAP market was reported at $355-$370/st FOB regional warehouses to the dealer, with MAP $10-$15/st higher. 10-34-0 was quoted at $575-$675/st FOB in the region.
California: MAP and DAP were steady at $455-$460/st DEL or FOB warehouse locations in California. The 16-20-0 market was tagged at $310-$320/st FOB in the state, down slightly from last report, while 10-34-0 remained at $477-$487/st FOB in California.
Phosphoric acid remained at $11.00/unit DEL for both super phosphoric acid (SPA) and merchant grade acid (MGA), with Simplot also referencing MGA at $11.20/unit FOB California warehouse locations.
Pacific Northwest: MAP was unchanged at $445-$455/st FOB or DEL in the region, with DAP at $450-$460/st FOB or DEL. 16-20-0 was quoted at $300-$305/st DEL, and 10-34-0 remained at $470-$480/st FOB in the region. Phosphoric acid was reported at $11.00/unit DEL in the region for both SPA and MGA.
Western Canada: MAP was pegged at $665-$680/mt DEL in Western Canada, with reference levels as high as $790-$825/mt DEL to the dealer.
U.S.Export: Although India was rumored to have made buys from Russia and Tunisia, U.S. firms were not involved. However, Transammonia did make relatively small sales of 3,500 mt into Latin America last week for a price of $340/mt FOB, which was within the previous export price range. In general, export phosphate prices were becoming increasingly soft.
TFI issued its phosphate export report for March last week, which showed increased deliveries for the month, but sales for the calendar-year-to date are down compared to 2008.
Of course, India took the most DAP, 215,875 mt, but Australia received 114,978 mt, and Vietnam secured the third spot at 51,300 mt. Total DAP exports in March amounted to 457,854, an increase of 36.4 percent. For the calendar-year-to-date, India led the way with 439,766 mt, while Australia with 131,499 mt, and Vietnam with 96,946 mt, followed. DAP exports totaled 929,338 mt, but were down 4.3 percent from the previous year.
TFI said Australia was the biggest recipient of MAP in March with 96,491 mt, trailed by Brazil at 69,458 mt and Canada at 44,835 mt. Total MAP exports for March amounted to 230,500 mt, an increase of 10.2 percent. For the calendar-year-to-date, the order was similar. Australia led with 153,525 mt, Canada was second at 122,096 mt, and Brazil was the third biggest customer at 69,458 mt. The total through March was 383,810 mt, a decrease of 5.5 percent from the amount shipped in 2008 at that point.
The export DAP price range fell last week to a flat $340/mt FOB, down from the previous week’s $340-$350/mt FOB.
India: Buyers have now settled phos acid contracts with suppliers other than OCP at US$630/mt CFR India. The list includes: OCP, Morocco, 300,000 mt; Foskor, South Africa, 125,000 mt; ICS, Senegal, 100,000 mt; GCT, Tunisia, 80,000 mt; PhosChem, U.S., 50,000 mt; and IJCC, Jordan, 40,000 mt.
POTASH
Eastern Cornbelt: Potash was tagged at $680-$720/st FOB regional warehouses from brokers or resellers, with most sources putting the dealer market at the $700/st FOB level, give or take.
Western Cornbelt: Potash was pegged at $675-$710/st FOB warehouses to the dealer, depending on grade and location. One Iowa supplier reported moving limited tons at the $700/st FOB level last week, but another source said potash movement was “not enough to even have a discussion” about at mid-month.
California: Muriate of potash pricing remained at $849-$875/st FOB and $875-$900/st DEL in the region. Sulfate of potash was steady as well at $1,015-$1,055/st FOB for bulk tons, with the low for standard grade and the high for water soluble.
Potassium nitrate pricing was unchanged at $1,310-$1,380/st FOB in California, with the low for bulk and the upper end for bagged product.
Pacific Northwest: Potash pricing out of regional warehouses remained as high as $820-$860/st FOB, with little new business reported to test that market. On a delivered basis, however, Washington sources said 60 percent muriate could be had from Midwest suppliers for as low as $750-$760/st DEL in mid-April.
Western Canada: Potash FOB Saskatchewan mines was reported at $960-$1,000/mt FOB to Canadian customers, depending on grade and supplier.
U.S. Imports: Potash imports were off 74 percent in February, to 307,754 st from the year-ago 1.2 million st. July-February imports were off 24 percent, to 5.7 million st from the year-ago 7.5 million st.
SULFUR
Tampa: If second-quarter sulfur contracts were settled based on current levels of supply and demand, the sulfur industry would be in command and could secure a bump of around $50/lt, according to sources. However, projecting out into the next few months, the story would be quite different.
Refineries were generally up and running after many took a break for turnarounds, and were busy producing fuel for the summer driving season, so production was up and will probably continue to be in the near future. However, the phosphate industry was not sharing the same rosy scenario.
Phosphate production increased in January after taking a big drop late last year, but that does not appear likely to continue. Most figure domestic sales will be down and exports off a bit as well, and prices were taking a dive. Last week it appeared phosphate production may be curtailed again, at least until sales pick up sometime this summer. That means phosphate will need less sulfur. Another negative of more immediate consequence for the sulfur industry is the big block Mosaic has in storage at Galveston. This week or early next week, the company will have to begin melting that supply for delivery to Tampa, and will not be taking as much molten product as it has been. The move was determined to be necessary to meet its contracted supply obligations. Supply will soon outstrip demand.
Last week, the sides were far, far apart on any possible agreement. The phosphate industry was looking for a rollover at the current $0.00/lt price, while sulfur would like something near $50/lt.
West Coast: Contract negotiations for the West Coast will not begin until around the end of the month, when current agreements were scheduled to expire.
U.S. Import: February imports were off 72 percent, to 47,316 st from the year-ago 169,110 st. July-February imports were off only 11 percent, to 1.24 million st from 1.4 million st.
Vancouver: The world sulfur market was somewhat healthier than the U.S. situation and spot prices out of Vancouver were holding in the $40-$45/mt price range, which was about twice as high as spot prill from the U.S. Gulf Coast. Brazil, which was said to have only a limited need, had not reached a new semester agreement last week, but was somewhat active in the spot market.
MARKET NOTES
Pakistan: Private sector Pak-Arab Fertilizer Ltd. (PAFL) in Punjab earned an after-tax profit amounting to Rs 7,160.29 million (US$89.50 million) for the year ended on Dec. 31, 2008. Its production capacities were operated at a high level during 2008, manufacturing 312,095 mt of nitrophosphate, in addition to 342,574 tons of CAN and 104,102 mt of urea.
With a vision for the future, Pak Arab continued to invest in its fully-owned subsidiary, the Fatima Fertilizer Co. Ltd., which is a greenfield complex being set up with an investment of Rs 15 billion for producing 1.5 million mt of urea and other fertilizers. Fatima is expected to go into production by mid-2009. It will mark a big step forward in overcoming a major shortage of urea, which has been a hurdle for the country. As the Fatima facility comes on stream, the combined capacity of the two group units would shoot up to 2.3 million mt, which would bring the group’s fertilizer production at par with other fertilizer producers in the country.
Agrium, CF make separate appeals to shareholders; ARA releases measured statement about consolidation
Agrium ramped up its efforts to acquire CF Industries on April 7 by taking out a full-page ad in the Wall Street Journal, telling CF stockholders in big, bold letters that “now is the time to send a message to CF’s board and management.”
The ad, on page C5 of the April 7 edition, is an open appeal to CF stockholders, urging them to “withhold your vote for CF’s three director nominees on April 21.” It then supplies a litany of reasons for supporting the merger, while charging that the CF board “has refused to engage with us on your behalf” and “has taken away your vote.”
Beneath a banner touting its offer of $35 in cash plus one Agrium share for each CF share, Agrium once again stresses that the offer is a “substantial premium” for CF shareholders. “Based on our closing price on March 26, 2009, the day before we raised our offer for CF, this offer is a 35 percent premium to CF’s closing price on February 24, 2009, the day before we announced our initial proposal – and a 48 percent premium to CF’s 30-day volume weighted average price through that day,” the ad states. “You get the best of both worlds – a substantial cash premium at closing plus shares in a well positioned company with a track record of growth, successful integration of acquisitions, and attainment of synergies.”
The ad then starts finger-pointing at the CF board. “Despite this substantial premium ?Çô and our public statement that we would consider increasing our offer further to reflect any additional value that CF can demonstrate – CF’s board has summarily rejected our offer,” it states. “We are left with no choice but to take our offer directly to you – but you need to act now!”
In the ad, Agrium says it believes “CF’s board knows CF’s stockholders would choose Agrium’s offer over CF’s offer to acquire Terra Industries. After all, wouldn’t you want to receive a substantial premium rather than pay one? That’s why CF restructured the Terra offer to take away your right to vote on the CF/Terra combination.”
Agrium then advises CF stockholders to “protect your interests” by “withholding votes for CF’s directors at CF’s annual meeting on April 21,” stressing that this is “the way for you to send a strong message to CF’s board that they should engage with us to get value for you.” The ad concludes with a “time is short, so vote today” message, providing telephone numbers for Agrium’s proxy solicitor, Georgeson Inc.
On April 6, one day before the WSJ ad, Agrium announced that it had filed its definitive proxy statement with the Securities and Exchange Commission and was mailing a letter to CF stockholders urging them to vote the green proxy card and withhold votes for CF’s three director nominees. “Agrium is initiating a withhold vote to allow CF stockholders a say in the future of their company, which CF is intentionally denying them,” said Mike Wilson, Agrium’s president and CEO.
CF responded on April 9 by releasing its own letter to stockholders, reminding them that the CF board remains committed to “delivering value to stockholders,” and it is because of this that they have rejected Agrium’s offer.
“Agrium’s offer is grossly inadequate ?Çô nothing Agrium says changes that,” the CF letter states. “We believe that, even absent Agrium’s offer, CF Industries shares would be trading well over $60 per share. Given this, Agrium’s offer with a nominal value of $75 (and lower trading value) is at a very low premium, particularly since it is almost half in cash. Recent premiums for cash transactions are nearly 90 percent and premiums for stock transactions are close to 35 percent.”
The letter charges that if Agrium were serious about acquiring CF, it would have made a credible offer rather than one at a very low premium; it would have put up its own slate of directors for election rather than letting the date pass for making nominations; and it would not have acquired a toehold
stake in CF stock, “the only purpose of which could be to cover the expenses of a failed acquisition attempt.” CF said these and other actions “suggest that Agrium is more interested in derailing our proposed business combination with Terra Industries than in acquiring CF Industries for anything other than a bargain price.”
The letter, signed by CF Chairman, President and CEO Stephen R. Wilson on behalf of the CF board, also touts CF’s performance in recent years. “Since our IPO less than four years ago, our stock has risen over 350 percent, and we have been the best performing stock in our peer group,” the
letter states. “BusinessWeek just ranked CF Industries second among the 50 top performing S&P 500 companies measured over a three-year period. We returned $500 million of cash to our stockholders through an accelerated stock repurchase just this past fall, and we continue to pursue value-enhancing strategic initiatives such as our KEYTRADE investment, our project in Peru and our proposed business combination with Terra Industries.”
While the two companies continued their war of words, some industry participants were becoming more vocal in their opposition to any of the proposed megers. The Agricultural Retailers Association, in a carefully worded statement on April 3, said it was responding to a “high percentage of ARA board members” who expressed concerns in an independent third-party survey on crop nutrient producer consolidation. ARA said it was responding with “educational efforts to ARA membership” about how to register their opinions with the appropriate federal agencies and officials.
“It remains unclear what effects further concentration, control and consolidation within the (crop nutrient) industry will have on (crop nutrient) prices, distribution access, transportation costs and competition in key marketplaces throughout the United States,” ARA said. The statement then gives an overview of U.S. antitrust laws, but cautions members that “antitrust laws are concerned with the functioning of the marketplace – i.e. competition, and NOT protection of any individual competitor.”
The statement provides a list of “options for ARA members,” including contact information for, and instructions on how to register comments with, the Federal Trade Commission and the Department of Justice’s Antitrust Division. The statement also advises members to contact their representatives in Congress “to voice an opinion regarding any potential merger within the agricultural industry.”
Given its varied membership, however, ARA stopped short of adopting its own position on the “fertilizer wars,” as some national publications and at least one dedicated website (www.fertilizerwars.com) have dubbed the Agrium-CF-Terra battle. “Please know that any ARA member contacting the FTC, DOJ, or Congress is a voluntary action on the part of your company or individual employees,” the statement concludes.
Green Markets is conducting its own survey of industry participants about the proposed mergers, and will publish the results when responses are tallied. For more information and/or to register your opinion.
Mosaic 3Q earnings off nearly 89 percent
The Mosaic Co. reported a sharp drop in net income for the third quarter ending Feb. 28, 2009, to $58.8 million ($.13 per diluted share) from the year-ago record-setting $520.8 million ($1.17 per share). Net sales dropped to $1.37 billion, down from $2.15 billion. Mosaic said the primary drivers for third-quarter results were significantly lower sales and production volumes, and a decline in phosphate selling prices as demand for crop nutrients slowed.
The company said phosphate sales have been improving and as a result production is now closer to normal levels, though Mosaic does not expect to reach full capacity in the fourth quarter. Mosaic expects potash to remain weak in the fourth quarter. It expects fourth-quarter phosphate results will be above the third quarter, but not the year-ago comparison.
“Despite the turmoil in commodity markets, we remain confident that long-term agricultural fundamentals are excellent,” said Jim Prokopanko, Mosaic president and CEO. “This is a self-correcting cycle because demand for crop nutrients can only be deferred so long. Large crops are still required to secure the world’s food supply, and crop nutrients will play an essential role in achieving that objective. We are well positioned financially and strategically to serve our customers and create value for our shareholders.”
“The crop nutrient industry just endured one of the weakest fall application seasons on record,” Prokopanko continued. “With an expected rebound this spring, we estimate U.S. nutrient use could decline approximately 10-15 percent this crop year, with more pronounced declines in phosphate and potash usage than for nitrogen.” The company said that overall, the U.S. may see the largest one-year drop in nutrient use since 1983, when the government implemented the payment-in-kind (PIK) program to cut production.
Prokopanko said the situation outside the U.S. is expected to be modestly better, with India and China appearing immune from this global trend. He said crop nutrient use in those countries continues due to population growth and their drive for food security. He noted that PhosChem recently signed a large contract in India, and that product in North America is starting to move from producers to dealers and from dealers to farmers.
He said several catalysts could jump-start the market, including China and India’s annual contracts and the North American spring season, as well as continued improvement in Brazil. He said Brazil could also begin sourcing normal volumes of phosphate and potash at midyear.
He noted USDA still projects that world grain and oilseed use will increase a solid 2.4 percent in the 2008-09 crop year.
Phosphates saw an operating loss in the third quarter of $123.9 million on sales of $552.4 million, versus the year-ago income of $442.7 million and $1.26 billion, respectively. Sales volumes were cut in half at 1.1 million mt, down from 2.2 million mt. Phosphate crop nutrients sales were off 51 percent to North America and 49 percent to the international market. The average DAP price for the quarter was $413/mt, down from the year-ago $487/mt. Mosaic said fourth-quarter prices are running in the mid-$300s/mt.
Firm potash prices kept operating results in that sector well into the plus column at $186 million on sales of $480.8 million, though down from the year-ago $195.9 million and $547.3 million, respectively. Potash sales volumes sank to 784,000 mt, or 76 percent from the year-ago 2.1 million mt. North American sales were off some 69 percent, while international sales were off only 7 percent. The average potash and K-Mag prices during the quarter were $565/mt and $354/mt, respectively, versus the year-ago $221/mt and $145/mt.
The offshore segment had a third-quarter loss of $103.6 million on sales of $334.7 million, down from the year-ago income of $18.1 million and $387 million, respectively.
Buoyed by earlier strength in 2008, nine-month Mosaic net earnings stand at $2.2 billion ($4.94 per share) on sales of $8.7 billion, up from the year-ago $1.2 billion ($2.74 per share) and $6.34 billion.
Nine-month phosphate earnings were $1.08 billion on sales of $4.9 billion, versus the year-ago $1.1 billion and $3.67 billion. Sales volumes were off, at 4.42 million mt from 6.73 million mt. Phosphate crop nutrient sales were off 40 percent in the North American market and 28 percent internationally. The average DAP price was $886/mt versus the year-ago $435/mt.
Nine-month potash earnings were $1.2 million on sales of $2.43 million, up from the year-ago $467.3 million and $1.4 billion. Sales volumes were down, at 4.4 million mt from 6.2 million mt. Potash crop nutrient sales were off 47 percent in North America and 24 percent internationally. Mosaic expects potash volumes to be off 2 million mt in fiscal 2009.
The average nine-month potash and K-Mag crop nutrient price was $518/mt and $309/mt, respectively, versus the year-ago $185/mt and $133/mt.
The offshore segment had a nine-month loss of $64.7 million on sales of $1.95 billion, versus the year-ago income of $73.9 million and sales of $1.53 billion.
Mosaic said potash sales volumes will likely remain constrained until the annual Chinese contract is inked. Mosaic is now expecting that to occur mid-year. It estimated that current Chinese inventories at the ports are 1.6 million mt, with 2-3 million mt inland.
Prokopanko said until then it will be all eyes on China and India, and that is going to set the tone for future pricing. Company plans are to curtail production until the demand returns and the market finds a price at which it will clear the product.
Richard McLellan, senior vice president, commercial, said anything beyond June is too late for them to order product without shorting the dealers close to the farmers. He said by June, North and Latin America pipelines should need restocking as well. With everybody waiting to better their position, the industry could have North America, Latin America, India, and China all with cupboards bare saying “okay, it’s time to get some potash,” and in the meantime the major producers in the world have curtailed production. “So, it can get pretty tight pretty quick.” However, the company also reiterated that it can respond quickly if demand does return.
Mosaic said it is fully committed to its potash production plans. As for why not produce more potash now and put it in inventory for later, the company said it only has about six weeks worth of space of potash inventories.
The company said fourth-quarter phosphate gross profit is expected to be positive, but it will still be adversely impacted by higher cost raw materials and finished products that remain in inventory.
Dr. Michael Rahm, vice president of market analysis and strategic planning, said U.S. phosphate usage could be down this year 10-20 percent and potash 20-30 percent. “Farmers are spending lots, they’re investing lots of working capital with very high-tech seed, herbicides and so forth, and to cut back on application rates is a very difficult decision, I would think, at the farm level.” He said phosphate demand outlook for India remains extremely robust.
Simplot says if court blocks mine, layoffs will follow
A J.R. Simplot Co. attorney says if a federal appeals court agrees with a group of environmentalists, outdoor enthusiasts, and landowners to temporarily block the 1,400-acre expansion of Simplot’s Smoky Canyon Mine in Idaho near the Wyoming border, almost immediate layoffs would result.
Simplot has mined at Smoky Canyon on the Caribou/Targhee National Forest since 1984. Each year, about 1.5 million tons of phosphate ore are removed and converted into slurry pumped through nearly 90 miles of pipeline to Simplot’s Don plant near Pocatello, where it’s converted into dry and liquid fertilizers used throughout North America.
Annual wages and salaries paid at Simplot’s Pocatello plant, where about 375 are employed, and its Smoky Canyon Mine, where about 210 are employed, exceed $52 million. Another estimated 1,450 people are indirectly employed by the operations, whose annual property taxes exceed $3 million.
On Tuesday, April 7, Timothy Preso, a lawyer with environmental law firm Earthjustice, told a three-judge panel of the 9th U.S. Circuit Court of Appeals in Seattle that Simplot’s plan to expand the phosphate mine would create a “massive environmental disturbance” without sufficient scientific review. Preso said large amounts of selenium from the mine historically have leached into area streams and groundwater, poisoning or causing birth defects in livestock and wildlife.
The judges did not indicate when they would rule.
In December, Simplot started its expansion, which includes infrastructure work such as paving roads, installing utilities, and clearing timber. That is scheduled to continue for about a year before Simplot crews begin mining phosphate ore pits at the Smoky Canyon site.
In November, U.S. Magistrate Mikel Williams in Idaho refused to issue a preliminary injunction blocking the mine’s expansion into roadless areas of the national forest, about 100 miles south of Yellowstone National Park. He found the U.S. Forest Service and Bureau of Land Management spent years studying the expansion and used computer modeling to analyze whether the company’s plan for containing the selenium by covering it with limestone and topsoil would work.
Preso, who represents the Greater Yellowstone Coalition in the case, questioned that modeling’s adequacy, saying it didn’t consider what would happen during spring rains and snow melt. Claiming it was a large omission in the modeling, he cited a U.S. Forest Service scientist who recommended more computer modeling before deciding whether to approve the plan.
Preso said the federal government still doesn’t have a grasp on how much pollution there is at the mine, or its exact sources.
Simplot attorney Albert Barker said that without the expansion, the company would need to begin laying off workers who are logging the site and building roads to prepare for it. He called the operation “the economic engine of southeastern Idaho.”
Justin Pidot, a Justice Department attorney, told the judges that federal officials thoroughly studied the matter and reached a reasonable conclusion that the mine expansion was not likely to contribute to violations of the Clean Water Act. On-the-ground monitoring of selenium levels would be conducted, Pidot said.
Simplot, along with Monsanto and Agrium Inc., has mined areas in Southeast Idaho for decades to supply its phosphate processing plants. Simplot officials say expansion of Smoky Canyon, along the Webster Range 10 miles from the Wyoming border, is critical to keeping its plant near Pocatello running through 2025. Without it, the company says it will run out of phosphate by the summer of 2010.
Opponents say Smoky Canyon and 17 other former mines scattered along the edge of the Greater Yellowstone Ecosystem continue to pose an environmental threat to clean water, fish, and wildlife. All are designated under Superfund status.
In December 1996, five horses grazing on private land downstream from one of southeastern Idaho’s more than 30 phosphate mine sites were poisoned with selenium and had to be destroyed. A year later, more horses and hundreds of sheep also died not far from another phosphate mine near Soda Springs.
CHS 2Q income drops; ag business earnings off 89 percent
CHS Inc. reported net income of $82.3 million on sales of $5.2 billion for the second quarter ending Feb. 28, 2009, compared to the year-ago $168 million and $6.9 billion, respectively. Six-month net income was $219.5 million on sales of $12.9 billion, versus the year-ago $468.9 million and $13.4 billion.
CHS said the drop in revenues reflected lower values for many of its grain, refined fuels, and crop nutrients products. Also, CHS noted that during first quarter 2009, it recorded a $70.7 million impairment in its processing segment on the value of its ownership in VeraSun Energy Corp., an ethanol producer that filed for bankruptcy and has been liquidated. During fiscal 2008, CHS recorded a gain of $91.7 million on the company’s sale of stock in CF Industries Holdings Inc.
During the first six months of fiscal 2009, the ag business unit, which consists of crop nutrients, grain marketing, and country retail operations, reported lower earnings due to reduced global grain demand and lower crop nutrient values. Six-month ag business earnings before income taxes dropped to $32.7 million on sales of $8.4 billion from the year-ago $324.7 million and $8.1 billion. Second-quarter earnings were $13 million on sales of $3.4 billion, down from $120 million and $4.3 billion, respectively.
During the second quarter, earnings from the wholesale crop nutrients business decreased $44.3 million. The market prices for crop nutrients fell significantly during the first half of fiscal 2009, and due to a wet fall season, CHS had a higher quantity of inventories on hand at the end of the first quarter than is typical. Fertilizer margins realized were significantly reduced compared to the same period in the previous fiscal year. In order to reflect whole crop nutrient inventories at net-realizable value, CHS made a lower-of-cost-or-market adjustment in this business of $56.8 million in November 2008, of which $18.1 million was remaining at the end of the second quarter.
Second-quarter wholesale crop nutrient revenues were $325.8 million, down from the year-ago $397.9 million. Of the decrease of $72.1 million, $66.7 million was attributable to decreased volumes and $5.4 million was due to decreased average fertilizer selling prices. Volumes decreased 17 percent, mainly due to higher fertilizer prices and a fall season that experienced excess moisture.
The average sales price of all fertilizers sold reflected a decrease of $6/st from year-ago levels. Second-quarter whole crop nutrients cost of goods sold was $350.6 million versus the year-ago $378.4 million.
Six-month wholesale crop nutrient revenues were $959.3 million, up from the year-ago $931.3 million. Of the revenue increase of $28 million, $311.1 million was due to increased average fertilizer selling prices, partially offset by $283.1 million in reduced volumes. The average sales price of all fertilizer sold reflected an increase of $171/st over the year-ago period. Volumes decreased 30 percent. Cost of goods was $1 billion for the recent six months, versus the year-ago $888.6 million.
As of Feb. 28, 2009, crop nutrient inventories stood at $380.4 million versus the year-ago $400 million. As of that date, CHS said fertilizer commodity prices affecting its wholesale crop nutrient and country operations retail businesses generally had decreases between 21-66 percent, depending on the specific products, compared to prices on Aug. 31, 2008.
CHS said its energy segment benefited from improved refining margins and increased propane demand driven by cold winter weather. Earnings from the processing segment declined due in part to lower consumer demand for food and ingredients, which impacted CHS joint venture food manufacturing and flour milling operations. CHS said the weak economy also contributed to lower earnings for the company’s insurance, risk management, and financial services businesses.
| $/M | 2Q-09 | 2Q-08 | 6Mo-09 | 6Mo-08 |
| Energy | 75.1 | 44.7 | 259.8 | 153.2 |
| Ag Business | 13.0 | 120.0 | 32.7 | 324.7 |
| Processing | 9.2 | 28.0 | (43.5) | 48.2 |
| Corporate/Other | (1.1) | 4.7 | 3.3 | 9.1 |
| Taxes | (13.9) | (29.4) | (32.8) | (66.3) |
| Total | 82.3 | 168.0 | 219.5 | 468.9 |
CHS and LOL sell selected Agriliance units to Agri-AFC
CHS Inc. and Land O’Lakes Inc., the co-owners of Agriliance Retail, said April 8 that Agri-AFC LLC, headquartered in Decatur, Ala., will acquire the Agriliance Retail South locations in Georgia, along with two locations in Mississippi. The Georgia locations being acquired by Agri-AFC are in Waynesboro, Sasser, Hawkinsville, Rochelle, Arabi, Sylvester, and Camilla. In Mississippi, the locations are at Hattiesburg and Magnolia.
Agri-AFC was formed in 2003 as a joint venture between Alabama Farmers Cooperative Inc. and Agriliance LLC. In 2007, Winfield Solutions LLC, a Land O’Lakes company, acquired Agriliance’s interest in Agri-AFC. Agri-AFC provides crop input products to Alabama Farmer’s Co-op member cooperatives through seven fertilizer terminals, three crop protection warehouses, and two seed warehouses. In addition, Agri-AFC operates seven former Agriliance retail locations in south Alabama and southwest Georgia. The acquisition of the Agriliance locations in Georgia and Mississippi supports Agri-AFC’s strategic plan for growth.
CHS and LOL said Agriliance will continue to operate and aggressively support its 84 remaining retail locations while investigating other repositioning opportunities.
LSB starting up Pryor Chemical in July
Oklahoma City-LSB Industries Inc. has announced it is starting up the old Wil Gro fertilizer plant as Pryor Chemical in July. LSB officials said they have hired approximately 60 employees so far, and will be building toward a total work force of 100 as the plant gets up and running. LSB Chairman and CEO Jack Golsen told Green Markets that there is no firm date, but start-up is expected sometime in July. He said the property was acquired from John Hancock Insurance, who repossessed it from Wil Gro, which was an independent operator several years ago. Golsen reported earlier that Pryor will produce and sell approximately 325,000 tons of UAN and approximately 35,000 tons of anhydrous ammonia annually. He estimated the total cost to activate the Pryor facility at between $15-$20 million. Golsen also disclosed that most of the workforce hired so far is made up of skilled personnel, including lab technicians, environmental specialists, safety specialists, or chemists needed to operate highly technical equipment. He expects an additional 40 employees will be hired when the plant starts up in July.