| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 74.85 | 75.76 | 53.61 |
| CF Industries | CF | 110.20 | 110.34 | 73.58 |
| Intrepid Potash | IPI | 31.60 | 31.97 | N/A |
| Mosaic | MOS | 84.59 | 84.73 | 50.07 |
| PotashCorp | POT | 158.04 | 163.50 | 102.20 |
| Terra Industries | TRA | 37.90 | 39.75 | 30.35 |
| Terra Nitrogen | TNH | 119.67 | 118.43 | 102.89 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 38.96 | 45.41 | 47.07 |
| Deere & Co. | DE | 57.76 | 62.02 | 70.16 |
| Scotts | SMG | 22.93 | 26.41 | 42.30 |
All posts by traceybg@gmail.com
SPOT BARGE PRICES
Agrifos, CHS facilities hit by Hurricane Ike; electricity, infrastructure are near-term issues
Hurricane Ike, a strong Category 2 storm with winds of 110 mph and a 12-foot tidal surge, washed across Galveston and into Houston early last week. Within the fertilizer industry, the most damage appears to have befallen phosphate producer Agrifos Fertilizers. Still, despite the high storm surge and strong winds, damage was less than anticipated, but a lack of power will likely be an obstacle to a quick recovery.
Agrifos said Sept. 18 that the eye of the storm passed over Galveston Bay and that the surge in the Houston Ship Channel was about 12 feet. Operations ceased a day before the storm hit and no employees were killed or injured. However, one of the biggest problems the company will face was labor, since the homes of some employees were damaged or destroyed.
“Assessment work to date has discovered significant damage to office buildings, spare parts storage, dry product inventories, warehouses and low-lying motors and electrical gear,” said Agrifos. “There does not appear to have been major mechanical damage to the plant, and at this time Agrifos is working towards a progressive restart of its operating units through the course of October 2008. This preliminary plan is subject to modification as damage assessment and rehabilitation efforts continue. Agrifos has been in contact with its customers and suppliers and will keep them informed of its progress towards restarting normal operations.”
The company also reported a portion of its phosphogypsum stack’s retaining wall failed during the storm, apparently as a result of the storm surge, and about 1 million gallons of process water were released. The incident was reported to federal, state, and local authorities; however, there was “no evidence of harm to human health or the local marine environment,” the company said.
CHS Inc. told Green Markets that its urea distribution center in Galveston suffered virtually no damage. There was some cosmetic damage, with roofs suffering some damage. Cranes were reported to be standing in water and water also was reported in the office.
CHS said there was almost no damage to the 30,000 st of urea in storage. The facility has total dry capacity of 70,000 st and currently only handles urea. Company officials were able to get back to the facility on Monday, Sept. 15, to assess the damage. All employees have since returned to the facility and are in clean-up mode. However, the main problem with a return to operations is infrastructure. As of Sept. 18, CHS said they are being told it will be seven-to-ten days before electricity is back on. In addition, rail transportation remains down in the area, and the Port of Galveston is still assessing the waterways. The company said it does have one vessel of urea offshore awaiting a delivery that was originally slated for Sept. 20. There was no word on the eventual destination of the vessel, Galveston or elsewhere.
LSB Industries Inc. said its Baytown, Texas, nitric acid facility is expected to return to production Sept. 20. It had only minor damage.
Most, if not all, oil refineries in the area were off line temporarily as a result of the storm. Most suffered some damage, but a loss of power was likely to keep several out of operation for two weeks or more, which meant a loss of new sulfur supplies. Some refineries had already restarted, but at least 14 were either down or running at reduced capacity. It will take another two-to-five days for sulfur production to begin once the facilities restart.
Phosphate producers in Central Florida had sulfur inventories at the time the storm struck, and three sulfur vessels that had been harbored at Texas ports during Ike departed for Tampa late last week.
Agrifos, which obtains sulfur from several nearby refineries, will not be taking sulfur until its sulfuric acid plant restarts, which will be a problem for those refineries. However, a source said the acid plant would be the first part of the operation to restart.
Martin’s sulfur handling terminal at Beaumont had lost power but was running generators and was expected to begin receiving trucks by this weekend. In addition, the priller and ship loader there suffered no serious damage from Ike other than having power and water issues, and was expected to return to service by the weekend.
An unconfirmed report said a unit train of sulfur from Lost Cabin was at Galveston when Ike struck and the product was lost. Mosaic was Lost Cabin’s customer. Another sulfur supplier said its railcars were moved out of the city prior to the arrival of the storm and doubted the report on the loss of the Lost Cabin sulfur cars.
The impact on the NOLA DAP barge and rail markets was murky late last week. Some traders were working to replace supplies that were supposed to have come from Agrifos but may not. However, current market prices were lower last week than at the time most of the orders were made, and product replacement could become a windfall for those traders.
A source said most of the product Agrifos had stored in its two large warehouses was not damaged, but transportation could be a bigger problem. The roof of one of the warehouses suffered a collapse in the central portion, the source said.
The U. S. Minerals Management Service reported 28 oil and natural gas platforms were destroyed, but those accounted for a relatively small portion of production.
Another potash antitrust case filed
A second potash antitrust case, alleging price fixing, was filed against major international potash companies. The case, styled Gage’s Fertilizer & Grain Inc. v. Agrium Inc., was filed Sept. 11, 2008, in U.S. District Court for the Northern District of Illinois. As with the other case (GM Sept. 15, p.1), it names as defendants Agrium Inc., Agrium U.S. Inc., Mosaic Co., Mosaic Crop Nutrition LLC, Potash Corp. of Saskatchewan Inc., PCS Sales (USA) Inc., JSC Uralkali, RUE PA Belaruskali, RUE PA Chicago LLC, JSC Silvinit, and JSC International Potash Co.
Gage’s Fertilizer, the plaintiff, is identified as headquartered in Stanberry, Mo. The complaint says Gage’s purchased potash directly from one or more defendants during the class period, which runs from July 1, 2003, through the present. It says Gage’s purchases included, but were not limited to, purchases of potash from Mosaic. The suit was filed by the law firm Segal, McCambridge, Singer and Mahoney Ltd., Chicago; Pearson, Simon, Soter, Warshaw and Penny, San Francisco; and Shughart Thomson and Kilroy PC, Kansas City, Mo. The other lawsuit, Minn-Chem Inc. v. Agrium Inc., which was filed Sept. 11 in Minneapolis, was filed by Lockridge, Grindal and Nauen PLLP, Minneapolis. Like Minn-Chem, Gage’s seeks class action status.
Uralkali said it intends to defend itself vigorously and that it continues to be focused on the management of its business in the best interests of its investors. PotashCorp said that the case has no merit, that it will vigorously defend, and that it will be business as usual at PotashCorp in the meantime. Mosaic also said the case has no merit and that its lawyers are still reviewing it. Other defendants either had no comment or said they were still reviewing the case.
Gage’s case pretty much lays out the same complaint as does Minn-Chem. It notes the power of the two export marketing entities, Canpotex Ltd. for Canada and BPC for the Former Soviet Union. It notes that the latter, which is a joint venture between Uralkali and Belaruskali, supplies 34 percent of the world’s potash exports. It notes that Silvinit, another FSU producer, shares common ownership by Dmitry Rybolovlev, who owns at least 66 percent of Uralkali and about 20 percent of Silvinit. The complaint says Silvinit has been in active negotiations to join BPC, raising the prospect of further consolidation of the industry.
The Gage’s complaint also notes the sinkhole problems faced by Silvinit in the past few years and claims that other producers have used this to withhold their own product and raise prices.
The complaint also cites various FSU executive quotes. One BPC official was quoted as saying “We will be the strongest and most powerful company that will set to a great degree the rules of the game in the world’s potash market, which means billions of dollars.”
The complaint says BPC’s intention to set the “rules of the game” includes cooperation with Canadian producers.
Plaintiff said Uralkali gave a presentation to analysts saying “the two major export associations (Canpotex and BPC) ensure [a] stable pricing environment” for potash.
An outside analyst was cited for saying, “BPC and Canpotex have a dominant role in setting annual prices with large potash customers such as China, India and Brazil.”
In 2007, after obtaining significant price increases for potash sales, Vladimir Nikolaenko, BPC’s director general, was quoted as saying “the company is not only an efficient pursuer of its shareholders’ interests, but is actually a leader to create an acceptable world market price condition for all manufacturers of potash fertilizers.” (emphasis added).
A Goldman Sachs analyst was quoted as recently saying potash producers are simply able to “raise prices at will.”
The complaint claims that between 2007 and early 2008, North American potash prices essentially doubled. By comparison, it cites USDA to show that potash prices far exceeded other prices during that period, with seeds up 30 percent, livestock 27 percent, and fuel 43 percent.
The complaint notes that while 150 countries use potash, only 15 produce notable quantities of it, and that Belarus, Canada, Germany, Israel, Jordan, and Russia have about 90 percent of global potash supply within their borders. It says over half of the world’s global capacity is located in just two regions – Canada and the FSU. It cites industry analysts for saying “the global trade in potash is even more concentrated than OPEC for oil.” Another was said to have referred to the producers as the “Organization of Potash Exporting Countries.”
The complaint also noted the common mantra that there are high barriers to entry to the industry, with a new mine requiring $2.5 billion to build and five-to-seven years to do so.
Likewise, it says Canopotex has entered into cooperative marketing agreements with producers from the FSU.
Gage’s also noted PotashCorp’s reach beyond Canada, to its 26 percent stake in Arab Potash Co. in Jordan, 9 percent in Israel Chemical ltd., 32 percent in Sociedad Quimica y Minera de Chile, and 20 percent interest in Sinofert Holding Ltd., China’s largest potash distributor, as well as its exclusive overseas marketer status for Intrepid Potash, the largest U.S. producer.
Enviros sue to halt Simplot expansion; company says facility will close without it
The Greater Yellowstone Coalition, Natural Resources Defense Council, Sierra Club, and Defenders of Wildlife filed a lawsuit in U.S. District Court in Boise Sept. 12 to block the J.R. Simplot Co.’s expansion of its Smoky Canyon Mine in the Caribou-Targhee National Forest near the Idaho/Wyoming border.
Represented by Earthjustice, the coalition of environmental groups argues the U.S. Forest Service acted arbitrarily when it approved Simplot’s expansion plans in June. It also points to past phosphate mining pollution problems, including toxic selenium contaminating waterways, that helped the area earn Superfund status in the 1990s. The groups disagree with the Forest Service’s decision to clear the way for mining across more than 1,100 acres of roadless forest.
The lawsuit names as defendants federal agencies and top administrators, including Interior Secretary Dirk Kempthorne, Bureau of Land Management Director Jim Caswell, and Caribou-Targhee National Forest Supervisor Lawrence Timchak. Deputy Regional Forester Cathy Beaty recently said Timchak complied with applicable laws and regulations in his decision to approve the expansion.
Smoky Canyon and 17 former mines scattered along the edge of the Greater Yellowstone Ecosystem continue to pose an environmental threat to clean water, fish, and wildlife, the coalition says.
Simplot officials say the Smoky Canyon Mine expansion is critical to keeping its fertilizer plant near Pocatello operating through 2025. It announced five years ago its hopes of extending operations to the south, pushing into federal wilderness land.
Simplot, Monsanto, and Agrium have mined areas in Southeast Idaho for decades for their regional phosphate plants. Monsanto’s proposed new Blackfoot Bridge mine, near Soda Springs, is also under federal review.
For the past two years, Idaho has been working with the Forest Service on a rule to manage the state’s 9.3 million acres of roadless land. The most recent version of that plan removes the Smoky Canyon expansion acreage from protected roadless status, a conflict the groups also are challenging in the lawsuit. The lawsuit disputes the Bush administration’s June authorization of the mine’s expansion, which was approved by the Forest Service and the BLM on assurances by Simplot that additional selenium contamination will be effectively contained.
On Sept. 18, Simplot said it had filed a motion to intervene so as to oppose the lawsuit. Simplot said the mine, which is located along the Idaho-Wyoming border in Caribou County, has been in continuous operation since 1984. It said there are two remaining panels, or sections, to be mined at Smoky Canyon, which are estimated to provide another 15 years of phosphate ore to the company’s fertilizer plant in Pocatello. The mine is the only source of ore for the Pocatello plant, and current mining operations will keep the plant supplied for approximately two more years.
Phosphate ore is transported from the mine to the plant via an 87-mile buried slurry pipeline. Approximately 210 employees work at the mine, and another 350 work at the Pocatello facility.
Bill Whitacre, president of Simplot’s AgriBusiness Group, says the agencies’ decision to approve the mine’s next phase came after five years of study, decisions, appeals, and public comment. “Tens of thousands of public comments have been submitted at different stages of this five-year permit process,” Whitacre said. “The agencies have reviewed each comment, held it up to their own scientific review process, and have approved the plan we submitted.”
According to Whitacre, the unusually lengthy decision and approval process was important to ensure exhaustive review and public involvement, but has left the mine dangerously low of remaining ore to supply the Pocatello plant, and has put 560 highly-skilled employees at risk.
“Unless this approval is upheld, we will put immediate contingency plans in place to curtail production, resulting in a loss of production, a loss of jobs, and the ultimate closure of both the mine and the plant,” he said.
Whitacre estimates it will take well over a year to build the roads and power lines and remove the overburden before phosphate ore can be shipped from the two new approved panels.
Simplot notes that the approval decisions from both the U.S. Forest Service (USFS) and Bureau of Land Management (BLM) came after a very technically rigorous examination of mining practices and environmental impacts from the proposed project. This included state-of-the-art scientific studies, collections of thousands of pieces of data, and the utilization of latest science to determine the best mining engineering methods available. Simplot said when the BLM issued the final Environmental Impact Statement in October of 2007, their announcement stated that mining and reclamation practices are held to an extremely high standard, and Simplot’s “Smoky Canyon will be a trendsetter.”
An economic impact study conducted by Idaho Economics, an economic research firm in Boise, Idaho, concluded that if the phosphate mine and fertilizer plant were to close, it would have a combined economic impact of $131 million per year across 11 counties in Eastern Idaho and Lincoln County, Wyoming. The two facilities have a large impact on three Idaho counties and one in Wyoming. While the mine is located in Idaho’s Caribou County, most workers live in Lincoln County, Wyo. The fertilizer plant is located in Power County, but most workers live in Bannock County. The buried pipeline between the two facilities passes through all three of the Idaho counties.
The study also concluded that in addition to the 560 jobs in jeopardy from closing the mine and plant, the phosphate operation creates another 1,066 jobs in the region and over $6.3 million in Idaho tax revenue.
According to Whitacre, the local economic impact of closing the mine would be staggering, as well as the impact on Western U.S. agriculture.
“We are all suffering with the higher food prices stemming from the global food crisis” he stated. “The food shortage has created an unprecedented need for fertilizer products around the world, particularly here in the Western U.S., which is one of the most fertile and productive regions in the world.”
The Smoky Canyon Mine produces enough ore to manufacture over a million tons of various fertilizer products, which are distributed in every state west of the Mississippi river.
Whitacre predicts that if fertilizer products from Simplot’s operations are suddenly removed from the market, it will have a significant impact on Western U.S. agriculture. “It would create an additional hardship for family farms who are already struggling at today’s costs for fertilizer, fuel and seed,” he said.
Simplot has been in the phosphate business in the region since the 1940’s, when J.R. Simplot experimented with crude phosphate from bat and bird guano from Pacific islands. The company said he was surprised how phosphate improved the quality and yield of crops, particularly potatoes. He built a small fertilizer plant in Pocatello with the promise that phosphate rock would be provided by a company from Montana. When that fell through he found phosphate reserves in Southeast Idaho, and developed Idaho’s first open pit mine on the Shoshone-Bannock Indian reservation 25 miles north of Pocatello. That mine supplied ore to both Simplot and FMC until it was closed in 1990 and mining operations shifted to the Smoky Canyon mine.
County rejects Mosaic’s mine; company plans suit
Bradenton, Fla.-After seven years and approvals of its permit and mining plan by all other federal, state, and regional authorities, the Manatee County, Fla., Commission voted 4-3 to deny The Mosaic Co. the final authority to mine the Altman Tract. Mosaic spokesman David Townsend said the company would sue unless the county reverses its decision. “The vote Tuesday (Sept. 16) was not a surprise,” Townsend said. “It went along predictable lines, 4-3, so it was close.” He added that two of those who voted against the company’s plan had already been defeated in the primaries and soon will be off the Commission. The Altman Tract amounted to 2,048 total acres, of which Mosaic planned to mine 1,409 acres. The tract was to become a part of the Four Corners Mine, which amounts to about 50,000 acres in parts of four counties. Commissioners voted against the plan out of fear that sensitive wetlands would be destroyed and could not be restored. Townsend said the county’s move amounted to a “taking” and that Mosaic would seek damages under the Bert J. Harris Property Rights Protection Act. Once the company officially notifies the county in a letter, it will have 90 days to file the suit. Although a newspaper article said the property and its phosphate deposits were worth approximately $400 million, Mosaic hired a Jacksonville real estate firm to determine a price, which will be difficult. The last sale of mine property was made by Mosaic with the purchase of the Wingate Creek Mine, but the price of phosphate has increased significantly since.
Viterra office workers end strike; others to vote
Regina-Viterra Inc. said Sept. 16 that the strike led by the Grain Services Union at the company’s Regina office is over. On Tuesday, a majority of Regina Office bargaining unit employees voted to accept the company’s offer, ending the 11-week work stoppage. Some 190 employees work for the unit. Employees who participated in the strike will return to work on Monday, Sept. 22. “We are looking forward to our Regina Office employees returning to work under a new long-term contract that will give our employees market-based compensation and benefits, fairness and flexibility, and labor stability,” said Colleen Vancha, Viterra’s vice president of investor relations and corporate affairs. Viterra’s five-year offer consists of a 6 percent compensation payment on signing and annual increases, based on performance, of 6, 5, 5, and 5 percent, in addition to an annual incentive program that has the potential to add to an employee’s total compensation in the range of 5, 10, and 15 percent of their pay. The Saskatchewan Maintenance and Operations bargaining unit employees, totaling about 650, will vote on the company’s offer over the next 10 days. The labor disruption at the Regina office, which began on July 7, has had no material impact on business, said Viterra.
Viterra building new terminal in Alberta
Regina-Viterra Inc. said Sept. 16 that it plans to build a new high throughput grain terminal near Sexsmith, Alberta, approximately 18 kms north of Grande Prairie, to meet growing market demand in the Peace River area. The concrete and steel facility will be developed at an estimated capital cost of $24 million, featuring 30,000 mt of grain storage and 104 railcar loading capability. “This investment demonstrates Viterra’s confidence in the future of grain production in the Peace River area,” said Mayo Schmidt, president and CEO of Viterra. “The upswing in commodity prices has provided an incentive for farmers to convert forage and pasture land back into grain production. The new terminal will complement our crop input network in the region, offering farmers premium products including fertilizer, seed, equipment and crop protection products.” Site work is planned to start this fall, with construction to start in the spring of 2009 and the first grain deliveries expected in August of 2010. Future plans are being developed to establish an ag retail location at the Sexsmith terminal, providing one-stop shopping for farm customers. The general contract for the project has been awarded to FWS Construction Ltd. The terminal will be serviced by Canadian National Railway. Schmidt added the project is another example of Viterra’s commitment to driving excellence in Canada’s transportation supply chain. “By maximizing the percentage of shipments in full trains we can increase overall system capacity and reduce costs for farmers, end users, railways and Viterra,” he said. Viterra said the investment will also have a positive economic impact on the local area, which has a strong history of grain production. The new terminal will employ approximately nine full-time staff.
Intrepid adjusts potash guidance
Denver-Intrepid Potash Inc. said Sept. 15 that it is adjusting its full-year production guidance for potash downward by 20,000 st, or approximately two percent. The adjustment is a result of two items. First, the company has made the decision to extend its turnaround schedule to include approximately three-to-five additional days of planned downtime during the turnaround cycle. The decision to invest in additional reliability enhancement projects associated with its electrical systems at its Carlsbad, N.M., operations is expected to enhance overall reliability and reduce future unscheduled downtime. Work that will be performed during the turnaround period has been expanded to include coordinated improvements performed by the local power provider, after mutual agreement with the company, to upgrade the regional system that serves the Carlsbad facilities, and the hiring of three major electrical firms to work concurrently during the extended turnaround to renovate and upgrade the electrical systems in surface plants and underground mine operations. The second item was lower than expected recovery rates experienced at the company’s West Mine during the third quarter, due primarily to the decreased performance of a binding chemical purchased for use in the flotation circuit. The company is actively working to address this item. “The decision to take proactive steps to upgrade the electrical systems is designed to benefit the company for the long-term and enhance overall reliability of production at our Carlsbad operations,” noted Bob Jornayvaz, chairman and CEO. The impact of these items is an adjusted full-year production range of 850,000 – 870,000 st of potash, with the effect of increasing the full-year potash production cost of goods sold forecast by $15 per short ton to $155-$165/st. The company is also reporting that it expects its net realized price per ton of potash for the third quarter to be approximately $620-$640/st.
McChip grants PotashCorp mining rights
Toronto-McChip Resources Inc. said Sept. 17 that it has signed a lease agreement with PotashCorp granting that company the right to mine potash from lands leased from McChip in the Rocanville area of Saskatchewan. McChip said that upon signing PotashCorp is obligated to pay the company $250,000, including a nonrefundable option payment and fees for historical technical data provided to PotashCorp by the company. Under the terms of and upon execution of the lease agreement, an additional advance of $100,000 shall be payable to McChip by PotashCorp after the execution of a unit agreement each year thereafter, until the year in which PotashCorp reaches commercial production on the lands specified in the lease. These advance payments will be recouped by PotashCorp from actual royalties due McChip. From the date of commercial production the company will earn a royalty on potash ore produced from the leased property at a rate equivalent to the royalty rate payable to the Crown calculated on potash ore from time to time, pursuant to the provision of the regulations provided under The Crown Minerals Act of the Province of Saskatchewan. Richard McCloskey, McChip president, said that “the extensive capital required to develop and mine potash, combined with the discontinuous leases held by McChip, would make it highly unlikely that the company would or could develop the property on its own. This agreement enables us to benefit financially from the long-held leases without incurring additional capital risk.”