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Senate approves Farm Bill, includes ag security tax credit

News

The Senate passed its five-year, $286 billion version of the 2007 Farm Bill (H.R. 2419) by a 79-14 vote on Friday, Dec. 14. The bill includes Section 12405, the Agricultural Chemicals Security Credit, which is strongly supported by a coalition of nearly 40 state and national trade groups, including the Agricultural Retailers Association, The Fertilizer Institute, CropLife America, the National Agricultural Aviation Association, and the Chemical Producers & Distributors Association.

The security credit legislation would help eligible agricultural businesses to partially offset security costs by providing a tax credit equivalent to 30 percent of the total amount paid on implementing qualified security measures. The legislation provides for up to $100,000 in security tax credits per facility, with an overall company cap of $2 million per year. Sen. Pat Roberts (R-Kan.), a member of the Finance Committee, successfully led the effort to include the legislation in the ag tax relief title attached to the 2007 Farm Bill.

ARA, TFI, and the other trade groups supporting the security tax credit language sent letters on Dec. 21 to the chairmen and ranking members of the House Committee on Finance and the Senate Committee on Ways and Means, urging them to keep the security tax credit provision in any final conference agreement between the House and Senate.

“Maintaining an abundant and safe domestic food supply is critical to our nation’s security,” the letters stated. “This important provision, which establishes an agricultural chemicals security credit, would provide agricultural retailers, distributors and other eligible agricultural businesses with the financial resources necessary to improve security at their agricultural fertilizer and pesticide storage facilities and help reduce threats from terrorists, drug dealers or other criminals.”

The Senate version of the Farm Bill also includes language for more oversight of over-the-counter energy trades, and clarifies the Commodity Futures Trading Commission’s (CFTC) authority to enforce the regulations applicable to trading of significant price discovery contracts. An amendment was also included to limit the distribution of farm payments to deceased individuals and their estates.

Many amendments were rejected, including two that would have put tighter limits on farm subsidies. The amendments by Sens. Chuck Grassley (R-Iowa) and Byron Dorgan (D-N.D.) would have capped annual farm payments at $250,000 per couple, down from $360,000, and would have barred subsidies to full-time farmers making more than $750,000 a year and part-time farmers making more than $250,000 annually.

Fertilizer business keeps ConAgra in plus column

News Briefs, Western Cornbelt

Omaha-ConAgra Foods Inc.’s fertilizer business continues to shine for the company as its food business suffers under the weight of recent recalls. A peanut butter recall last summer was followed by a pot pie recall in October, which cost the company an estimated $27 million. Pot pie production resumed in December. ConAgra’s Trading and Merchandising segment, which includes the fertilizer business, saw a 322.9 percent increase in operating profits in the second quarter ending Nov. 25, 2007, to $164.5 million on sales of $545.5 million, versus the year-ago $38.9 million and $297.3 million. By comparison, operating results in the Consumer Foods segment, ConAgra’s largest segment, were off 15.6 percent. Energy Trading is also within the T&M unit; however, its results, while strong, according to ConAgra, were below year-ago amounts, thereby further showing the positive impact of the fertilizer unit. Six-month T&M profits were up 340.6 percent, to $240.1 million on sales of $873.4 million, versus the year-ago $54.5 million and $502.7 million, respectively. ConAgra-wide, second-quarter net income was up, at $244.8 million ($.50 per share) on sales of $3.5 billion, versus the year-ago $213.3 million ($.42 per share) and $3.1 billion, respectively. Six-month net income was up, at $420.2 million ($.85 per share) on sales of $6.47 billion, versus the year-ago $380.0 million ($.74 per share) and $5.8 billion, respectively.

EuroChem reports positive news from U.S. DOC

News Briefs, Russia

Moscow-The U.S. Department of Commerce has published a preliminary decision determining a 0 percent dumping margin on EuroChem’s urea imports to the U.S. The preliminary decision came in December and was published in the Federal Register (See FR Today). As a result, EuroChem says if the decision becomes final, its urea exports to the U.S. will be free of antidumping duties. Individual review of antidumping measures for EuroChem was initiated on Feb. 27, 2007, on the basis of a urea shipment to the U.S. at the end of 2006. The company needed to prove lack of affiliation with the Soviet-time urea exporters to the U.S. and obtain an individual duty as a new exporter. EuroChem says the review is complicated, and in order to fully examine materials submitted by the parties, the DOC has extended the final decision deadline to a maximum of 150 days. The final verdict shall be out not later than May 15, 2008. On July 14, 1987, the U.S. International Trade Commission and the DOC adopted an order introducing an antidumping duty of 68.26 percent on urea from the USSR. Following the break-up of the Soviet Union, the antidumping duty order on solid urea was transferred to the individual members of the CIS. Currently, the antidumping duty applies to urea from Russia (68.26 percent) and Ukraine (53.23 percent).

Agrium refiles antitrust documents

Alberta, News Briefs

Calgary-Agrium Inc. announced Dec. 27 that it withdrew its notification and report form submitted to the Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) under the Hart-Scott-Rodino Antitrust Improvements Act in connection with the previously announced acquisition of all of the outstanding common stock of UAP Holding Corp. Agrium refiled its notification and report form on Dec. 28, 2007. Agrium originally filed its notification and report form under the HSR Act on Dec. 10, 2007. By re-filing, Agrium will have a full 15-day period after the re-filing to discuss the transaction and answer any questions raised by the DOJ or the FTC. The waiting period under the HSR Act will expire at 11:59 pm New York City time Jan. 14, 2008, unless this period is earlier terminated or extended.

Mosaic prepays $150 M in debt

News Briefs, Northern Plains

Plymouth, Minn.-The Mosaic Co. on Dec. 21 announced that it is notifying the lenders under its senior secured bank credit facility of its election to prepay $150 million principal amount of term loans under the facility on Dec. 31, 2007. “This prepayment reflects a very important milestone for Mosaic,” said Jim Prokopanko, president and CEO. “We have successfully prepaid $1 billion of long-term debt in the past eight months, and we’ve also established a strong financial base from which to grow.” The prepayments will consist of $56.4 million principal amount of Term Loan A-1 borrowings and $87.1 million principal amount of Term Loan B borrowings by Mosaic, and $6.5 million principal amount of Term Loan A borrowings by its subsidiary, Mosaic Potash Colonsay ULC. After the prepayments, outstanding term loans under the facility will be reduced to $2.2 million principal amount of Term Loan A borrowings, $19.2 million principal amount of Term Loan A-1 borrowings, and $29.6 million principal amount of Term Loan B borrowings. With the prepayment on December 31, 2007, during the last eight months Mosaic will have used cash generated by its ongoing business operations to prepay $1 billion of long-term debt. Mosaic considers the prepayments to be a significant step in its plan to reduce outstanding borrowings, strengthen its balance sheet, and achieve investment grade credit ratings.

Sherwood increases Rentech stake, reduces offer

California, News Briefs

Los Angeles-Sherwood Investments Overseas Ltd. said Dec. 18 that it has increased its stake in Rentech Inc. from 2.86 percent to 3.24 percent. In addition, it is now offering to buy all issued and outstanding shares at $2.28, rather than the $2.70 that it proposed in November (GM Nov. 26, p. 1). Sources told Green Markets the decrease was likely due to Rentech’s recent earnings report, in which a $38.3 million ($.13 per share) one-time charge was taken (GM Dec. 17, p. 14). However, the offer is still above the market. Sherwood’s Julian Benscher, in a letter to Rentech CEO Hunt Ramsbottom, noted that the offer represents a premium of more than 30 percent to the Dec. 17 closing price. He also reiterated that this is an offer and not an “offer to make an offer.” Ramsbottom had said the latter about Sherwood’s November offer.

Mosaic seeks to overcome mine objections

News Briefs, Tampa

Tampa-The Mosaic Co. was seeking last week to overcome objections to the expansion of two of its projects, one at the Four Corners Mine in Hillsborough County, Fla., and the other at Manatee County to the south. In Hillsborough, a zoning master will hold a hearing on the company’s request to extend its Four Corners Mine about 1,600 acres on Jan. 14. Some residents there have signed a petition to stop the expansion out of fear of noise, dust, and possible well contamination, according to Mosaic spokesman David Townsend. In Manatee, the county’s planning and zoning commission voted to approve a staff recommendation to reject the plan to mine the 2,000-plus-acre Altman tract. Townsend said that recommendation was based on a report by a county-hired consultant, who said reclamation does not restore the quality of wetlands. However, Townsend said many of the wetlands in question have been ditched since the 1940s, and would be improved after the mining activity. The Manatee County Commission will vote on the plan on Feb. 5.

Airgas acquires Pacific Diazo Products

News Briefs, Northeast

Radnor, Penn.-Airgas Inc. on Jan. 2 announced it has acquired the assets and operations of Pacific Diazo Products Inc., (PDP), a distributor of aqua ammonia, anhydrous ammonia, and related products and services. Effective Dec. 31, 2007, its operations have been integrated into Airgas Specialty Products, a leading national distributor of industrial ammonia products and services, various process chemicals, and refrigerants. PDP, headquartered in Colton, Calif., had more than $9 million in sales in calendar 2006. The acquired operations include a production and distribution facility in nearby Fontana, Calif., and two distribution locations in southern California and Arizona. Its approximately 20 employees have joined Airgas Specialty Products, which has 24 locations nationwide for distribution of anhydrous ammonia and aqua ammonia products and services, and nine locations for distribution of refrigerants. “PDP’s operations will expand our ammonia capabilities on the West Coast,” said Chuck Broadus, president of Airgas Specialty Products. “We are also pleased to welcome its co-owners, David Rubenstein and Joseph Ennes III, to the Airgas team. David, who has served as PDP’s president since 1986, will assist in the transition of the business. Joe will serve as Western Region Sales Manager for our ammonia operations.” Airgas is a leading supplier of ammonia products and services in the U.S. for nitrogen oxide abatement (DeNOx), metal finishing, water treatment, chemical processing, and refrigeration. The ammonia business, which traces its roots back more than a century, was acquired in 2005 from LaRoche Industries. Since then, process chemicals and enhanced refrigeration capabilities, through the 2007 acquisitions of CFC Refimax and Gartech Reclamation, have been added to the platform.

Northumberland Grain acquires Hunco

Canada, Eastern Canada, News Briefs

Brighton, Ont.-Northumberland Grain Inc., a joint venture of Agrico Canada Ltd./Ltee and Dexter and Karen Harder, acquired the assets of Hunco Farm Supply Co., Port Hope, Ont., in late December and will continue offering full service and agricultural supplies at the facility. “We plan to enhance the service by adding new products,” said Dexter Harder. “It is also a strategic move for us as we plan to close our plant in Cobourg next summer and consolidate our operations at the Hunco location.” Northumberland is a crop input business and grain elevator, with a head office in Brighton, Ont., and a branch at Cobourg. The latter is strictly a crop input outlet and was formerly a retail outlet owned 100 percent by Agrico. Hunco is a complete crop input dealer and handles feed and other farm supplies. Northumberland says the amalgamation of the three operations will result in two efficient crop input locations with ease of access and a full line of farm supplies. “We are proud to be a part of a progressive company like Northumberland Grain and we will relocate our liquid nitrogen terminal, currently at Cobourg, to the Hunco property,” said Agrico President R. L. “Bob” Whitelaw. “This acquisition will be a benefit to Agrico as well because a major component of our liquid nitrogen comes from Cameco at Port Hope, so we are moving closer to the source. Agrico has been serving agriculture in the area since 1931. The Cobourg location was opened in 1967 and we are pleased to continue that tradition by partnering with Northumberland Grain.” A name change is in the works for Hunco, which will be merged under the name Northumberland Grain. Northumberland has been offering elevator service in Northumberland County since 1980 and became a 50-50 joint venture with Agrico in 1996.

Alaska sides with LNG exporters

News Briefs

Anchorage-Governor Sarah Palin (R) has announced an agreement between the state and oil industry officials relating to LNG exports and further natural gas exploration on the Cook Inlet. Palin says the state will support a two-year extension of the federal export license for the LNG plant on Kenai Peninsula. Plant owners Marathon Oil Corp. and ConocoPhillips filed for an extension last January. The present export license expires in 2009. The owners have agreed that adequate supplies of gas will be available for local utilities. The agreement also requires the plant owners to develop additional natural gas reserves in Cook Inlet and allow third parties the opportunity to monetize their gas production through the LNG plant. In addition, the two companies have agreed to sell Cook Inlet seismic and well data to third parties. Gov. Palin’s agreement is not the final word on the issue, according to an Agrium spokesperson, who said Agrium has opposed the LNG export extension. The spokesperson said that it is up to DOE to decide if it is best to export the gas or keep it in the U.S. to support domestic jobs. To date, the gas has been going to Japan. The U.S. Department of Energy is expected to make a final decision on the export extension this spring. The state, along with Agrium, an electric utility, a gas distributor, and another oil company, reportedly all opposed the initial request for the two-year extension. The new agreement effectively takes most of the opposition away except for Agrium. Agrium idled its Kenai, Alaska, nitrogen plant late last year due to a shortage of gas. It is now focused on developing a coal gasification plant that could return its nitrogen plant to production. More word on whether it will proceed with coal gas is expected in the first half of 2008.