All posts by traceybg@gmail.com

Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Asia, Black Sea, Central Florida, Eastern Cornbelt, Great Lakes, India, Market Watch, Middle East, Nitrogen Solutions, Northeast, Northern Plains, Pakistan, Phosphate, Potash, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, Vancouver, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: The market remained quiet last week; however, with higher price ideas in the Black Sea, some players were wondering if those might also find their way to Tampa for March.

Eastern Cornbelt: Anhydrous ammonia pricing remained in the $450-$500/st FOB range, with the low for cash tons out of river locations in Illinois and the upper end reported in Ohio.

Western Cornbelt: The anhydrous ammonia market was pegged at $400-$450/st FOB most regional terminals. Delivered ammonia to points in Missouri remained in the low- to mid-$400s/st from southern production points.

Northern Plains: The ammonia market remained in a broad range at $450-$525/st FOB in the region, depending on location and time of delivery. Agrium’s anhydrous ammonia postings in the Leal, Velva, Grand Forks, and Beulah sales area in North Dakota were slated to move on March 15 to $600/st FOB and $620/st DEL.

Great Lakes: The anhydrous ammonia market was pegged at $450-$550/st FOB, with the upper end reported by Michigan sources and the low by Wisconsin sources FOB Dubuque, Iowa.

Black Sea: Prices are moving up as global demand picks up. Asian sources report Transammonia inked a deal at $250/mt FOB with OPZ. Producers are now saying the starting price for talks is $300/mt FOB.

The increase in area pricing is good news to Ukrainian producers, who mostly remain shut. Industry observers maintain that $320/mt is the break-even cost for the producers. OPZ reportedly can operate because its operations are more efficient than others, said one source.

One observer noted that the recent deal could prompt other producers to begin the process of starting up. The general consensus is that April will show market prices well beyond the producers’ production costs.

The growing global demand for ammonia is moving the price to areas more to the liking of sellers. Buyers, on the other hand, are grumbling about the price increase.

One trader noted that complaints of higher prices need to be tempered with a bit of history. At this time last year, the price was $575/mt FOB.

Middle East: Mitsui closed a deal with Fertil at $259/mt FOB. Producers had been pushing $260/mt FOB early last week and were surprised to get see a deal settle there so quickly.

The new asking price is $300/mt FOB. Nothing has been done at $300/mt FOB, but the close of March should see the first set of sales at that level.

For now, the market is still pegged in the $260s/mt FOB.

Producers say that with the Black Sea price on the rise, their prices should also increase.

The Mitsui tons will most likely go to an Asian buyer. Sources report Asian demand is combining with Indian buying to push the price higher east of the Suez.

Sabic has reportedly backed away from offering a spot cargo of 25,000 mt this month. Sources say the producer took a look at the rising market and decided April would be a better month – from its perspective – to sell.

In general, the area has full order books. India is on a buying spree as phos acid and phos rock deliveries step up. All told, sources say Indian buyers are expected to take about half a million mt during this buying session.

Asia: Demand is up across the board. Sources now report that industrial buyers are beginning to look beyond April for purchases.

Industry observers are still hesitant to declare a complete turnaround in the market, however. Many of the industrial buyers are still taking only what is needed to refill their tanks. No one seems to be ready to sign deals beyond that.

Industrial and fertilizer buyers in South Korea are all clamoring for ammonia. Sources report all the buyers are now operating at 100 percent capacity.

Taiwanese buyers are also back in the market. Taiwan Fertilizer and CPDC are about to revert to their old pattern of keeping a close eye on deliveries.

The two companies share storage facilities in the south of the island. Storage is just enough for each buyer. In the past, deliveries for one arrived just as the tanks were being emptied for the other.

Taiwan Fertilizer just paid $320/mt CFR for a cargo, reportedly from the Black Sea. While the price is higher than what would have been paid a week ago, sources say in the big picture, the rate is “reasonable.”

UREA

U.S. Gulf: Price ideas showed a little strength last week, with sources generally reporting business in the $290-$295/st FOB range, and some eyeing $300/st FOB. Strength, because the week before, some were expecting sub-$290/st was around the corner. There were unconfirmed reports that Koch was again having trouble with its Enid plant, and some surmised that this was reason enough for prices to firm.

Eastern Cornbelt: Fieldwork was limited in the region because of wet conditions, but sources reported some wheat topdressing and dry spreading activity where field and weather conditions allowed it. The granular urea market remained at $355-$365/st FOB regional terminals for cash tons to the dealer.

Western Cornbelt: The granular urea market remained at $350-$365/st FOB to the dealer out of most regional shipping points. There were reports that Koch’s Enid, Okla., urea plant was back down last week after coming online earlier in the month.

Northern Plains: Granular urea remained at $365-$385/st FOB regional terminals, with the upper numbers reported in South Dakota and the low FOB the Twin Cities to the dealer. Effective March 15, Agrium’s granular urea postings will move to $410/st FOB North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton, and $415/st rail-DEL in the Dakotas, Minnesota and Wisconsin.

Great Lakes: Michigan sources said fields were wet or still laden with frost, so field activities were minimal. Several areas of the state saw some wheat topdressing activity prior to last week’s precipitation. Wisconsin sources also reported spotty fieldwork and dry spreading activity on frozen ground earlier in March, but activity was stalled last week.

One source said he expects a normal crop mix in his location, but fertilizer usage will be down. “All volumes will be off for spring for the most part due to reduced rates,” he said. “They’ll put something on, but if it was 200 pounds before, maybe it’ll be 150 or 100 this year. It’s the economics of everything. It’s just the way it is.”

The granular urea market was tagged at $365-$395/st FOB, with the low in Wisconsin and the high reflecting the published price to the dealer in Michigan. One Wisconsin source also quoted delivered urea at the $380/st level last week.

Northeast: The granular urea market was quoted at $350-$360/st FOB, with most dealer quotes reported at the $355/st mark FOB Baltimore. Sources pegged delivered urea in the $380-$387/st range in Delaware and Pennsylvania.

Pakistan: TCP closed a tender for 50,000 mt March 7 with 12 companies participating. Even as this tender closed, TCP called another tender March 9 for 25,000 mt. The closing date of the tender is confusing.

The original documents posted on the TCP site said the tender would close April 20. Media reports late last week indicated a closing date of March 20. As Green Markets went to press, the original documents were withdrawn from the web site.

Sources say the March 20 date makes more sense.

The apparent winner in the just-closed tender is Template.

Asian sources were not familiar with the company. However, its offer of $298/mt CFR was too good for TCP to pass up.

Reportedly, TCP went to the other companies offering in the tender to see if any would match the Template price. Sources say no one was willing to step up and cut their prices any further.

TCP tender results
Offering Company Quantity (mt) Origin G/P US$/mt CFR Remarks
Template 25,000 Russia P 298.00 Per Tender
Keytrade 35-40,000 Firm
35-40,000 Opt.		 Open S/O 321.95
318.85		 Per Tender April
Helm 30,000 Open S/O 326.90 Per Tender
Transfert 42,000 Firm
25,000 Opt.		 Open S/O 332.00 Per Tender
Dreymoor 25-30,000 Firm
25-30,000 Opt.		 CIS-Russia Open S/O 333.00 Per Tender
Swiss Singapore 25-30,000 Firm
25-30,00 Opt.		 Open S/O 338.70 Per Tender
Sabic 30,000 Saudi Arabia S/O 339.00 Per Tender
Transammonia 25-40,000 Open S/O 339.33 Per Tender
Multicommerce 30,000 Black Sea – Middle East – Open S/O 342.00 Per Tender
Havi Ocean 25,000 Ukraine – Russia P 344.00 Per Tender
Emirates Trading 25,000 Open P 356.27 Per Tender

One more company, Midlink, came in with an offer of 25,000 mt at $310/mt CFR. For reasons unexplained, TCP rejected the offer.

By the end of last week, sources were still waiting to hear official word of Template’s winning. Sources say it is unusual for TCP to take so long to snap up a deal in an apparent down market.

Some of the delay may be attributed to turmoil in the Pakistan government and within TCP itself.

According to local media reports, the government directed TCP to not accept any more offers until the commerce ministry issues its approval.

The action is to ensure all the rules are being followed, an unnamed TCP official told one newspaper.

According to the reports, complaints were leveled against TCP for favoring too many “blue-eyed” parties. The complaints include charges that TCP may have been paying too much to import fertilizer and other commodities.

Another unnamed official complained to the press of the decision. He said the move indicated the ministry did not trust TCP to carry out its job in a fair and transparent manner.

At the same time, the government named a new head for TCP.

Last Monday the prime minister named Saeed Khan as the new TCP chairman. Khan moved into his new office Tuesday.

Government officials are quoted as saying once Khan settles in, the restrictions placed on TCP making contracts will be lifted.

Middle East: Sabic appeared anxious to show that it was willing, once again, to be an upward price leader.

The Sabic offer in the TCP/Pakistan tender came in at $339/mt CFR. Once freight and handling are taken off, sources say the netback would have been about $320-$330/mt FOB.

The low end of that range is where Sabic once said it would start negotiations. But that was before it offered 60,000 mt at $322/mt CFR.

One source opined that Sabic low-balled the number to guarantee it had a full order book and no reserves in stock so it could argue for higher prices later.

Unfortunately for Sabic, Asian sources say the price has not moved as it wanted.

The current price is pegged at $300-$310/mt FOB, with a couple of bucks extra for prompt granular.

On the plus side for the producers, they can look with joy at the removal of the last of the tons in the $290s/mt FOB. On the negative side, all that happened was the lower price in the range moved up. Little happened on the upper end of the range.

Black Sea: Producers were hoping to keep riding a wave of price increases based on the Pakistan business and rumors of the return of Indian buyers. Unfortunately for the producers, the price slid last week.

As the market moved to get past $280/mt FOB and producers talking $290-$300/mt FOB, sources now report the week closed with deals in the mid-$270s/mt FOB.

One depressing factor on the prices seemed to be the Template offer into Pakistan at $298/mt CFR. One trader noted that the pricing idea producers want can only be seen if Template got a freight rate of $18/mt – a price no one would believe.

With the Pakistan business and what appears to be a softening global market, sources now put the Black Sea price at $270-$280/mt FOB.

India: People keep waiting for India to come in. One trader noted that only the re-entrance of India to the market can move urea prices back up. Until MMTC, IPL, or STC steps in, sources say prices in Yuzhnyy and the Middle East will continue to slide.

NITROGEN SOLUTIONS

Eastern Cornbelt: Illinois sources tagged the UAN market as low as $7.60-$8.00/unit FOB terminals for spot tons, down slightly from last report. Elsewhere in the region, the UAN-32 market was reported at $265-$275/st ($8.28-$8.59/unit) FOB to the dealer.

Western Cornbelt: UAN-32 remained at $250-$280/st ($7.81-$8.75/unit) FOB regional terminals to the dealer, with the low out of spot Mississippi River locations.

Northern Plains: The UAN market remained at $8.75-$9.60/unit FOB regional terminals, with the upper end reflecting reference prices for cash tons FOB Winona, Minn. Sources said spring prepay UAN-28 could still be sourced at Winona for $274.40/st ($9.80/unit) FOB last week.

Great Lakes: UAN pricing covered a wide range. Wisconsin sources pegged the market as low as $8.00/unit FOB terminals for spot tons to the dealer, while Michigan sources quoted reference prices for UAN-28 at $255-$260/st ($9.11-$9.29/unit) FOB to the dealer. One supplier was also referencing UAN-28 prepay in Wisconsin at the $274.40/st ($9.80/unit) FOB level in early March.

Northeast: UAN-30 was down just slightly from last report. Sources tagged the market at $245-$255/st ($8.17-$8.50/unit) FOB terminals, with most pegging the Baltimore market at the $250/st ($8.33/unit) FOB mark, give or take. Out of terminals in upstate New York, the UAN-32 market was quoted at $305/st ($9.50/unit) FOB to the dealer.

AMMONIUM NITRATE

Western Cornbelt: Ammonium nitrate was steady at $275-$305/st FOB in the region, with the upper end in Missouri.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was reported at $210-$235/st FOB in the region, reflecting another increase from last report. Sources said steel mill grade sulfate was hard to get in early March, as was granular product from some suppliers.

Western Cornbelt: Granular ammonium sulfate was quoted at $205-$245/st FOB in the region.

Northern Plains: Granular ammonium sulfate was reported at $215-$235/st DEL in the region, depending on location and supplier. Agrium’s reference price for granular ammonium sulfate firmed on March 1 to $235/st DEL in North Dakota, Minnesota, and Wisconsin.

Great Lakes: Granular ammonium sulfate was pegged at $225/st FOB in Michigan, up significantly from last report. Wisconsin sources quoted delivered granular sulfate in a wide range at $210-$255/st, with the upper end reflecting new postings from some regional suppliers. Agrium’s reference price for granular ammonium sulfate firmed on March 1 to $235/st DEL in Wisconsin.

Northeast: The granular ammonium sulfate market was quoted at $175-$180/st FOB and $194-$206/st DEL in the region, up from last report.

PHOSPHATE

Central Florida: Wet weather in the eastern Midwest and Northeast put a damper on farmers’ thoughts of beginning to prepare their fields for planting, as spring put off its debut last week. Hopes for an early spring sank, as did opportunities for a quick break on sales. In Florida, crops were well underway, but a lack of rain created a high risk of fire.

Phosphate production was essentially unchanged – CF was running full bore, PCS was down at White Springs, and Mosaic was essentially unchanged from the previous week, which was unclear then but up from January.

DAP and urea were expected to do well this season, but sources said potash sales were slow.

Phosphate prices in Central Florida were firmer last week, as cheaper cargos were no longer available. The Central Florida DAP price range was slightly lower on the top end of the range of the previous week’s $315-$325/st FOB and moved to a firm range of $315-$320/st FOB last week. PCS Sales had no published price. Mosaic’s price was $315/st FOB for DAP and $325/st FOB for MAP. CF was at $320/st FOB for DAP and $20/st FOB higher for MAP. The price from Agrifos remained at $350/st FOB for trucks and $345/st FOB for rail shipments.

U.S. Gulf: NOLA DAP barge sales on the river slowed last week due to weather that cooperated with no one. Areas that were already far too dry were generally skipped by the heavy clouds, while areas that were too wet got even more rain, snow, or ice. As a result, not much got done.

On the Arkansas River, sales of DAP fell off drastically because of a lack of rain, which has caused problems in areas of Oklahoma and Texas. However, some areas of Texas, such as Dallas and Fort Worth, did get a relatively heavy dose of water. Farther north, the opposite was the problem. The northern areas will have to see some dry weather before farmers can work the fields.

Corn remained the key to phosphate sales, as usual. The board price for December was over $4/bushel, which makes the crop worthwhile as long as fertilizer and/or fuel prices do not begin to shoot up. The longer the market remains in slow mode, the greater the chance of price deterioration. Meanwhile, warehouse prices were essentially stable last week.

Locks on the Mississippi were all open by late last week, but Lake Pepin south of St. Paul still had ice conditions, which could be a threat to barge traffic in the area. Barges were in place to begin making the trip north.

The lowest-priced sales were made on Tuesday by a trader seeking to remove the threat of demurrage fees, which would have been higher than the small loss on the deals. Those DAP barges sold for $315/st FOB. Others who moved barges did so at $318/st FOB.

The NOLA DAP barge price range for last week was down from $318-$325/st FOB the previous week to $315-$318/st FOB. Expect that range to rebound to higher numbers before the end of the month.

Eastern Cornbelt: DAP pricing out of river warehouses continued to be quoted in the $365-$385/st FOB range in the region, with some warehouses in Ohio referenced at the $400/st FOB mark on the upper end. MAP was $10/st higher than DAP. 10-34-0 pricing remained in a broad range at $650-$750/st FOB in the region, with the low in Illinois.

Western Cornbelt: DAP was steady at $360-$375/st FOB most regional warehouses to the dealer, with MAP at $375-$385/st FOB. The 10-34-0 market was quoted at $575-$650/st FOB range in the region, reflecting a drop from last report.

Northern Plains: DAP remained at $370-$385/st FOB the Twin Cities, with MAP $10-$15/st higher. 10-34-0 was quoted at $650-$730/st FOB in Minnesota, with the upper end reported for spring prepay.

Effective March 1, Agrium’s phosphoric acid postings firmed to $1,050/st rail-DEL in Minnesota and the Dakotas for both super phosphoric acid (SPA) and merchant grade acid (MGA). Simplot also reposted phos acid on March 1 to $10.50/unit DEL in the Midwest.

Great Lakes: DAP remained in a broad range at $365-$435/st FOB regional warehouses, with the low in southern Wisconsin and the high in Michigan. MAP was $10/st higher than DAP. One Wisconsin source pegged delivered DAP at the $380/st mark in early March.

10-34-0 remained in a broad range at $730-$900/st FOB to the dealer, with the low in Wisconsin for spring prepay tons and the upper end quoted in Michigan to the dealer.

Northeast: MAP was pegged at $405-$410/st FOB Philadelphia to the dealer, with DAP roughly $15/st less. One Delaware source quoted delivered DAP at the $398-$403/st level to his location, while a Pennsylvania dealer pegged delivered MAP at $412/st last week.

10-34-0 remained at $990/st FOB the tank in upstate New York. In Pennsylvania, delivered 10-34-0 was reported in a broad range at $975-$1,100/st, depending on supplier.

U.S. Export: PhosChem made a sale of 30,000 mt of MAP into Brazil at $375/mt FOB last week, and the export market appeared ready for takeoff. Prices have been slowly rising since January, and that trend will likely continue as the season progresses.

India, of course, remained a promising market, and Africa, Asia, and Latin America were showing considerably more interest. Russia was said to be making offers to customers in Brazil and Asia, but no information on sales was available.

The export DAP price range last week moved up from $367-$380/mt FOB to $375-$380/mt FOB. Expect prices to gradually work their way up during the next couple of months.

Pakistan: The country will require about 560,000 mt of DAP to meet demands in the 2009 Kharif season (April-Sept). According to the latest estimates of the National Fertilizer Development Centre (NFDC), with 298,000 mt opening inventory and 330,000 mt domestic production, about 628,000 mt of DAP would be available against the estimated 560,000 mt demand. Hence, NFDC is projecting no need for imports during this period.

POTASH

Eastern Cornbelt: Sources pegged the potash market in the $680-$750/st FOB range in the region from brokers or resellers, with the low reported in Illinois on a spot basis. That number reflected a slight drop from the previous level.

Western Cornbelt: Potash out of regional warehouses was pegged at the $680-$750/st FOB range to the dealer, depending on grade and location, with several sources quoting the $700/st level as a common dealer price from secondary sources.

Northern Plains: Potash pricing 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 reported at $800-$850/st, depending on location and supplier.

Great Lakes: Potash was pegged as low as $715/st FOB in Wisconsin from brokers or resellers, while Michigan sources quoted dealer reference pricing at $815/st FOB for red granular and $823/st FOB for white. Michigan sources also talked of spot tons from some secondary suppliers for as low as $750/st FOB last week, however, and there were even reports of some retailers quoting direct-to-grower pricing at the $750/st level last week.

Northeast: Potash was quoted at $800-$840/st FOB regional warehouses, down slightly from last report, with the low FOB Lancaster, Pa., and the upper end reflecting the dealer reference FOB Baltimore. Delivered potash pricing was also down from last report. The low end of the range was reported at $790-$800/st DEL, with the bottom of that range quoted by a Pennsylvania source for tons from E. Liverpool, Ohio.

SULFUR

Tampa: The sulfur situation appeared to be taking a swing away from far more supply than demand, as a result of a number of factors. Probably the most important was a dwindling supply, due to decreased refinery production. In order to get prepared for the summer driving season, some refineries were in the process of conducting turnarounds. In addition, more were using sweet crude instead of the heavy sour stuff, which meant less sulfur as a byproduct. Several were also hit with unexpected problems and shutdowns.

An electrical short apparently caused a compressor to trip at Shell’s 340,000 barrel-per-day refinery at Deer Park, Texas. A Hunt plant in Alabama went offline shortly before it was scheduled to begin a turnaround, and did not have a chance to build stocks before an incident caused the outage. Valero’s Delaware City refinery remained out of service last week.

A source said the blocking facility at Galveston was not nearly as full as had been reported, and still had close to 60 percent of capacity to reach its maximum. Another source said landfilling of some sulfur was on the decline.

At the same time, the phosphate industry has increased its production during the past month although it remained well below capacity, and industrial customers were increasing their demand. Still, excess sulfur remains, but it appeared a shift was beginning to take place. If that trend continues, prices may rise for the next quarter.

One source complained that contracts were becoming meaningless in some cases, and prices have changed after terms have been agreed upon. That situation could become a problem for both buyers and sellers in the future.

For a change, transportation was beginning to be a plus rather than a problem. Railcars were being freed up and trucks were far more available and at better prices than in the recent past. The sagging economy and lower diesel prices were cited as causes.

Vancouver: Although discussions on new semester contracts between Canadian suppliers and Brazilian customers were ongoing last week, no new agreement had been reached. Currently, the contracts call for Brazil to pay as much as $200/mt, but buyers in that country were seeking a new price of $40/mt or lower in the new terms.

Meanwhile, sulfur movement out of Vancouver was said to be good last week, and spot prices were stabilizing between the mid $30/mt FOB and $40/mt FOB.

MARKET NOTES

India: Tata Chemicals reports the successful debottlenecking of its Babrala facility. As a result, ammonia capacity moved from 1,520 mt/d to 2,000 mt/d, and urea from 2,620 mt/d to 3,500 mt/d.

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 36.23 32.57 70.36
CF Industries CF 67.38 60.89 116.64
Intrepid Potash IPI 15.66 17.04 N/A
Mosaic MOS 43.21 40.09 106.11
PotashCorp POT 77.66 69.49 154.79
Terra Industries TRA 26.40 25.00 41.23
Terra Nitrogen TNH 126.53 117.26 112.67
Distribution/Retail
Andersons Inc. ANDE 12.50 11.07 42.82
Deere & Co. DE 29.90 25.32 83.98
Scotts SMG 30.28 25.71 34.28

Green Markets Webinar offers fertilizer, crop outlook

Featured, News

Representatives from more than 80 companies in the U.S. and overseas tuned in March 4 to the Green Markets 2009 Agriculture & Fertilizer Outlook audio conference. The event was the fourth annual spring outlook conference sponsored by Green Markets, and its most successful to date.

The interactive event allowed registrants to tune in via telephone and computer to hear three industry experts talk about a range of issues, detailed on more than 50 graphs and slides, including the latest planting estimates for 2009; factors behind the wild swings in fertilizer pricing in 2008 and early 2009; and long-range forecasts for acreage and fertilizer pricing/supply.

Dr. Gerald Bange, chairman of the World Outlook Board for USDA, kicked off the event with a look at the most recent acreage estimates for major crops in 2009 and beyond. Bange said USDA is estimating U.S. corn acreage for 2008/09 at 86 million acres, and likely to remain at that level for the 2009/10 crop year. Soybeans are projected at 75.7 million acres in 2008/09 and expected to jump 1.7 percent to 77 million acres in 2009/10. Wheat acreage is estimated at 63.1 million acres in 2008/09 and projected to drop more than 8 percent to 58 million acres in 2009/10. Dr. Bange estimated all U.S. cotton acreage for 2008/09 at 9.5 million acres, dropping more than 10 percent to 8.5 million acres in 2009/10.

Total planted area for the eight major crops (wheat, corn, sorghum, barley, oats, soybeans, upland cotton, and rice) is projected to total 248 million acres in 2009 – identical to 2007, but down from last year’s 253 million acres.

Dr. Bange also offered in-depth supply/demand figures for the next two crop years for corn, soybeans, wheat, and cotton, as well as detailed observations about the effect of the Renewable Fuels Standard on future corn/ soybeans acreage and ethanol/biodiesel production through 2017/18.

Tom Blue, senior fertilizer industry consultant for Blue, Johnson and Associates, offered his own acreage estimates for 2009 for corn, soybeans, wheat, cotton, and other grains, and also detailed expected nutrient demand and usage estimates for nitrogen, phosphates, and potash for the 2009 spring planting season. Ammonia and UAN supplies could approach “adequate” volumes via imports and operating rates, he said, while high producer stocks of DAP, MAP, and potash will be “drawn down” due to large production curtailments, in spite of weak domestic purchases.

Timothy Chrislip, director of product management and business development for CHS Crop Nutrients, concluded the event by providing answers to key questions pressing the industry: how did fertilizer prices get so high and fall so fast, and where are they going from here? Chrislip gave an overview of the factors driving both the pricing increase and the subsequent fall in 2008, and also provided a detailed outlook for nitrogen, phosphate, and potash pricing going forward.

Terra board recommends rejection of CF offer

Featured, News

Terra Industries Inc. said March 5 that its board of directors unanimously recommends that Terra stockholders reject CF Industries Holdings Inc.’s unsolicited offer to acquire all outstanding shares of Terra at a fixed exchange ratio of 0.4235 CF shares for each Terra share.

In a letter to shareholders, the board noted that since the initial offer, Agrium Inc. has offered to acquire CF, minus Terra. “In addition to our conclusion that CF’s offer is not in the best interests of Terra and Terra’s stockholders, the Terra board believes the existence of the Agrium offer makes it unlikely that CF Industries’ own stockholders will grant the necessary approval for CF’s proposed acquisition of Terra, presenting Terra’s stockholders with what is effectively an illusory proposal,” said Terra. The letter also said the Agrium offer creates significant uncertainty for Terra. Terra said the CF offer is also contingent on some 20 conditions, including limits on market index declines, due diligence, and CF stockholder approval.

The letter went on to say the CF-Terra combination runs counter to Terra’s strategic objectives, which are designed to provide substantial value differentiators to Terra’s stockholders. “We believe that the industrial logic behind the offer is not compelling. Terra has deliberately pursued a strategy of lowering its dependence on agricultural urea and ammonia sales by, among other things, upgrading its product mix to urea ammonium nitrate solutions and industrial ammonium nitrate and increasing its sales into the industrial and environmental markets. A combination with CF would shift that focus back to agricultural urea and ammonia, which represent 70 percent of CF’s nitrogen sales and only 16 percent of Terra’s. Moreover, Terra has deliberately located its core manufacturing assets away from the U.S. Gulf Coast, where import competition is most severe. In addition, Terra’s geographic plant positions in Oklahoma and Iowa provide Terra with favorable transportation cost to its customers as compared to its U.S. Gulf Coast competitors, and its joint venture in Trinidad provides it with access to advantaged natural gas. Of CF’s total ammonia production volumes, 73 percent is located on the U.S. Gulf Coast whereas 65 percent of Terra’s is located inland or in gas advantaged countries.”

The board also said the offer is opportunistic and substantially undervalues Terra on both an absolute basis and relative to CF. Terra said the offer does not take into account its strong market position, large cash position, and future growth prospects. “CF’s bid does not reflect Terra’s much greater relative contribution of nitrogen results to the combined entity, and is opportunistically timed to take advantage of Terra’s stock price being temporarily depressed relative to CF’s stock price as compared to historic average trading prices during early 2006 through early 2008.”

Terra says CF’s projected synergies claims are aggressive and the combination is subject to substantial execution risk. It noted that Terra’s management team has led four significant acquisition integration efforts and is fully aware of the difficulty in achieving synergies, while CF’s management does not have experience effecting business combinations like the one proposed.

Terra said that it will deliver greater value for its stockholders on a stand-alone basis than with CF’s offer. It added that a combination with CF would expose Terra shareholders to a phosphate market without the compelling scale in that nutrient. Terra said it does not believe CF has the scale to be a leading participant in that market, and that the addition of phosphate would dilute its value as a nitrogen pure play investment.

Martin 4Q income more than doubles; cuts growth capital, eyes asset sales

News

Martin Midstream Partners LP reported improved earnings for both the fourth quarter and year 2008. However, giving a nod to the current economic climate, the company said it is cutting back growth capital and is looking to shed non-strategic assets.

MMLP net income more than doubled, going to $16.7 million ($1.08 per lp unit) on sales of $228.4 million for the fourth quarter ending Dec. 31, 2008, from the year-ago $7.7 million ($.49 per unit) and $262.9 million.

“Given the overall challenging economic conditions, I am pleased to say that we performed extremely well in the fourth quarter,” said Ruben Martin, Martin Midstream GL LLC president and CEO. “As expected, our Sulfur Services segment had an outstanding quarter due to the advantageous movement in sulfur prices coupled with favorable contract terms. In addition, our shorebase terminals benefited from our broad-based Gulf Coast footprint as we gained new business as a result of Hurricane Ike in September.”

Fourth-quarter sales from MMLP’s Sulfur Services segment, which includes both sulfur and fertilizer products, doubled to $82.4 million from the year-ago $41.7 million. Martin told analysts that the segment’s operating income, which includes depreciation and amortization, was $16.7 million, up from the third quarter’s $8.1 million. Volumes decreased six percent, while margins increased 81 percent. Although sulfur prices fell $467 per ton in the fourth quarter, Martin said this had a positive impact due to its contract structure with its major customer. This is because for a portion of any quarter’s contract, the customer pays previous quarter pricing. This provides improved margins to MMLP when prices are falling.

For the year, MMLP reported net income of $42.8 million ($2.72 per unit) on sales of $1.2 billion, up from 2007’s $24.9 million ($1.67 per unit) and $765.8 million. Sulfur Services sales almost tripled for the year at $371.9 million, up from 2007’s $131.3 million.

“Looking ahead to 2009, however, we are facing headwinds that were not present in the first half of 2008,” said Martin. “We expect the capital markets to remain closed to us in the near term as a result of the current financial malaise coupled with existing litigation at the parent company of our general partner. Therefore, we have committed to a reduction of growth capital in 2009 to allow for more balance sheet flexibility. In addition, we are pursuing certain asset sales that are non-strategic in nature and represent minimal contribution to the historical cash flow of our company. Despite these challenges, however, we expect our unique diversified business model to continue to perform relatively well in a difficult environment. We continue to remain focused on our existing operations to ensure that we are poised to take advantage of opportunities once these headwinds are behind us.”

Martin is expecting 2009 capital expenditures of $30 million, down from 2008’s $84 million. Assets likely to be sold include a terminal that could generate $24 million in cash, as well as a few tugboats and barges.

Intrepid income soars in 4Q, year; 4Q potash sales nosedive

News, Potash

Intrepid Potash Inc. reported net income of $22.7 million ($.30 per diluted share) on sales of $79.5 million for the fourth quarter ending Dec. 31, 2008, up from the year-ago pro forma $4.7 million ($.06 per share) and $56.3 million, respectively. The average potash price for the quarter was $762/st, versus the year-ago $224/st FOB. Sales volumes were off significantly, to 94,000 st from the year-ago 215,000 st. Production was 201,000 st, down from the year-ago 217,000 st.

The average fourth-quarter langbeinite price was $323/st, up from $137/st. Sales dropped to 17,000 st from the year-ago 27,000 st, while production was also down at 34,000 st from 51,000 st.

Pro forma income for the year 2008 was $124.1 million ($1.65 per share) on sales of $415.3 million, versus the year-ago $17.6 million ($.24 per share) and $213.4 million. The average potash price for the year was $486/st versus the year-ago $194/st. Potash sales for the year were down to 724,000 st from 2007’s 893,000 st, while production was 836,000 st from 877,000 st.

The average 2008 langbeinite price was $192/st, up from $119/st. Sales were up in 2008, to 207,000 st from 2007’s 158,000 st. Production was up at 197,000 st from 177,000 st.

Despite the economic downturn, Intrepid believes in potash long-term fundamentals and says it important to continue to invest in capital projects that add sustainability and improve overall operating efficiency. As a result, it expects to spend $100-$140 million on capital projects in 2009, up from 2008’s $94 million.

Unity Envirotech receives permit for new nitrogen plant

Florida, News, Nitrogen

Unity Envirotech LLC, St. Petersburg, Fla., said Feb. 27 that Florida’s Department of Environmental Protection has issued the firm a permit to construct and operate a $200 million, 725,000 short ton, nitrogen fertilizer manufacturing facility on a 364-acre site in Polk County. Using its patented technology, the company plans to manufacture Unity Fertilizer, a slow-release nitrogen product containing amino acids, micronutrients, and sterilized organics.

“Extensive research and laboratory testing confirms that the fertilizer to be manufactured at this new facility will release less nitrogen to groundwater and the atmosphere than other commercial nitrogen fertilizers, thereby reducing damage to the environment,” said Roger Tuttle, Unity CEO. “This will be particularly important in locations where protection of fragile drinking water supplies and reduction of fertilizer runoff to watersheds like southern Florida and the Mississippi River system have high priority. Our tests show that Unity Fertilizer increases nitrogen efficiency in plant root-zones, and returns organic matter and micronutrients back to the soil, resulting in increased yields.”

Tuttle told Green Markets that the fertilizer would be derived from protein from organic matter, such as biosolids and manure. Nitrogen content in the fertilizer would be 18-20 percent, and it could be used on both row crops and specialty crops. More information, such as the sourcing of raw materials, groundbreaking, and potential completion date, will come later.

Raymond James & Associates, St. Petersburg, a member of the New York Stock Exchange/SIPC, and BMO Capital Markets, Toronto, are providing financial services to Unity in connection with the project. CCC Group Inc., San Antonio, will provide construction and construction management services. Unity is completing negotiations with leading international companies to provide engineering services and facility operations for the project and others throughout the U.S.

Raymond James has been engaged to provide project finance-related senior debt advisory and placement services in connection with the project financing. “Our project finance group is delighted to support Unity in this unique environmental development,” said George Longo, managing director of the Structured Finance Group of Raymond James. “We have worked with members of the Unity management team in the past and have the utmost confidence in their experience and ability to bring this exciting technological breakthrough to the State of Florida and at other sites throughout North America.”

“We are honored to join forces with BMO Capital Markets in providing financial services for a new facility that will further the welfare of Floridians in a state where we have been dedicated for over four decades,” added Longo.

“We have been working with Unity since late 2007 and continue to be impressed with their advancements,” said Stephen Shapiro, managing director of BMO Capital Markets’ Diversified Industries. “Unity has developed an innovative fertilizer technology that produces a new fertilizer that we believe will be in great demand by North American farmers and will provide a unique and green solution for the environment.”

Unity has engaged Drinker Biddle and Reath LLP, Philadelphia, as its patent counsel. Gray Robinson, with law offices throughout Florida, will serve as counsel for financing. “We are very pleased to have helped the company obtain a $155 million tax exempt bond allocation, which will enable the company to move forward on the issuance of tax exempt bonds,” said Hank Morgan of Gray Robinson.

Fertilizer facility destroyed by fire at Port of Catoosa

News Briefs, Southern Plains

Catoosa-No one was injured when the Agri-Nutrients blending and bagging facility at the Port of Catoosa was destroyed by fire Saturday, Feb. 28. Agri-Nutrients provides a broad range of fertilizer products, and most of those were included in the fire, including urea, DAP, and ammonium sulfate. While there was some ammonium nitrate, the company said there were only 12 bags. There were also herbicides, according to Michael Baker of the Tulsa Fire Department. Baker said that the 60-some firemen used so much water that it was believed to have significantly diluted any runoff into the river. Agri-Nutrients told Green Markets March 2 that it remains in business and has set up a temporary office in Port of Catoosa. A company spokesperson said Agri-Nutrients can still conduct bulk business. It plans to rebuild and is looking into other blending and bagging options in the meantime. No damage estimate has been released, and the cause of the fire is still under investigation.

Terra restarts Donaldsonville facility

News Briefs, Western Cornbelt

Sioux City-Terra Industries Inc. said March 4 that it has resumed production at its Donaldsonville, La., manufacturing facility, which has been idle since Dec. 9, 2008. Terra had elected to idle the plant for needed repairs during a period when it was more economical to import ammonia to fulfill ongoing sales commitments that would normally be met with Donaldsonville production. Repairs have now been completed and inventory has been reduced, and under current market conditions it has become economical for Terra to restart the facility. The Donaldsonville facility has the capacity to produce 500,000 st of ammonia per year.