| Company | Symbol | Price | Week Ago | Year Ago |
| Producer | ||||
| Agrium | AGU | 41.91 | 42.25 | 24.14 |
| CF Industries | CF | 58.17 | 54.63 | 15.32 |
| Mosaic | MOS | 40.03 | 35.64 | 15.20 |
| PotashCorp | POT | 83.81 | 78.37 | 31.28 |
| Terra Industries | TRA | 23.28 | 24.45 | 6.93 |
| Terra Nitrogen | TNH | 92.61 | 117.89 | 22.00 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 46.86 | 42.99 | 37.63 |
| Deere & Co. | DE | 120.18 | 121.02 | 72.60 |
| Scotts | SMG | 43.56 | 41.75 | 38.08 |
| UAP | UAPH | 26.70 | 27.72 | 19.61 |
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SPOT BARGE PRICES
PotashCorp reports all-time record quarter; next five years will be best in history, says Doyle
Potash Corp. of Saskatchewan Inc. reported its best quarterly earnings in the history of the company. Second-quarter earnings were $285.7 million ($.88 per diluted share) on sales of $1.35 billion, compared to the year-ago $175.1 million ($.55 per share) and $928.7 million. All three major nutrients saw stronger prices and increased volumes. Potash volumes were up significantly, especially since the year-ago period reflected delayed purchases by major offshore buyers.
“The fundamentals that drive our business have aligned for the foreseeable future, and we are well positioned to capitalize on the growing global need for all three primary nutrients,” said PotashCorp President and CEO Bill Doyle. “Fertilizer applications have increased as farmers around the world strive to keep pace with the rising demand for crops. Our world-class assets focused long-term strategies, especially our Potash First approach, have positioned us for strong performance in these conditions as we demonstrated again this quarter.”
Based on its performance, which surpassed expectations in all three nutrients, PotashCorp increased its range for full-year net income from $2.50-$2.83 per share to $3.00-$3.25 per diluted share. It expects the third quarter to come in at $.70-.$.80.
Doyle was in effect singing an old Carpenters’ tune. “We are only just beginning to realize the benefits of our leverage in potash, the foundation of our business. With greater volumes, higher prices and lower unit costs, we are delivering record returns and increased value to our shareholders. As we look ahead, we expect the next five years to be the greatest in our history.” Doyle told analysts that PotashCorp has not peaked. He said that the U.S. will not be growing below 90 million acres of corn anytime soon, noting the near 93 million acres planted this year.
As for potash, he said it is on allocation around the world, with major buyers paying much higher prices. He said China is expected to come to the negotiating table early this year and predicted they would see a significant increase. He noted that they are currently paying approximately $225/mt DEL, whereas countries such as Indonesia, Malaysia, and Vietnam are paying $300/mt DEL.
Phosphate delivered its highest gross margin in company history, more than tripling year-ago numbers. Solid phosphates finally got their place in the sun, generating some $51.4 million during the quarter while just breaking even for the year-ago quarter. The company predicted increased phosphate prices, with higher price ideas for phosphate rock putting pressure on those who have to buy their rock from other sources. PotashCorp is in that category for Geismar, but noted that it has long term contracts. It expects to pay up as those come up for renewal. The company said some 17 percent of global P205 is made from purchased rock.
Nitrogen also saw a record $144.2 million gross profit. Ammonia sales volumes were up 30 percent quarter over quarter, as more product was available from Trinidad No. 1 due to a turnaround and debottleneck. Urea sales were off, but only because more customers bought product in the first quarter. Nitrogen solutions volumes were up 174 percent, with the company capitalizing on its Geismar facility.
In addition, offshore investments in Chile, Jordan, Israel, and China contributed $81.5 million to the other income line for the first six months, more than doubling the year-ago figure.
PotashCorp-wide, six-month net income was $483.7 million ($1.50 per share) on sales of $2.5 billion, up from the year-ago $300.6 million ($.95 per share) and $1.79 billion, respectively.
| Sales | Potash | Nitrogen | Phosphate | Consolidated |
| 2Q-07 Sales | 510.2 | 481.2 | 361.7 | 1,353.1 |
| Gross Margin | 260.4 | 144.2 | 96.8 | 501.4 |
| Mt (000) sold | 2,813 | 1,580 | 946 | |
| 2Q-06 Sales | 296.4 | 342.4 | 289.9 | 928.7 |
| Gross Margin | 132.8 | 91.7 | 28.9 | 253.4 |
| Mt (000) sold | 1,690 | 1,253 | 923 | |
| YTD-07 Sales | 890.7 | 900.8 | 716.3 | 2.507.8 |
| Gross Margin | 434.6 | 275.5 | 161.0 | 871.1 |
| Mt (000) sold | 4,978 | 2,966 | 2,023 | |
| YTD-06 Sales | 522.2 | 674.3 | 593.8 | 1,790.3 |
| Gross Margin | 223.6 | 171.1 | 62.2 | 456.9 |
| Mt (000) sold | 2,949 | 2,334 | 1,898 |
Farmers Cooperative Association to merge with MKC
Farmers Cooperative Association (FCA), based in Talmage, Kan., will merge with Mid Kansas Cooperative Association (MKC) on Sept. 1, following a positive vote by 98 percent of FCA patrons in a special meeting on July 24. MKC, headquartered in Moundbridge, Kan., will see its territory expand to 10 counties and 37 retail and wholesale locations in central Kansas as a result of the merger.
“I am very pleased that FCA members approved the merger with MKC,” said Dave Christiansen, MKC president and CEO. “MKC will most certainly be a stronger overall organization with the addition of the FCA members and employees.”
FCA has operations in Talmage, Abilene, Solomon, Longford, Bennington, Salina, Wells, Niles, and Culver, and provides fuel, feed, agronomy, and grain services to more than 3,500 members and patrons. The co-op will operate under the MKC banner after the merger, and brings approximately 47 full-time employees to the combined enterprise. FCA’s agronomy centers are located at Solomon, Abilene, Talmage, Longford, and Bennington.
FCA said its board members interviewed three cooperatives when the decision was made to explore a merger due to the “ongoing challenge faced by agricultural businesses.” A source close to the sale said FCA took a “proactive approach” after back-to-back drought years impacted revenues.
FCA said MKC was selected as a cooperative partner in part because of its profitable operations, sound financial condition, and strong management. FCA said its board members also believed that as a part of MKC they would be able to maintain a cooperative presence within their trade territory.
“MKC shares our values, our mission and our standards of customer service,” said Toby Watt, FCA board chairman. “I am very pleased to see our members vote in favor of the merger and feel that we will become a stronger organization as we transition to the MKC family.”
The FCA board of directors will appoint one board member and one associate board member to serve on the MKC board of directors.
MKC has more than 4,500 members and 145 full-time employees, and had total sales at year-end February 2006 of over $217 million. The company posted nearly $3.16 million in patronage allocations in 2006, along with $558,728 in equity redemptions. MKC’s trade territory comprises some 550,000 acres of cropland, on which approximately 70,000 tons of fertilizer are applied annually.
MKC’s agronomy business includes a full line of fertilizers, crop protection products, and seed, in addition to custom application equipment and crop consulting and precision agriculture services. The cooperative has fertilizer facilities in Kansas at Buhler, Burns, Castleton, Conway, Florence, Galva, Goessel, Groveland, Haven, Inman, Lindsborg, Marquette, McLain, Moundridge, Peabody, Roxbury, Walton, and Whitewater.
In addition to its agronomy and fuel services, MKC has 27 grain locations with a combined elevator space of 20.3 million bushels, and offers wholesale and retail feed sales to swine, beef, dairy, and poultry operations within its trade territory.
United Suppliers drops AN; Kansas starts tracking AN sales
United Suppliers Inc. is no longer in the ammonium nitrate business. The company, based in Eldora, Iowa, decided to stop selling AN at the close of this year’s spring planting season due to continuing concerns about liability and security.
United Suppliers joins a growing list of agronomy companies that have exited the AN market due to similar concerns. Earlier this month, Green Markets reported the decision by Terral River Services Inc. in Alexandria, La., to drop AN from its fertilizer line because of burdensome federal security regulations enforced by the U.S. Coast Guard (GM July 2, p. 1).
Laws to track AN sales are also being considered at the federal level, and are already in place in several states. A bill went into effect July 1 in Kansas requiring AN dealers to maintain logs of AN sales for three years. The logs must include the name, address, driver’s license number, date of purchase, and amount purchased for each sale.
According to the Kansas Agribusiness Retailers Association (KARA), which supports the legislation and worked for its introduction, the state department of agriculture will have authority to inspect records to make sure dealers are complying with the law. If the AN is purchased by a third party, the same information is required to be logged for both the end-user and the third party. The law also gives the agriculture department authority to charge up to $25 to AN registrants unless the registrant is also a registered custom blender.
“KARA supports securing AN in a reasonable fashion so that regulatory compliance does not price the product out of the market,” the trade association said. Kansas joins several other states, including Oklahoma, Nevada, South Carolina, Maryland, California, and New York, that have either already approved or are in the process of approving similar bills to track AN sales to keep it out of the hands of those with criminal intent.
At the federal level, companion bills are under consideration in the House and Senate to create a regulatory system that would require all AN producers, sellers, and purchasers to register with the Department of Homeland Security to be checked against federal terrorism watch lists.
The Secure Handling of Ammonium Nitrate Act of 2007, which has the support of industry associations such as The Fertilizer Institute and the Agricultural Retailers Association, would require producers and sellers to maintain records of all sales for two years. The records must include the producer’s name, address, phone number, and registration number, as well as the date and quantity of AN sold. The bill, which does not preempt state law, would also require all thefts or unexplained losses to be reported to federal law enforcement within 24 hours.
Lawmakers said the federal AN sales provisions could be added to a bill that would implement the recommendations of the Sept. 11 commission (HR1), which is currently awaiting conference with the Senate version (S4). Kathy Mathers of The Fertilizer Institute, however, told Green Markets that “given what we have heard from the Hill, the likelihood is slim at this point that the AN language from the Senate bill will be added to the Sept. 11 bill.”
New Brunswick expansion will take PotashCorp capacity to 14.9 M mt
Potash Corp. of Saskatchewan Inc. on July 20 announced plans for a new two million mt potash mine and expanded milling operations in New Brunswick that will raise the company’s projected total annual potash capacity to 14.9 million mt by 2011. The four-year construction project will begin once necessary regulatory approvals are obtained and has an estimated cost of US $1.6 billion, which includes US $100 million for additional upgraded granular production capability.
“This major expansion prepares us for the next step in the growth of our company,” said PotashCorp President and CEO Bill Doyle. “By continuing to invest in our Potash First strategy, we will be well positioned to meet the expected growth in potash demand around the world.”
PotashCorp said the expansion at New Brunswick is strategically and logistically important, as it is located close to the company’s existing terminal at the Port of Saint John, offering short shipping times to key Latin American markets such as Brazil. Substantially increasing production in Eastern Canada also further diversifies the sources of PotashCorp’s growing potash capacity, the company said.
Using conventional underground methods, the new mine will draw on PotashCorp’s Picadilly deposit, which contains potash ore grades similar to those found in Saskatchewan deposits. Water inflow is not expected to be an issue in the new mine, the company said. Once fully developed, the new mine will replace the existing underground operation, while the current milling facility will be expanded by 1.2 million mt, including 750,000 mt of additional compaction capacity. Water inflow at the existing New Brunswick mine costs the company some $30-$40/mt per ton and it still makes money, said Doyle.
Doyle termed the deposit as spectacular, saying the relatively flat new deposit contains two potash seams, each varying in thickness to a maximum of 60 feet, that will provide a long-term, low-cost source of potash. By comparison, he said Saskatchewan seams are 17 feet.
Because this new mine will be built adjacent to the company’s existing New Brunswick property and use some of its facilities, PotashCorp said construction can be completed in less time than the five to seven years typically projected for a greenfield potash operation, at a per-mt cost 33 percent below the current estimate of $2.22 billion needed for 2 million mt of new production in Saskatchewan. The project will be financed out of free cash flow and existing credit facilities.
Plans are to keep the existing mine and mill fully operational throughout the construction and new mine development process. Once completed, the new mine will create 140 new full-time positions.
The New Brunswick development is in addition to previously announced debottlenecking and expansion initiatives underway at PotashCorp’s Lanigan, Patience Lake, and Cory operations in Saskatchewan, which are expected to increase the company’s productive annual capacity from 10.7 million mt to 13.7 million mt by the end of 2010. Doyle told analysts that further expansions in Saskatchewan could take total capacity to 15.7 million mt by 2015.
“Our goal is to be the lowest-cost supplier on a delivered basis to all key world markets,” Doyle said. “By expanding our existing operations in New Brunswick, we are capitalizing on the logistical advantages there, further strengthening our leadership position in potash for the benefit of our customers, investors and other stakeholders over the long term.”
EU lifts trade restrictions on Russian urea
Brussels, Belgium-The European Union has lifted a tariff on Russian urea that was in place since 1995, claiming Russian urea exporters are no longer dumping their product at below fair market value and therefore no longer represent a threat to EU urea producers. The EU said Russian companies such as EuroChem and Nevinnomyssky Azot are selling their urea “significantly above” a minimum price established by the tariff, which is determined by the difference between a price floor of 115 euros/mt and the import price when it is lower. “There is no reason why the Russian exporting producers would apply lower prices if the existing measures were repealed, considering they have managed to sustain much higher prices,” the EU said in a July 23 decision. The decision represented a defeat for the European Fertilizer Manufacturers Association (EFMA), which wanted the tariff extended for another five years and argued that lifting it would lead to price-undercutting by Russian exporters. Press reports said EFMA had also wanted the duty turned into a fixed levy in euros/mt. The EU statement, however, said the financial situation of EU urea producers “overwhelmingly improved” between 2002 and 2006, and domestic producers have “not suffered any injury” from Russian exports, which continued to be dumped while being sold above the price floor. EU urea manufacturers include Grand Paroisse of France, Yara International ASA based in Oslo, SKW Stickstoffwerke Piesteritz GmbH in Germany, Fertiberia SA in Spain, Nitrogenmuvik Zrt. in Hungary, and Chemopetrol AS in the Czech Republic. According to press reports, Russian companies have 16 percent of the EU’s 1.5 billion-euro urea market.
Anti-meth grant program included in farm bill
Washington, D.C.-An anti-methamphetamine grant program was included in the 2007 farm bill during the full House Ag Committee’s mark-up of the legislation earlier this month. The amendment, adopted by a voice vote after being introduced by Rep. Leonard Boswell (D-Iowa) on July 16, authorizes a grant program that would allow cooperatives, agricultural retailers, or producers who own an anhydrous ammonia nurse tank to purchase a chemical additive or meth inhibitor that would reduce the amount of methamphetamine that could be produced. Grants under the program would be $40-$60 per nurse tank, per year on a given facility, for as many nurse tanks as the facility has. The Agricultural Retailers Association, which provided input in the development of the amendment as it relates to the definition of agricultural retailer, said it supports the Boswell amendment. “It will provide grant funding to ag retailers to help offset costs of purchasing meth inhibitors placed in anhydrous ammonia to prevent theft by drug dealers,” ARA’s Richard Gupton told Green Markets.
Environmental Respect Award recipients honored
Washington, D.C.-Wisconsin River Agronomy LLC of Adams, Wisc., has been selected as the national winner for the 2007 Environmental Respect Awards. Representatives of the company accepted the award at a special ceremony on July 19 in Washington, D.C., along with the four regional Environmental Respect Award winners and the international Ambassadors of Respect recipients. The Environmental Respect Awards, sponsored each year by CropLife® magazine and DuPont Crop Protection, are the agricultural industry’s highest recognition for environmental stewardship among U.S. agricultural retailers. Wisconsin River Agronomy won the award based on excellence in site design, in-plant storage and handling procedures, proper application, and leadership in safety and stewardship among customers and employees. Wisconsin River Agronomy was also a regional and state winner for 2007, and was joined in the regional category by Ritter Crop Services Inc., Marked Tree, Ark.; Simplot Grower Solutions, Berea, Neb.; Growmark FS LLC, Bridgeton, N.J.; and The McGregor Co., Oakesdale, Wash. Other state winners this year included Ritter Crop Services; Crop Production Services, Dothan, Ala.; Douglass Fertilizer & Chemical, Clewiston, Fla.; Nichols Ag, Nichols, Iowa; UAP Distribution, Flora, Ill.; Daylight Farm Supply Inc., Evansville, Ill.; Sims Fertilizer & Chemical, Osborne, Kan.; Crop Production Services, Blissfield, Mich.; Consumer’s Co-op, Litchfield, Minn.; Crop Production Services, Sikeston, Mo.; Simplot Grower Solutions, Bayard, Neb.; Carolina Eastern-Vail Inc., Salem, N.Y.; Wilco Agriliance LLC, Mt. Angel, Ore.; Crop Production Services, Bloomsburg, Pa.; Western Consolidated Cooperative, Twin Brooks, S.D.; and Simplot Grower Solutions, Moses Lake, Wash.
Coffeyville puts price tag on residential purchases
Coffeyville, Kan.-Coffeyville Resources Refining & Marketing LLC is willing to purchase approximately 300 flood-damaged homes (GM July 23, p. 1) at a price calculated at 110 percent of the pre-flood fair market appraised value. It has already received 200 completed appraisals based on claims previously filed. The company will guarantee purchase of eligible flood-damaged residences for qualified homeowners who contact it during the next 30 days. Participation in the program is strictly voluntary. Both the City of Coffeyville and Coffeyville Resources believe this program will speed recovery efforts within the designated flood-affected area and help families reestablish their lives. “This innovative program is good for Coffeyville and its citizens, which is why city officials are backing it,” said Keith Osborn, executive vice president and general manager of the refinery. “For our company, this program represents our commitment to helping the city and its residents recover.” The designated homes are the properties in Coffeyville determined to be most affected by the flood and subsequent oil spill. The company said it will use local banks and real estate title companies to quickly and efficiently purchase homes under the program so that homeowners can get access to money for use as down payments on their next Coffeyville residences. The company said its claims office will also provide residents with contact information for federal and state financial assistance programs, which could be used to assist with buying a new home. The company said it has no plans for the purchased land other than remediation, although after remediation it could be made available for public use if requested.