Converted Organics Inc. has named Dean Ulrich as the general manager of the company’s new flagship processing facility in Woodbridge, N.J. Ulrich, 43, has two decades of transportation and waste management industry expertise, most recently with EnviroSolutions Inc., Newark, N.J.
Dan Hutson II, who was killed in a plane crash June 18 (GM June 23, p. 10) was survived by his wife, Cindy; three daughters, three granddaughters, a sister, and step-mother Sue Hutson, the widow of Dan Hutson Sr. Expressions of sympathy may take the form of contributions to St. Jude’s or Murray State Foundation in memory of Dan C. Hutson II.
Market Watch
AMMONIA
U.S. Gulf/Tampa: The latest Tampa business is reported at $585/mt DEL, with at least one buyer reported to have concluded business at that number, as well as Yara, per last week’s issue. In the meantime, sources report that an import cargo has been sold into Donaldsonville at $590/mt DEL.
Eastern Cornbelt: Dealers reported fairly heavy sidedress movement and post-emergence herbicide applications on corn in areas where field and weather conditions allowed it. One Illinois source said ammonia was catching a lot of interest in his trade area, but sidedress activity was a full two weeks behind the normal pace there.
Ammonia pricing continued to be “all over the board,” according to one source. Dealer-to-dealer trades of spring prepay tons continued to be reported as low as $750/st FOB in some areas, while reseller pricing for spot market tons had reportedly firmed to $850-$860/st FOB in the region. Some producers, meanwhile, were referencing cash tons for July as high as $1,035-$1,040/st FOB regional terminals, with forward contract ammonia priced in the $1,040-$1,050/st FOB range in the region for August shipments and beyond.
Western Cornbelt: Dealers reported some sidedress activity in the region as weather and field conditions permitted. The ammonia market continued to cover a wide range, with reports of extra spring prepay tons being bartered between dealers for as low as $725-$750/st FOB. At the upper end, sources quoted spot market values from wholesalers and producers at the $850/st FOB mark, with fall prepay reportedly being offered in the $1,000-$1,025/st FOB range. One supplier was referencing forward contract ammonia for August through December at $1,030/st FOB in Nebraska, $1,035/st FOB in Iowa, and $1,040/st FOB in Missouri.
Northern Plains: Hot, dry weather blanketed much of the region last week, which was a big change from earlier in June. A Minnesota source speculated that sidedress applications on corn were one to three weeks later than normal in his trade area, but the demand was heavy last week. North Dakota sources reported heavy sidedress demand for anhydrous ammonia.
The ammonia market was quoted in a very broad range at $850-$1,025/st FOB to the dealer, with the upper level quoted by Minnesota sources for a published summer fill price and the low end reported for cash sales on the spot market. Delivered ammonia was quoted at $1,025-$1,050/st in North Dakota depending on time of delivery, although there were unconfirmed reports of one supplier offering fill tons for as low as $990/st DEL in North Dakota in late June.
Agrium’s June 13 anhydrous ammonia postings included $850/st FOB Mankato, Minn. The company’s ammonia postings in the Leal, Velva, Grand Forks, and Beulah sales area in North Dakota will firm on July 1 to $1,119/st FOB and $1,139/st DEL. Another supplier was referencing forward contract ammonia for August through December at $1,035/st FOB in Minnesota and $1,055/st FOB in North Dakota.
Great Lakes: Although parts of the Great Lakes region reported brisk sidedress activity last week, other areas continued to be delayed by wet field conditions. One Wisconsin source said sidedressing was a full two weeks behind schedule in his territory, and speculated that some replanting will be necessary when fields finally dry out.
Ammonia pricing was reported in a broad range at $850-$1,000/st FOB in the region for cash market or summer fill tons. Sources reported no prices for fall prepay ammonia.
Pacific Northwest: Agrium’s new anhydrous ammonia postings, effective July 1, include $1,183/st rail-DEL in Oregon, Washington, Idaho, and Utah; $1,203/st truck-DEL in northern Idaho and in Oregon and Washington east of the Cascades; and $1,208/st truck-DEL in Montana and northern Wyoming. The company’s aqua ammonia postings will firm on July 1 to $301/st FOB Central Ferry and Finley, Wash.
UREA
U.S. Gulf: The NOLA urea rally continued last week with another huge run-up in prices as the week progressed. Sources reported granular product as low as $680/st FOB early in the week; by mid-week, however, $700-$710/st were common numbers. By late Thursday, business was reported at $715/st FOB, with sellers reportedly eyeing $720-$730/st FOB for the next round of trades.
While reports continued to circulate of additional exports out of the U.S., sources generally said the U.S. market is now starting to come in parity with other international price points, meaning that product sourced from the U.S. may no longer be quite as lucrative as elsewhere. Most sources, however, pointed to the rice market for the majority of the demand last week, though others said some of it was likely speculative buying, as some buyers were thinking ahead to the Southwestern Fertilizer Conference just a few weeks away and were predicting that selling prices would be much higher by then. Buy now, sell later.
Still other buyers are likely looking toward the fall season. With the high corn prices, less than expected corn acreage, and flooded farmland across the Midwest, many were expecting a big fall fertilizer season.
In the meantime, prills were reported to be lagging granular, still back in the $650-$660/st FOB range. Sources noted that there were few prills available in NOLA right now and that they are still under the world market.
As for the world market, sources noted that all the NOLA frenzy is occurring without expected business from India. Should India enter the market later this summer, as many expect, prices could see another significant boost.
Eastern Cornbelt: The granular urea market was quoted at $695-$705/st FOB for spot market tons in the region, reflecting an increase from last report. One supplier was offering July pricing last week at $725-$728/st FOB river terminals in the region, with forward contract tons up another $5/st for August and again in September.
Western Cornbelt: Granular urea was $685-$700/st FOB to the dealer, but higher postings were circulating as the week advanced. One supplier was referencing July tons at the $725/st mark FOB St. Louis, and Koch moved its posted price FOB Enid, Okla., up to the $740/st level on June 26.
Northern Plains: Granular urea was quoted at $690-$700/st FOB the Twin Cities, with delivered urea pegged at $705-$715/st in North Dakota. Sources said higher postings were taking effect, however. One supplier was referencing forward contract urea for August at $735/st FOB in Minnesota and $755/st DEL in North Dakota and northern Minnesota.
Agrium’s granular urea postings will firm on July 1 to $735/st FOB North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton, and $740/st rail-DEL in Minnesota and the Dakotas. Those levels reflect a $30/st increase from the company’s May 28 urea postings in the region, a $65/st increase from the May 8 postings and a $140/st increase from Agrium’s May 1 urea postings in the region.
Great Lakes: Granular urea was moving for corn sidedressing in the region. Sources tagged the dealer market at $695-$720/st FOB, with the low in southern Wisconsin and the upper end reflecting list pricing in Michigan. One Wisconsin source quoted truck-delivered urea at the $685/st mark for prompt tons last week. Agrium’s June 4 urea postings included $720/st FOB Saginaw, Mich. The company’s rail-delivered urea postings will firm on July 1 to $740/st in Wisconsin.
Northeast: Heat and high humidity preceded a surge of thunderstorm activity throughout New England early in the week. Parts of Delaware also collected some moisture early in the week, but many locations in Pennsylvania and the Delmarva area were dry.
Granular urea was reported in a broad range at $678-$710/st FOB regional terminals last week, with reports of some suppliers now referencing as high as $737/st FOB to the dealer. Further south, limited quantities were still being offered at the $650/st level FOB Savanna, Ga.
Western U.S.: Agrium’s July 1 granular urea postings include $735-$750/st DEL in Montana and Wyoming, depending on location; $760/st FOB Washington warehouses at Glade, Kennewick, Warden, and Wilson; $765/st DEL in Washington, Oregon, Idaho, and northern Nevada; $775/st DEL in northern and central Utah; and $780/st DEL in southern Utah. Agrium’s urea postings in the California market will move on July 1 to $755/st FOB West Sacramento, $780/st truck-DEL in central California, and $785/st truck-DEL in northern California.
Pakistan: The National Fertilizer Development Centre (NFDC), in a report released June 25, said: “The urea availability situation would be unsatisfactory during Kharif 2008. Further imports will be required to meet the coming Kharif months demand. Ministry of Food, Agriculture and Livestock (MINFAL) is planning to import 300,000 mt of urea during July and August 2008 to meet demand in Kharif season 2008 which is ending in September.” The report also added that the season will conclude with the imported urea quantity of 242,000 mt and domestic production of 2.5 million mt. Pakistan has so far produced 4.502 million mt of urea from July 2007 to May 2008.
NITROGEN SOLUTIONS
U.S.Gulf: Like urea, UAN prices were moving up last week. Early in the week sources were calling the market $420-$430/st FOB ($13.13-$13.44/unit); however, by week’s end a trade was reported as high as $465/st FOB ($14.53/unit).
Eastern Cornbelt: The UAN market was generally quoted in the $13.90-$14.50/unit range FOB regional terminals. An Illinois source put the UAN-32 market at the $450/st ($14.06/unit) FOB level out of spot river locations after netbacks on delivered tons, but said prices were going up. One supplier was reportedly offering cash market tons at $13.90-$14.00/unit FOB river terminals in Illinois and $14.15.unit FOB Terra Haute, Ind. Another was posting forward contract UAN for August through December at $15.50-$15.80/unit FOB in the region.
Western Cornbelt: UAN was quoted at $13.91-$14.25/unit FOB in the region. One Iowa source reported the common dealer price at $14.00/unit FOB for confirmed sales last week.
Northern Plains: The UAN market was tagged at $14.20-$14.50/unit FOB Minnesota terminals for spot tons to the dealer, with reports from some sources of reference levels jumping to as high as $15.70-$15.85/unit FOB in July and August. North Dakota sources pegged delivered UAN-28 in a broad range at $450-$480/st ($16.07-$17.14/unit) in late June, although little business was reported to test the market.
Great Lakes: UAN-28 was reported at $395-$415/st ($14.11-$14.82/unit) FOB regional terminals, with the upper end reflecting new dealer reference pricing in Michigan. Dealer postings in Wisconsin were reported at the $14.50/unit FOB level. Delivered UAN-32 fill tons were quoted at $460-$470/st ($14.38-$14.69/unit) to points in central Wisconsin, but sources said a near-term increase is likely.
Northeast: Several sources reported some nitrogen applications on corn through sprinkler systems. The UAN-30 market was reported at $385-$394/st ($12.83-$13.13/unit) FOB in the region, with the low at Baltimore, Md., and the upper end quoted at Philadelphia, Pa. Sources said those numbers were still behind replacement costs; one said vessel ton values have been reported in the $480-$485/mt C&F range, although no business has actually been concluded at those numbers.
The UAN-32 market out of terminals in upstate New York was referenced at the $464/st ($14.50/unit) FOB level last week, but sources said an increase to $480/st ($15.00/unit) would take effect late in the week.
AMMONIUM NITRATE
U.S. Gulf: The barge market for AN continues to be reported as quiet, with the most recent pricing in the $370-$380/st FOB range.
Western Cornbelt: Ammonium nitrate was reported in the $400-$410/st FOB range in the region.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate pricing continued to firm, with postings reportedly up $60/st. Sources quoted the market at $400-$420/st FOB in the region last week, with the low out of spot river locations in Illinois.
Western Cornbelt: Granular ammonium sulfate pricing was reportedly on the move. The regional market was quoted at $400-$410/st FOB last week, with the low FOB Dubuque, Iowa.
Northern Plains: Granular ammonium sulfate was reported at a firm $400/st FOB in the region, with delivered product in North Dakota quoted at $420-$430/st, depending on supplier. Agrium’s July 1 ammonium sulfate postings include $420/st DEL in North Dakota and Minnesota, reflecting a $20/st increase from the company’s June 2 reference levels in the region.
Ammonium thiosulfate remained at $295/st FOB Winona, Minn., for straight loads.
Great Lakes: Granular ammonium sulfate pricing was up from last report at $405-$435/st FOB in the region. A Wisconsin source quoted the mid-grade sulfate market at a firm $420/st FOB, up $60/st from the previous week. Agrium’s July 1 granular ammonium sulfate postings include $420/st DEL in Wisconsin, up $20/st from the company’s June 2 reference levels in the state.
Northeast: The granular ammonium sulfate market had reportedly firmed some $60/st from last report, with sources quoting the market last week at $420-$442/st FOB in the region. The upper end was reported FOB Philadelphia to the dealer.
WesternU.S.: Agrium’s granular ammonium sulfate postings will firm on July 1 to $415/st FOB the warehouse in Idaho, Washington, Oregon, Utah, and Nevada, and $420/st DEL in those states plus Montana and Wyoming.
PHOSPHATES
Central Florida: With the exception of orders placed earlier and export business already on the books, the phosphate market in Central Florida continued to slumber last week. The few prompt sales made last week were done at the high of the previous week’s range of $1,070/st FOB.
Nevertheless, sources said there appeared to be more interest in forward sales, August through October, than has been the case in recent years at that time.
Producers made no changes to their asking prices, and a trader said, “No one wants to buy now,” due to the high cost of capital.
The Central Florida DAP price range last week continued unchanged from the previous week’s range of $1,025-$1,070/st FOB. PCS Sales’s Central Florida reference price remained at $1,050/st FOB for DAP. Mosaic’s asking price was still $1,070/st FOB for DAP and $1,095/st FOB for MAP. CF’s price was $1,050/st FOB for DAP and $1,125/st FOB for MAP, which continued to be scarce. In Texas, Agrifos’s price remained at $1,050/st FOB for trucks and $1,045/st FOB for rail shipments.
U.S. Gulf: Just before family members were notified and the tombstone chiseled, the Gulf’s river market twitched and returned to life. After lingering in a coma for the past several weeks, which was normal for this time of year, the phosphate market began early in the week with transactions being done around $1,010/st FOB. The following day, prices for prompt shipments began moving upward and forward sales for August into October were made at even higher prices – in the range of $1,065-$1,070/st FOB.
However, the best deals were available at Lower Mississippi River warehouses, which were selling at below barge prices at between $995/st FOB and $1,035/st FOB. Most of the product from warehouses was originally purchased at prices well below those of the current market, and sellers realized handsome profits. Most of the phosphates being purchased last week were for storage for the fall season, but little of the product was moving from warehouses to dealers or farmers in the fields.
Flood waters were on the retreat on the upper Mississippi and its tributaries last week, but a large amount of the corn crop in Iowa, between 10 and 15 percent, will likely be lost. Still, sources said that situation had not affected prices at warehouses, and little or nothing of stored phosphates was damaged.
For prompt sales, the lowest prices were found at the beginning of the week, but the market began moving up last Tuesday and continued to do so throughout the week. One large trader said he expected the NOLA DAP barge price to rise to $1,100/st FOB by mid-July, around the time the Southwestern Conference gets underway at San Antonio.
MAP barges were moving last week, and several barges were sold at $1,115/st FOB, which would translate to $1,090/st FOB for DAP.
Based on new prompt sales, the price range last week moved from $1,005-$1,030/st FOB the previous week to $1,010-$1,045/st FOB. MAP barges were available at prices $25-$75/st FOB more than DAP. Mosaic’s asking price for forward sales through August was $1,090/st FOB for DAP and $1,105/st FOB for MAP. CF was seeking $1,070/st FOB for DAP and $1,145/st FOB for MAP for prompt deliveries.
Eastern Cornbelt: DAP remained at $1,050-$1,107/st FOB regional warehouses to the dealer, with MAP quoted at $1,075-$1,125/st FOB. One Illinois source quoted the cash market for DAP at the $1,094/st FOB level in his trade area last week.
The only 10-34-0 quote came from an Illinois source at $950-$975/st FOB last week, but others said spot tons were difficult to come by.
Western Cornbelt: DAP was reported at $1,050-$1,094/st FOB regional warehouses, with MAP at $1,075-$1,107/st FOB. Forward contract DAP for August through September was reported at the $1,104/st FOB St. Louis mark from one regional supplier.
Dealers continued to offer no current pricing quotes for 10-34-0 in the region.
Northern Plains: DAP remained at $1,065-$1,100/st FOB Minnesota warehouses for spot tons to the dealer, with the MAP market quoted in a broad range at $1,100-$1,175/st FOB. Forward contract tons FOB Pine Bend, Minn., were being offered for the August through September shipping period at $1,110/st for DAP and $1,185/st for MAP. A North Dakota source quoted delivered MAP in the $1,100-$1,120/st range from western shipping points for limited tons.
10-34-0 was reported at $950-$1,050/st FOB in Minnesota, with the low end for spot loads of black product and the upper numbers for green 10-34-0. A North Dakota source quoted delivered green 10-34-0 last week at the $1,080/st level from Canadian shipping points.
Great Lakes: The DAP market was quoted at $1,070-$1,143/st FOB regional warehouses, with the low in Wisconsin and the upper level reflecting dealer reference levels out of Michigan shipping points. MAP was tagged at $1,090-$1,158/st FOB, with the upper level again in Michigan.
10-34-0 was tagged at $975-$1,030/st FOB and in very tight supply, with the upper end of the range reported in Michigan and the low reported by sources in southern Wisconsin.
Northeast: MAP was reported at $1,080-$1,110/st FOB in the region, with the low FOB Philadelphia to the dealer. DAP was quoted at $1,050-$1,100/st FOB the warehouse.
10-34-0 was quoted as high as $1,070/st FOB terminals in upstate New York for new sales, up more than $200/st from last report. Several sources continued to quote the spot 10-34-0 market in the $800s/st FOB last week, but that was presumably for tons ordered earlier and did not reflect new replacement costs.
U.S. Export: The export market was quiet last week, and PhosChem made no new sales while it waits for prices to move up. India was said to be poised to make additional purchases around the beginning of this week.
KeyTrade’s sale into India during the previous week was said to have been done at $1,270/mt CFR for 35,000 mt.
In what could be a positive development for the export market, Argentina’s farmers’ strike may be over – or at least coming to an end. Sources said the farmers, who have been protesting against a proposed export tariff, have gotten the national legislature to agree to take a vote on the tax. Legislators were far more likely to modify or reject the hike sought by the country’s president. However, fertilizer sellers were taking a wait-and-see attitude toward moving product out of warehouses at the ports to the fields until the drama is complete.
With no new sales last week, the export DAP price range was unchanged at $1,160-$1,205 mt.
India: IFFCO issued a tender for an unspecified quantity of DAP for arrival August thru October, 2008. The tender initially was to close June 23 and was to be valid through June 25. Reports now are that it will close June 27 and remain valid until June 30.
The country has projected a DAP requirement for the current kharif season 2008 at 4-4.8 million mt, while domestic production is estimated to be around 1.9-2 million mt. According to local media, imports of 2.9 million mt have already been contracted to meet this imbalance. However, only 1.7-1.8 million mt of DAP is expected to arrive in time for use in this season, thereby leading to a shortage of 0.5-1 million mt.
POTASH
Eastern Cornbelt: Potash was quoted at $800-$830/st FOB regional warehouses on the secondary market, depending on grade and location.
Western Cornbelt: Potash was generally quoted at a firm $795-$800/st FOB regional warehouses for brokered or resellers tons last week, with some locations referenced as high as $830/st FOB.
Northern Plains: Potash remained at $522-$530/st FOB Saskatchewan mines, depending on grade, for allocated June product shipments. Dakota sources quoted a $610-$650/st DEL range for allocated tons, while Minnesota dealers reported warehouse pricing on the secondary market as high as $800/st FOB in late June.
As of last report, Agrium’s postings FOB Vade, Saskatchewan, for the July 1 forward shipping period will include $585/st for standard grade and $590/st for red premium.
Great Lakes: The potash market was quoted at $800-$830/st FOB on the secondary market, with truck-delivered tons reported at the $830/st level in central Wisconsin.
Northeast: Potash pricing was tagged at $645-$693/st DEL in the region, depending on grade and location, for allocated tons from producers.
SULFUR
Tampa: No serious negotiations between sulfur producers and phosphate companies had begun as of late last week, although some preliminary discussions were just underway. However, no new prices had been tossed on the table, so the process could take another week or, perhaps, a month. Speculation that sulfur producers could seek as much as $250/lt FOB persisted. The upcoming Southwestern Conference could provide an opportunity for the parties to resolve the issue.
No new problems were reported at refineries or in sulfur transportation last week.
A rumor held one of the four sulfur vessels Mosaic was importing to supplement its supplies was coming from India, which is normally an importer of sulfur itself. Two of the other vessels sold by ICEC were said to have been identified, one from Vancouver and the other from the Black Sea.
Valero was seeking input from the public on a $600-million sulfur recovery unit planned for the company’s refinery at Benicia, which will not only reduce sulfur emissions, but also put more product into the market.
Vancouver: Sulfur producers were said to have begun negotiations with China for new third quarter prices. However, that country has restricted the amount of sulfur it was importing until sometime after the Summer Olympics.
MARKET NOTES
India: The Indian Government this week has approved a new scheme for phosphatic and potassic fertilizers that would reduce the subsidy bill by Rs 11.63bn, besides encouraging the industry to raise production. The Cabinet Committee on Economic Affairs (CCEA) approved the Department of Fertilizer’s proposal relating to the Concession Scheme on de-controlled P&K fertilizers. The Concession Scheme on P&K fertilizers, which lapsed on March 31, included DAP, MOP, MAP, and 11 grades of complex fertilizers. The new scheme, which will come into effect retrospectively from April 1, 2008, based on a revised framework, envisages a reduction in subsidy outgo to the extent of Rs 11.63bn. The scheme is aimed at providing a long-term perspective to the fertilizer industry to seek out new and cheaper sources of phosphatic and potassic raw material, intermediaries, and finished fertilizers, thereby helping the Indian farmers meet their nutrients requirements. Under the new scheme, indigenous DAP has been brought at par with imported DAP for calculating concessions.
Welcoming the government decision, the Fertilizer Association of India (FAI) said that the new scheme, by and large, meets the expectations of the industry. “Industry is equally keen that the subsidy dues are disbursed without any delay. Since the farmer is paying only 15 percent of the actual cost of fertilizer, the rest has to come from the government if the companies are to avoid working capital crunch,” said Satish Chander, FAI director general. The CCEA decided that DOF would maintain a buffer stock of 350,000 mt of DAP and 100,000mt of MOP to meet any exigency.
The CCEA also sanctioned Rs 4.29bn for a centrally-sponsored scheme on a “national project on management of soil health and fertility.” The main components of the scheme will be for the strengthening of soil testing laboratories and promotion of integrated nutrient management.
India: The Union government has asked the states to act tough on hoarders and black marketers of fertilizer, which is not reaching the farmers and resulting in unrest in some parts of the country. Asserting that there were adequate supplies, Fertilizer Secretary J.S. Sarma asked farmers “not to resort to panic buying. State governments are requested to take action to de-hoard stock and ensure that stocks are evenly distributed.” In Haveri, in North Karnataka, one person was killed and four others were injured recently as police fired at farmers protesting fertilizer shortages.
Sarma said urea is plentiful in all the states and that Andhra Pradesh is getting almost double the DAP that it requires.
India: There is a declining trend in production of DAP and SSP in the country, according to local sources. The domestic production of DAP has declined substantially to 4.21 million mt in 2007-08 from 4.85 million mt in the previous year, and that of urea to 19.86 million mt from 20.3 million mt a year-ago. The program to import at least three million mt of DAP in the current financial year is expected to drive international prices. It is felt that the government should take steps to revive the fertilizer industry that will pave the way for reduced imports of DAP, urea, and other fertilizers. It is also felt that the government should exempt customs duty on inputs such as sulfur and rock phosphate, which will help reduce the bulging subsidy bill on fertilizers.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 103.92 | 108.42 | 43.88 |
| CF Industries | CF | 153.79 | 162.16 | 58.49 |
| Intrepid Potash | IPI | 65.50 | 64.09 | N/A |
| Mosaic | MOS | 142.73 | 151.25 | 38.81 |
| PotashCorp | POT | 219.20 | 233.01 | 76.85 |
| Terra Industries | TRA | 48.18 | 52.80 | 23.89 |
| Terra Nitrogen | TNH | 131.47 | 141.97 | 117.18 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 32.93 | 34.41 | 44.39 |
| Deere & Co. | DE | 71.50 | 77.68 | 59.51 |
| Scotts | SMG | 18.33 | 21.08 | 43.52 |
SPOT BARGE PRICES
Flooding Mississippi causes widespread crop damage
The swollen Mississippi River was on a rampage last week, overtopping or breaching more than 20 levees and flooding thousands of acres of Midwest cropland.
While waters began to recede in flood-weary Iowa, the high water surge continued to move south, threatening numerous communities in Illinois and Missouri. By Thursday, nearly 11 levees in the St. Louis area had been breached. River levels at Canton, Mo., reached 27.5 feet on Thursday, just short of the 27.88 mark set in 1993 and more than 13 feet above flood stage. The river was expected to crest at 40 feet in St. Louis by Saturday, more than 10 feet above flood stage and less than a foot lower than the record high reached in 1993.
Estimates of the amount of cropland affected by the floods last week ranged from 2 million to 5 million acres. Iowa Farm Bureau officials put the losses for that state alone at nearly $3 billion if flooded fields remain unplanted. Sources said 1.3 million acres of corn and 2 million acres of soybeans in Iowa are either flooded or unplanted because of sodden field conditions. Illinois officials at midweek said roughly 75,000 acres of farmland was under water.
Nearly 300 miles of the Mississippi River were closed to barge traffic because of the high water, but some locks on the upper Mississippi were slated to open as the week advanced. Locks 13 and 14 in Clinton and Pleasant Valley, Iowa, were scheduled to reopen June 18, with Lock 15 in Rock Island, Ill., expected to reopen June 19. Locks 16 through 25 remained closed late last week, and the U.S. Army Corps of Engineers one week earlier had predicted closures lasting possibly until early July in some areas (GM June 16, p. 1). The St. Louis harbor was expected to close on June 19 for at least five days as the river crests.
One news report estimated losses of $750,000 to $1 million per day for barge companies with vessels and tows stranded in closed sections of the river.
News reports on the rising river grew progressively more ominous as the week advanced. A levee gave way early Tuesday near Lomax, Ill., flooding thousands of acres of farmland covering about 12 square miles. The river overtopped or breached eight levees north of St. Louis overnight on Tuesday, and a levee breach in Adams County in western Illinois on Wednesday had the potential to swamp some 30,000 acres, or 47 square miles. Two more levees were breached Wednesday morning in northwestern Ill., and the Corps on Wednesday said a total of 21 additional levees in Missouri, Iowa, and Illinois were in danger of failing.
By most accounts, fertilizer terminals on the river system had emerged generally unscathed, although several sources said some sites were cut off from transportation due to flooded roads. Henry Merschman, president and CEO of Merschman Fertilizer LLC – headquartered in West Point, Iowa – told Green Markets, “We’ve been lucky and have not had major problems.”
Merschman said, however, that the levee protecting the company’s terminal at Burlington, Iowa, was being monitored 24/7, and was the scene of a tense waiting period early in the week. “We actually reached 27.5 feet at Burlington early Tuesday and it was still going up,” he said. A levee then failed across the river and caused water levels to fall several feet before continuing a second steady climb. “Once a levee breaks, it provides about a 24-hour reprieve,” he said. Water levels at the Burlington site had climbed back to 25.2 feet by Thursday morning, and were holding at that level when Merschman spoke with Green Markets Thursday afternoon.
Merschman said a direct load-out facility owned by the company was swamped last week despite sandbagging efforts, but the site was storing no product when the flood waters hit. He noted, however, that some grain elevators did not fare so well, and reports were emerging of several corn and soybean silos that burst after being flooded. Local reports said Ursa Farmers Cooperative in Warsaw, Ill., lost two of six concrete silos filled with soybeans on June 17, and Archer Daniels Midland closed grain elevators at Gulfport and Keithsburg, Ill., due to flooding concerns.
The flooded cropland continued to push up commodity prices last week, although prices dropped slightly Thursday on reports of improved Midwest weather conditions. Corn futures for July delivery fell 2.6 percent on Thursday to $7.27 a bushel from Wednesday’s record-high settlement at $7.46 a bushel on the Chicago Board of Trade. July soybeans lost 10.5 cents on Thursday, falling to $15.455 a bushel from Wednesday’s $15.56 a bushel.
While some sources were already talking about upcoming replanting efforts in the flooded areas, others were pessimistic. Some analysts predicted that it will be too late for crops to recover or be replanted by the time water recedes in the next several weeks. As one source commented to Green Markets, “What do you do now? Do you dam the levee and start pumping, or let it drain naturally? Either way, it’ll be weeks.”
Concerns were also emerging about a toxic stew of floodwaters containing sewage, fuel, and chemicals ranging from paint to pesticides. An Associated Press report quoted Leroy Lippert, chairman of emergency management and homeland security in Des Moines County, Iowa, as saying, “If you drink this water and live, tell me about it. You have no idea. It is very, very wise to stay out of it. It’s as dangerous as anything.”
The flooding was expected to have significantly less impact on the lower Mississippi River, which is more heavily influenced by Ohio River flows. Water levels in Baton Rouge, La., on June 17 were at 28.5 feet and on their way to an expected crest of 31.5 feet on July 1, while New Orleans water levels were at 10.4 feet early last week and expected to crest at 12 feet on July 1. Flood stage is 35 feet in Baton Rouge, and 17 feet in New Orleans.
Egypt wants to move EAgrium facility; Agrium may have to write off $280 M
Agrium Inc. said June 20 that the Egyptian Peoples Assembly has voted to recommend the relocation of the EAgrium facility to an unnamed location, and the Egyptian Prime Minister has indicated he will support the recommendation. The Peoples Assembly ratified the Fact Finding Committee Report that EAgrium satisfied all of the requirements of Egyptian law in acquiring the necessary permits and approvals to construct the EAgrium project on land zoned for industrial projects, in partnership with the Egyptian Government.
Agrium has previously stated, and remains of the opinion, that movement of the facility from the existing industrial-zoned site would require new financing, permitting, and the negotiation of new engineering, procurement, and construction contracts, and that it is not a viable option.
Agrium said it will be aggressively pursuing full recovery of its costs, equity contribution, and future lost profits.
The Egyptian Prime Minister has offered two possible options to resolve the matter. These options include a buyout of Agrium’s investment in the project, and/or the transfer to Agrium of an interest in an Egyptian government-owned nitrogen facility currently being commissioned adjacent to the EAgrium site. Agrium will be evaluating all options and may have to write off the approximately $280-million invested in the project in the second quarter of 2008.
Earlier in the week, Agrium reported that the $1.2 billion project had been cleared by the Egyptian Parliamentary Committee of all substantive issues relating to the project. Yet, the project was still on hold. Agrium was in negotiations with the government about returning the project to construction.
Construction on the project was stopped in late April. Agrium says it and its partners and international banks have already invested over $500 million and the project is now 42 percent complete from an overall engineering, procurement, and construction perspective.
Agrium had expressed disappointment that it was being singled out from other projects, considering it has advanced the project to world standards and has followed the same procedures as other world-class capital projects located at or adjacent to the industrial port of Damietta. Citing the Egyptian press, Agrium said special interest groups have organized a misinformation campaign within the local community in order to gain access to EAgrium’s land for other purposes.
Agrium noted that there are significant implications to Egypt if the project were not to proceed. In addition to the funds already invested, Egypt would be assuming a potentially significant lost profit claim, said Agrium. Given the Egyptian Government’s one-third investment in the project, it would be susceptible to a potential loss of approximately $150 million. Also, the local community and national economy would forego substantial economic benefits associated with the project, estimated to be in the hundreds of millions of dollars. Given the political uncertainty that this raises, Agrium said there are reports that various other international projects and investments have recently been suspended, including two large refineries and various other investment projects.
Agrium has been in Egypt for over four years, developing local community ties and obtaining all necessary permits for the development of the world-scale facility. The Agrium facility would be the sixth nitrogen facility in the country; there have been no environmental issues raised with any of these facilities.
Agrium, noted as an example, there is an Egyptian-owned nitrogen facility (MOPCO) directly across a small canal from EAgrium that is currently commencing production, and, to Agrium’s knowledge, these types of issues were not raised at that facility.
Saskferco is for sale
The Mosaic Co. and Investment Saskatchewan said June 20 they are seeking a buyer for Saskferco Products Inc. (Saskferco).
“Saskferco is an excellent company and will have an exciting future under new ownership,” said Jim Prokopanko, Mosaic president and CEO. “The sale of Saskferco will allow us to focus on our core businesses of potash and phosphates and to fund the planned expansions of our Saskatchewan potash mines and other non-U.S. assets. We remain fully committed to Saskatchewan and are aggressively pursuing our 5.1 million mt potash capacity expansion initiative in the province over the next 12 years.”
“Saskferco is a strong company that is well positioned for the future,” said Minister Lyle Stewart, the Minister Responsible for Investment Saskatchewan. “Provided that a fair value can be obtained, there is no longer any reason for the government to retain its minority ownership position. We expect Saskferco to continue as a vibrant and successful private company in our provincial economy.”
The owners said there can be no certainty a sale of Saskferco will result from this process.
The Saskferco nitrogen plant at Belle Plaine, Sask., has the capacity to produce 648,000 mt of anhydrous ammonia, 968,000 mt of urea, and 230,000 mt of UAN, according to the International Fertilizer Development Center.
CVR pulls fertilizer IPO
CVR Energy Inc., in a release dated June 13, said it has postponed indefinitely the initial public offering of CVR Partners LP. The previously filed registration statement will be withdrawn. CVR Partners was to include CVR Energy’s nitrogen assets, as well as some other properties.
CVR alluded to a possible change in direction of the IPO during its recent earnings call, as was reported in Green Markets (GM May 26, p. 1). CVR says that based on its review of public offering alternatives, the managing general partner has determined that current Master Limited Partnership (MLP) market conditions do not support the offering, which had been aimed at maximizing the value of the fertilizer business. It says keeping the fertilizer assets within CVR Energy provides greater value for its shareholders.
“The decision to withdraw the initial public offering of CVR Partners is based on MLP market conditions and is unrelated to the fundamentals and outlook for the fertilizer business, both of which continue to be strong,” said Jack Lipinski, CVR Energy CEO and the managing general partner of CVR Partners. “Given the positive environment in the agricultural sector and its related market performance, we believe more value is created for CVR Energy shareholders in our current form than in a publicly traded MLP at this time.”
Lipinski said CVR will continue to evaluate alternatives, including those in the public markets for maintaining and maximizing shareholder value for CVR’s fertilizer business.
ConAgra/Gavilon deal to close soon; new company to debut with positive ratings
ConAgra Foods Inc.’s sale of its trade and merchandising business to an investor group led by Ospraie Advisors LP (GM March 31, p. 1) is expected to close very soon. In the meantime the new unit, to be called Gavilon Group LLC, has already been racking up good reviews from Wall Street. Both Standard & Poor’s Ratings Services and Moody’s Investor Services are out with positive ratings for the new entity.
Gavilon will include ConAgra’s fertilizer trading business, which is based in Savannah. The fertilizer business has been a big money maker for ConAgra, particularly in the past few years. Other businesses included are grain, agricultural by-products, and energy.
S&P noted the company’s moderate hedging policies, solid cash flow from operations, strategically-located physical assets, experienced management team, and favorable near-term industry fundamentals. It said these would help mitigate inherent volatility in the agriculture and energy sectors.
S&P sees a stable outlook for Gavilon, expecting it will maintain its market position and continue to pursue a growth strategy while maintaining credit measures at or near current levels. Gavilon, which will continue to be based in Omaha, Neb., is expected to have $1.1 billion in total debt, according to S&P. S&P estimated the Gavilon purchase price as $2.8 billion, saying this includes book value plus $600 million, subject to working capital and other adjustments at closing.
S&P is giving Gavilon a “BB” corporate credit rating, and a “BBB” rating for its proposed $1.75 billion senior secured asset-based revolving credit facility (ABL). S&P said the latter is two notches above the corporate rating. S&P gave the company a “1” rating relating to the debt, saying this indicates expectations of a high rate of principal (90-100 percent) in case of default.
In the meantime, Moody’s Investors Service has reportedly assigned a “Ba3” corporate family rating to Gavilon, as well as a “Ba1” rating to the ABL. Moody’s said the outlook is stable.
Rentech nitrogen plant gets $53 M debt financing
Los Angeles-Rentech Inc. said June 16 that its ammonia fertilizer facility, Rentech Energy Midwest Corp., recently secured $53 million in total debt financing. REMC entered into a credit agreement for $26.5 million with a unit of Credit Suisse on May 30, 2008. The credit agreement was increased to $53 million on June 13, 2008. The loans have a two-year term, with an optional one-year extension. The net proceeds of the term loans are available to Rentech and will be used for general corporate purposes. The loans are expected to be repaid over the term from cash flows generated at REMC. “We are pleased to have enhanced our liquidity position through this debt financing, which is made possible by the financial performance of our ammonia fertilizer facility,” said Merrick Kerr, Rentech executive vice president and CFO. Rentech continues to see strong demand and favorable market prices for the REMC fertilizer products. The company is reaffirming its prior financial guidance of projected fiscal year 2008 EBITDA for REMC of over $40 million. REMC’s strong financial performance provides cash flows that help support Rentech’s efforts to commercialize its gasification technology business. In other news, Rentech reports that it has formed an alliance with UOP LLC, a Honeywell company, to jointly offer the companies’ respective technologies for the commercial production of synthetic fuels, specialty waxes, and chemicals.