Winnipeg-Agricore United (AU) and James Richardson International Ltd. (JRI) announced April 19 that AU has accepted JRI’s offer to match the proposal made by Saskatchewan Wheat Pool (SaskPool) on April 13, 2007, to buy AU. The revised JRI offer is an all-cash offer for 100 percent of the limited voting common shares of AU at a price of $19.25 per share. Holders of Series A convertible preferred shares of AU will receive $24.00 in cash per share, plus accrued and unpaid dividends. The transaction has a total enterprise value of approximately $1.8 billion. The proposed transaction between AU and JRI has been approved by the AU board of directors. The acquisition agreement includes customary non-solicitation and fiduciary out provisions, including a termination fee of $35 million, payable to JRI in certain circumstances. The transaction is expected to be completed in June 2007. Had AU opted for the April 13 offer by SaskPool, it would have had to pay JRI a $24 million termination fee. JRI had until April 20 to match or top SaskPool’s offer.
All posts by traceybg@gmail.com
‘Rare’ anhydrous incident causes N.D scare .
Lisbon, N.D.-Anhydrous ammonia thefts are down significantly in North Dakota because of controls over sales of cold medications, but Farmers Union Cooperative here got hit early Sunday, April 15 in what was probably the first such incident in a couple of years. Co-op officials said the thieves departed in a hurry, leaving the valve on the 1,000-gallon nurse tank open and causing the release of 350 gallons. “It’s the first theft that I know of since I’ve been here,” Agronomy Manager Dan Olson told Green Markets. “They used a hose and duct tape to siphon into an LP cylinder and when the pressure built up, it just blew the hose and the duct tape off,” Olson reported. “Apparently, at that point, they just took off running.” He said the police and fire departments got the valve closed and alerted residents, who were mostly asleep at the time, to stay inside and keep their windows shut as the vapor cloud drifted southeast. Olson said there were no evacuations, as reported in the local press, and calm was restored in about an hour and a half as the cloud drifted away. There was one report that a newspaper carrier out on his early rounds was treated at a hospital and released. No other injuries were reported. The only other loss was a large amount of produce at a nearby grocery store, where the heating system sucked in some of the fumes. Olson said the manager closed the store Sunday, threw out the produce, and washed down the floors, and then got the okay to reopen Monday. North Dakota has had restrictions on pseudoephredrine sales for two years, and Gary Wagner, registration coordinator in the fertilizer section of the state agriculture department, said anhydrous thefts are “not as common as they used to be.” Wagner didn’t have any statistics, but said the law “has been helping a lot as far as I can tell.”
Agrium eyes rail bonds for gasification plant
Kenai, Alaska-Agrium Inc. officials think they may have a way to finance the conversion of its troubled Nikiski nitrogen plant to coal gasification – that is, if state legislators agree. The legislature has been asked to authorize the issuance of $2.6 billion in tax-free bonds, with the proceeds being used for the Alaska Railroad, which wants to haul coal for the gasification plant and for construction of the plant itself. Agrium spokeswoman Lisa Parker said the railroad needs to purchase railcars and locomotives and upgrade its system, and under an unique authority granted by Congress can issue the tax-free bonds with legislative approval. The existing rail route extends from Fairbanks to Anchorage and Seward, and the coal trains would be routed from the mine site at Healy to Port MacKenzie or the Port of Anchorage. “It’s one of the options we are looking at,” Parker explained. “We are also in discussions with potential equity partners (regarding) the capital costs.” She declined to disclose any names. Parker reported that Agrium is hoping to bring the gasification project on line in 2011 or 2012, and is progressing toward its next “go or no go date” later this year. In the meantime, she added, “we want to keep the plant operating until we can bring along gasification.” She conceded that this depends on additional natural gas supplies, and discussions are continuing with Cook Inlet suppliers to increase deliveries, particularly during the winter months when Nikiski has had to shut down on several occasions. Some observers point out the financing plan depends on the Alaska Railroad exercising a unique – and legally untested – power to issue tax-free bonds. Rail President Pat Gamble was quoted in the local press as explaining that the authority, granted by Congress in the act transferring the railroad to the state, has never been used. “We look at this opportunity with Agrium as a first time to really put this to work for the state,” Gamble advised legislators.
Delayed report sparks probe into fertilizer spill
Minneapolis, Minn.-Investigators are still looking into why notification wasn’t made sooner after as much as 100,000 pounds of dry fertilizer was spilled when a storage building collapsed at a farm input retailer near Lewiston. According to the Minnesota duty office, Benson Farm Service didn’t report the incident until a day and a half after it occurred the morning of April 8. Press reports stated that the fertilizer was cleaned up with a front loader and vacuum and hauled to another storage facility. No surface or groundwater was affected, and the fertilizer appeared in good enough shape to be used. Ag Dept. spokesman Michael Schommer said business owners, farmers, and residents are all required to immediately report chemical spills of any substantial amount. “We’re aware of the incident, and both the severity of the situation and the consequences on the environment are being looked at,” he added. Meanwhile, environmental investigators in Kansas have decided that no action will be taken as result of a spill by a dry float spreader truck March 7. State Dept. of Health and Environment spokesman Mike Heideman said that 6,500 pounds of a mixture of solid urea, MAP, and potash were dumped in and near a stream when a bridge gave way beneath the spreader truck. “The spill was properly reported and highly localized,” Heideman reported. “The decision has been made not to take any enforcement action and the case is closed.”
Hanfeng to expand capacity
Toronto-Hanfeng Evergreen Inc. reports that it will expand production capacity at its Heilongjiang facility in China by an additional 100,000 mt/y with the construction of a NPK coating plant, which will utilize two patented technologies developed by Hanfeng. It will acquire raw land adjacent to their existing site to accommodate the construction of the new production plant, additional warehouses, and a rail spur to move raw materials and finished goods to the main railway line. Construction is expected to begin in May of 2007, with the first phase of 50,000 mt/y to be commissioned at the beginning of October 2007 and the second phase at the beginning of February 2008. When the new plant is completed, the Heilongjiang facility will have 450,000 mt of annual production capacity, including 150,000 mt of coating and blending capacity. The new coating plant will utilize Hanfeng’s technologies to produce a polymer-coated compound and a sulfur coated compound. The technology can precisely control the nutrient releasing period for up to 12 months, and has the added benefit of enabling Hanfeng to apply the coatings on NPK granules, instead of a single nutrient like urea. The estimated total budget of this project, including additional land costs, is approximately $85.2 million RMB (or CAD$12.5 million), and will be funded from proceeds generated by the $80 million in share subscriptions by Agrium Inc. and PetroChina Petrochemical Co. Once completed, the 100,000 mt expansion will increase Hanfeng’s total annual productive capacity from all facilities to 700,000 mt, including 400,000 mt of NPK capacity, 100,000 mt of sulfur coated urea capacity, 100,000 mt of NPK coating capacity, and 100,000 mt of blending capacity.
EPA, ARS study winter manure spreading
Chicago-Spreading manure on farms during the winter – a popular agriculture practice which opponents say increases risks of water pollution – is getting a closer look by both USDA and EPA. A joint study by EPA’s Region 5 and Office of Research and Development and USDA’s Agricultural Research Service has been underway since February at several small experimental watersheds at a USDA research facility near Coshocton, Ohio. Results are expected to be published next year. “The purpose is to improve the science used to make decisions about the safety of winter manure spreading,” said EPA Regional Water Division Director Jo-Lynn Traub. “The agencies are trying to balance environmental protection with the needs of farmers.” Mark Weltz, ARS national program leader for hydrology and remote sensing, added, “The focus of ARS scientists is to develop economical and environmentally sustainable agricultural practices that enhance soil and water quality.”
Growers ban manure to calm E coli fears
Sacramento, Calif.-New food safety procedures being adopted by California growers of spinach, lettuce, and other leafy green produce to calm consumer fears about E. coli include a ban on the use of untreated manure, a spokesman for the Western Growers Assn. (WGA) has confirmed. WGA is calling it a marketing agreement that is “the fulfillment of a promise we made to the nation in the wake of the food safety crisis that started with the E. coli outbreak in September of last year,” declared CEO and President Tom Nassif. Fresh produce handlers are required to accept produce only from farmers who follow specific food safety procedures, which include testing and mitigation of water, sanitation of tools, worker hygiene, and washing of produce. WGA spokesman Tom Chilling informed Green Markets that the procedures “do include a ban (on untreated manure).” Asked if that means there is concern that manure could be one of the contributors to E. coli, Chilling responded, “Actually no concern was expressed about manure per se.” The marketing agreement coincides with a movement in the California Legislature to amend the state’s agriculture health and safety code to prohibit use of “uncomposted, incompletely composted or non-thermally treated manure as a fertilizer or soil amendment” and other practices such as maintaining field toilets. The bill, sponsored by Sen. Dean Florez, who represents the Kern County agriculture area, would impose fines for violations up to $5,000 and jail terms of up to a year, and allow the State Dept. of Public Health to impose additional fines of up to $25,000.
Yara achieves strong results with higher volumes
Oslo-Yara International ASA reports strong results for the first quarter 2007. Results improved as the European fertilizer market recovered, global fertilizer prices strengthened, and energy costs were slightly down. Yara reports net income after minority interest of NOK 1,085 million (NOK 3.67 per share) for the first quarter, compared with NOK 853 million (NOK 2.77 per share) in the first quarter last year. Excluding net foreign exchange gain, the result was approximately NOK 3.52 per share compared with NOK 2.57 per share in first quarter 2006. EBITDA for the quarter was NOK 1,787 million compared with NOK 1,492 million in the first quarter last year. First-quarter operating income was NOK 1,063 million compared with NOK 758 million in the same quarter last year. “We delivered strong results in the first quarter, with fertilizer sales volumes up 18 percent from last year,” said Thorleif Enger, Yara president and CEO. “Most of the increase was in Europe, picking up from a slow first half of the season, and in Brazil following the recovery of the Brazilian agro-industry and our Fertibras acquisition. Fertilizer margins improved as prices increased and gas costs declined. Increased fertilizer prices reflect a tight market with increased imports into major markets.” The Downstream segment benefited from increased sales in Europe, Latin America and Southeast Asia. The Industrial segment saw solid sales growth, especially for technical ammonium nitrate and environmental products. The Upstream segment benefited from a strong increase in global urea prices and 10 percent higher ammonia production due to high capacity utilization in Europe and the new ammonia plant in Burrup, Australia. Higher grain prices will substantially improve farm profitability in 2007, and support fertilizer demand. Yara’s European gas costs for the next 6 months are, based on current forward prices, estimated to be NOK 250 million below last year.
Management Briefs
Anglo Minerals Ltd. has appointed Corey Giasson as vice president, business development and investor relations, effective May 1, 2007. He was previously employed with Potash Corp. of Saskatchewan Inc., where he was manager, market research. He received his MBA from the University of Saskatchewan, where he also received a B.Sc. in Agriculture Economics.
Anglo holds a 25 percent interest in a potash joint venture in Saskatchewan, with BHP Billiton Diamonds Inc. holding the other 75 percent.
Market Watch
AMMONIA
U.S. Gulf/Tampa: The latest round of barge business saw a sharp drop in price, with new business reported at $308/st FOB. Players reported that Mosaic was the seller, having offered product in the $310-$315/st range with no takers. Some sources predicted the prices would continue to fall unless another seller was able to find a sweetheart deal. However, with wet weather upriver and the quick passage of time, a sweetheart deal could simply be a repeat of $308/st FOB.
In the meantime, nothing new was reported at Tampa, though most are predicting a fall-off in prices for imports. The only question is how much. Numbers bantered around last week were a $10-$20/mt drop. Others said they would not be surprised if it is more, citing the recent weakness in the Black Sea and the lateness in the U.S. season.
Ammonia imports were off 10 percent both for February and the July-February period, according to the DOC. February imports were 604,236 st, down from the year-ago 667,877 st, while current YTD is 5.24 million st, down from 5.82 million st.
Eastern Cornbelt: Weather conditions were improving in the region as the week progressed, and sources reported accelerated field activities in some locations. Preplant applications of ammonia, dries, and starters were reported in the region last week, with one Illinois source talking of long lines at some ammonia terminals.
The ammonia market was steady at $460-$465/st FOB spot Illinois River terminals, and up to $475-$480/st FOB at other locations. One regional supplier was offering forward contract ammonia for May at $470-$475/st FOB in the region.
Western Cornbelt: Mild temperatures helped some parts of the region continue with fieldwork last week after lengthy delays earlier in the month due to cold, wet conditions. The ammonia market remained at $445-$465/st FOB regional terminals, with the low in Nebraska. Iowa sources pegged the common dealer price at $455-$460/st FOB last week, while Missouri dealers tagged the market at the $465-$470/st FOB level for prompt or forward business.
Northern Plains: Anhydrous ammonia remained at $460-$470/st FOB regional terminals for cash market or forward contract tons for May, although sources said most of the product moving last week was prepaid earlier. North Dakota sources pegged delivered ammonia at $495-$505/st, depending on supplier, with reports of very tight truck availability. Dakota Gasification’s Beulah, N.D., ammonia plant was operating at “controlled rates” last week until the season breaks in earnest, company sources said.
Great Lakes: A Michigan dealer said wheat topdressing was complete in his area, and heavy preplant movement on corn was about to begin. The ammonia market was quoted as high as $499/st FOB Courtright, Ont., by Michigan sources for prompt tons last week. The market FOB Huntington, Ind., was $480-$490/st FOB, depending on time of delivery, while Wisconsin sources quoted spot sales in the $475-$480/st FOB range.
Black Sea: The price is softening as demand from the United States wanes. Asian sources say reports of prices in the low $250s/mt FOB are more buyers talking than closed deals. Still, said one trader, $250/mt FOB is most likely not too far off.
The balance out of Yuzhnyy is said to be favoring buyers. Sources report there are still no fixtures confirmed for May. At the same time, the price for April loadings is still under negotiation.
The main destinations for Yuzhnyy tons are now India and Asia. Until India settles its phos acid talks, sources say the DAP producers will continue to take tons from where ever it can get the best price possible. Asian buyers are looking at more Black Sea ammonia and bypassing the Middle East because the delivered Yuzhnyy price is lower.
Sources say the Middle East producers are holding to the view that the freight difference is $50-$60/mt. Asian observers note that might have been true a few months ago. As of last week, said one trader, the difference is closer to $30-$40/mt. The traditional difference is $20-$30/mt, and sources say that level should be reached again soon.
Observers discount the buyers’ claims of $250/mt FOB and say producers’ belief of $265/mt FOB may be too high. The best bet for the current pricing is more likely $255-$265/mt FOB. One dissident says last week was closing just above $260/mt FOB, but that sub-$260/mt is likely this week.
Middle East: The order books remain full. Sources speculate about 80 percent of the tons shipped out of the region are under contract. The remaining tons are being snapped up quickly and quietly, mostly for India.
The contract tons usually are tied to a formula based on the Yuzhnyy price. Producers are claiming a freight differential of $50-$60/mt. Buyers say it is closer to $30-$40/mt. The traditional difference is $20-$30/mt FOB.
If one accepts the producers’ number, sources say the Middle East market dropped from the $330s/mt FOB to the $310s/mt FOB.
If one accepts the buyers’ rate, the price tops out at $300/mt FOB.
Much of the business is tied to the Indian DAP producers. Once the Indians conclude their phos acid import talks, sources say the shipments to India will fall off.
The talks are not expected to conclude until May, possibly around the time of the IFA gathering in Turkey.
For now, traders and buyers see the price at $285-$300/mt FOB.
Asia: Demand remains strong. Helping the buyers, however, are more tons coming out of Yuzhnyy and the re-opening of the Agrium Kenai plant.
Besides extra material coming into the region, one trader notes that downstream users are less likely to fight back on ammonia prices because their own product prices are significantly higher than previous years.
The Kenai product, while welcome, might not provide a substantial relief to pricing. One Asian source noted that at best only 20,000 mt/m might be shipped.
UREA
U.S. Gulf: While most players were putting the granular barge market within the $355-$358/st FOB range last week, $353/st FOB was reported. Though some expressed surprise at the low number, others were surprised at any number below $360/st FOB. The optimists among sellers predicted the market could easily rebound when wet weather in the Cornbelts subsides. This appeared to be the big hope last week among sellers. They are hopeful that warehouses and terminals will soon have to be replenished upriver. Barges already on the way upriver were reported to be in the low $360s/st FOB last week.
Another factor perking up sellers later in the week was that India had finally bought some urea, and this was shoring up the international market.
On the prill side, most players were more pessimistic regarding prices, saying more stray vessels of prills are on the way. Most were still putting prills within the $320-$325/st FOB range. However, one prediction was that they would soon dip below $320/st FOB, if not $300/st FOB. Others argued, however, that granular is not in a free-fall and that prills will not develop a huge differential with granular.
February urea imports were actually up 1 percent this year, to 713,310 st from the year-ago 709,586 st. However, they are still woefully behind for the July-February period – 31 percent behind, at 3.58 million st from the year-ago 5.18 million st. This figure, along with 90.5 million acres of projected corn acreage, gives sellers the wherewithal to predict a big urea shortage. On the other side of the coin, domestic urea producers are producing all out this year, whereas they did not in the year-ago period due to higher gas costs, lower urea prices, and a less optimistic acreage forecast.
Eastern Cornbelt: Granular urea was down just slightly from last report, with the market quoted at $390-$395/st FOB spot river locations and up to $400/st or more FOB inland points in the region.
Western Cornbelt: Granular urea remained at $390-$400/st FOB most river locations in the region. A Nebraska source reported the delivered market at $410/st from Oklahoma, where reference pricing from Koch had reportedly dropped another $5/st, to $380/st FOB Enid and $385/st FOB Inola.
Northern Plains: Granular urea was steady at $395-$405/st FOB the Twin Cities, with delivered urea pegged at the $420/st mark in North Dakota from Canadian shipping points, if available. Forward contract urea for May was available from one supplier at the $410/st mark FOB Pine Bend, Minn., and $425/st DEL in North Dakota and northern Minnesota.
Agrium’s urea postings moved on April 5 to $415/st FOB Shakopee, Minn., and North Dakota warehouses at Alton, Carrington, Colfax, Marion, and Scranton. Rail-delivered urea postings from the company moved on that date to $420/st in Minnesota and the Dakotas.
Great Lakes: Granular urea was quoted in a broad range at $406-$435/st FOB regional terminals, with the low reported in Wisconsin and the high reflecting dealer reference pricing from at least one supplier in Michigan. Agrium had rail-delivered urea posted at the $420/st mark in Wisconsin.
Northeast: Granular urea was quoted at $407-$410/st FOB, with the upper end referenced at Baltimore and the low to dealers FOB Philadelphia or E. Liverpool, Ohio. A Pennsylvania dealer tagged delivered urea at the $432/st market last week, with supplies described as tight along the East Coast.
India: After months of waiting and speculation, IPL reentered the market. The Indian buying house took 250,000 mt from the Middle East and 155,000 mt from elsewhere. It also issued a tender for more. Sources say IPL will need to buy an additional 750,000 mt.
Sources say IPL took cargoes from PIC/Kuwait, Qafco/Qatar, and Fertil/UAE. Reportedly, talks with Sabic/Saudi Arabia are also underway. By press time, one source reported the Sabic deal was done but could not be confirmed.
The tender closes April 29 and officially calls for an indeterminate quantity of either prills or granular.
Sources expect to see MMTC come back in shortly after the results of the IPL tender are known. One source pointed out that MMTC will look to match or beat the IPL price.
One Asian source noted that India must be seriously short of material for IPL to come in now instead of waiting until early May. Others note that the talk has always been that sometime between March 1 – the beginning of the fiscal year – and May 1, IPL and MMTC might enter the market.
The length of time between the announcement of the tender – April 16 – and the closing surprised some. Usually the tenders are called and concluded within a week.
The consensus is that the Indian buyers say the market hit its low point and decided to step in.
Backing that view, sources point to purchase orders from Latin America.
Material from the Black Sea, Middle East, Indonesia, and China is expected to make appearances in the final tender offers.
Black Sea: If the urea market were an amusement park, the Black Sea prices would be the roller coaster. Asian sources pointed to business last week that bottomed out at $269/mt FOB. By the end of the week, however, the price had shot up to $300/mt FOB with more to go.
Even as of early Thursday, some Asian sources were speculating that the mid-$280s/mt FOB might have been done. Later in the day European sources pointed to the $290s/mt FOB, and by the end of the European workday, $300/mt FOB was hit.
Clearly, the run-up in prices was ignited by the IPL tender, but sources add that increased interest queries from Latin America added to the excitement.
As last week opened, Latin American buyers were carefully monitoring the market so they could be ready to jump in as the price nadir was hit.
The speed in which IPL settled its pre-tender deals left many in the world reeling and scrambling to catch up.
While the $300/mt FOB was done by press time, sources say the deals at that level and higher are primarily by traders taking positions. The new price levels in the $300s/mt FOB do not yet reflect end-user deals.
Few expect to see the price soften as the year progresses.
With the IPL business on the books this quarter and MMTC expected to come in, India alone could keep most urea producers and vessel operators busy for several months.
Add to that furor the expectation that Brazil will most likely come in for June, July, and August shipments totaling about 200,000 mt. When that is done, Europe will need product, as will Pakistan.
For many in the industry, the slide in prices experienced in March and April represents the low point for the year.
If the Middle East and China take most of the Indian business, it can effectively cap prices in the Black Sea
Middle East material can be shipped in smaller lots into more favorable ports on a more flexible time schedule than the Yuzhnyy tons. Chinese urea shares this valuable benefit.
In addition, the larger ships from Yuzhnyy often face longer delays at the limited facilities in India that can handle the vessels.
The Chinese urea, even as it is hobbled by a 30 percent export duty, is still cheap enough to be competitive in a hot global market. One Asian source noted that a number of international trading houses had already started taking positions with Chinese urea in anticipation of the Indian business.
As last week ended, the price started at $300/mt FOB by traders taking positions. Source peg the market at $295-$305/mt FOB, but by this week few if any sub-$300/mt FOB tons will be available.
Middle East: Prices have come off. Actually, said one trader, the public was just now able to get a glimpse at a non-contract price.
Fertil, Qafco, and PIC reportedly will each send a cargo to IPL/India. Supposedly, Sabic is also in talks with IPL for a fourth cargo. The reported price for the shipments of prills and granular was pegged at $303/mt FOB.
The past couple of months showed higher prices because the order books were filled with contracted tons at prices that were not public. Only producer pricing ideas in tenders and spot deals gave the public a glimpse of what it would cost to buy tons in the region.
Many of the tender offers were discounted because the price was usually way above the conventional wisdom on market prices. The attitude at those times, said observers, seemed to be that if an award was given at those high prices the producer could rearrange its contract ton shipments to accommodate the higher-priced spot deal.
The next serious indicator of where prices are moving will reportedly not come in the offers made in the IPL tender, but in the final price negotiated following the tender.
One observer noted that with a pre-tender deal at $303/mt FOB, getting a higher price would take many serious arguments by the producers. In the past, Indian buyers have often been successful in holding the price line on tenders that follow individual orders.
Prills and granular remain at parity, say sources. Based on the pre-tender deal and views of what urea might cost other buyers looking for a spot cargo, sources say the market is pegged at $303-$315/mt FOB.
China: Sources expect to see Chinese material being offered heavily in the IPL/India tender. Even with the 30 percent export tax in place, one Asian trader noted the international market is sufficiently strong to allow the Chinese product to be competitive.
Reportedly, a number of traders had cut deals with producers to export cargoes earlier this year in the hope that India might have entered the market earlier this year. The tons that were booked under the hope that shipment might take place in the first quarter are still waiting for a foreign home.
With the domestic market softening, almost any deal offshore will be more lucrative to urea producers.
Indonesia: Kaltim and PIM continue to offer tons for export. The material is being handled by local trading operations that then work with international traders for major offshore deals.
Asian sources say at least one big house is trying to put together a deal involving 20-30,000 mt for shipment to India. Other traders are taking the lots of 3-5,000 mt for shipment to buyers that were more interested in smaller orders that could be shipped into smaller ports.
The sellers are focusing on making their material competitive to ensure sales.
When the Indonesian firms last exported tons, they held on to pricing ideas that kept their product $2-$5/mt higher than other sources.
In the sales made this month, sources say the price has hovered in the upper $290s/mt FOB. At that rate, said one trader, the Indonesian tons were competitive on a delivered basis against other sources.
Bangladesh: Once again, BCIC issued awards to non-traditional companies, and once again, said one trader, the companies are not able to fulfill the order. Reportedly, the awards were made based on the numbers from the April 2 tender. Few in the industry expect to see any urea actually be delivered. Another tender that closed April 12 was ignored by major players in the area. One source said the main issue was that BCIC wanted delivery to a port not normally known to receive urea.
The vessel Precious could not fully offload 12,500 mt of granular urea with bags at an outer anchor of the Chittagong port for the last two weeks, due first to a minor accident and later to rain and bad weather. The vessel suspended offloading April 13, still with over 1,000 mt on board. On April 2, the vessel was hit by two lighter vessels. It had arrived March 30 and had commenced discharge.
Vietnam: Despite reports by Vietnamese official media that the country will need to import close to 1 million mt, sources say the continuing lowering of prices by the Phu My plant ensures imported material will be too expensive to be attractive to regional buyers and farmers. Sources say the domestic price was lowered again just last week on the heels of attractive prices from Indonesia and a softening Middle East market. The price to do business in Vietnam is now pegged at $300/mt CFR bagged.
NITROGEN SOLUTIONS
U.S. Gulf: UAN barges continued to be strong last week, with recent sales reported at $263-$264/st FOB ($8.22-$8.25/unit), and quotes now being heard between $265-$270/st FOB for the next round of trading. Supplies were reported as tight.
There was one report that fill material was being offered for August in the $217-$220/st FOB range.
UAN imports were up 14 percent in February, perhaps reflecting the heady demand for the product this season. February imports were 392,415 st, up from the year-ago 344,478 st. Still, July-February imports were off 28 percent, to 1.6 million st from the year-ago 2.23 million st.
Eastern Cornbelt: UAN remained in very tight supply and the market continued to firm, with terminal pricing reported in the $8.90-$9.20/unit FOB range in the region last week. Most Illinois sources quoted pricing on the river at $8.90-$9.00/unit FOB on the low end, while inland terminals were referenced at the $9.20/unit FOB mark or higher. Forward contract UAN-32 was being offered for May from one supplier at $293-$297.80/st ($9.16-$9.31/unit) FOB regional terminals.
Western Cornbelt: UAN was quoted at $9.00-$9.38/unit FOB regional terminals, reflecting another increase from last report. Solutions inventories remained very tight; one Iowa source reported a common dealer reference price of $9.20/unit FOB on the upper river system last week.
Northern Plains: UAN was quoted at $8.95-$9.20/unit FOB regional terminals, up significantly from last report and in very tight supply in the region. Delivered UAN-28 was pegged at the $265/st ($9.46/unit) mark in North Dakota from Canadian shipping points. One regional supplier was reportedly referenced at $256.20/st ($9.15/unit) FOB Winona, Minn., and $257.60 ($9.20/unit) FOB Pine Bend, with forward contract tons for May as high as $9.31-$9.36/unit FOB Minnesota terminals.
Great Lakes: UAN remained in tight supply. The dealer market was pegged at $9.06-$9.22/unit FOB in Wisconsin, while Michigan sources quoted UAN-28 firmly at $260-$263/st ($9.29-$9.39/unit) to dealers FOB terminals in the state.
Northeast: UAN-30 remained at $237-$245/st ($7.90-$8.17/unit) FOB Baltimore, with the upper end reflecting dealer reference pricing from some suppliers. Delivered UAN-30 in southern Pennsylvania was quoted at the $252/st ($8.40/unit) mark, while UAN-32 pricing out of terminals in upstate New York was pegged at $288/st ($9.00/unit) to dealers, with slight discounts to larger buyers.
Sources said UAN vessels remained at a firm $270/mt C&F or higher for any tons due to arrive on the East Coast.
AMMONIUM NITRATE
U.S. Gulf: Prices continued to be strong at $265-$270/st FOB. While some said demand will soon start to slack off, they say that if you need it, it is hard to find. Barges were reportedly being quoted in the low $270s/st FOB last week.
February imports were off 15 percent, to 144,648 st from the year-ago 170,993 st. July-February imports were off 30 percent, to 664,601 st from the year-ago 944,016 st.
Western Cornbelt: Ammonium nitrate remained at $325/st FOB in the region, where available.
South Central: Terra raised its price to $305/st FOB Yazoo City for truckloads, effective April 23.
AMMONIUM SULFATE
U.S.: July-February imports are up 35 percent compared to all the other major nitrogens, which are off during the YTD period. Current imports stand at 217,974 st compared to the year-ago 161,620 st.
Eastern Cornbelt: Ammonium sulfate supplies remained extremely tight in the region, with only spot availability for April delivery. The market was quoted at $225-$240/st FOB last week, with the upper end reported in Illinois for limited granular tons. One source said no orders were being taken until May, and mid-grade sulfate suppliers were equally tight in the region.
Western Cornbelt: Granular ammonium sulfate was tagged at a firm $225-$240/st FOB in the region, but inventories were very tight.
Northern Plains: Ammonium sulfate was in very limited supply, both for granular and mid-grade product. Several sources said product was simply unavailable last week from some suppliers, but others reported spot quotes that reflected a wide range and market volatility. A Minnesota source said the last spot quote he’d heard for granular sulfate was a firm $225/st FOB, but supplies were now sold out into May. Another supplier was reportedly offering spot business last week at the $230/st mark FOB Winona and Grand Forks, N.D.
On a delivered basis, granular ammonium sulfate was quoted at $220-$235/st in the region last week, depending on location and supplier, with the upper end reported in South Dakota. North Dakota sources tagged the market at $220-$225/st DEL for available tons. Dakota Gasification was only taking orders for near-term shipments in an effort to limit product hording. The company also raised its delivered price for granular ammonium sulfate to Saskatchewan and Manitoba to the $265/st level.
Great Lakes: Ammonium sulfate was quoted at $220-$230/st FOB in the region, with the low reported in Wisconsin for mid-grade product and the high in Michigan for granular sulfate. That said, several sources noted there was “virtually none to be had” in the region last week, with some suppliers not taking orders until May. One Michigan supplier said a pricing increase to $235/st FOB was likely for granular ammonium sulfate as the week advanced.
Northeast: Pricing quotes for ammonium sulfate were very sketchy in the region last week due to unavailability. One Pennsylvania dealer reported a delivered price of $211/st for tons out of Philadelphia at mid-month, but no other spot quotes were reported in the region.
PHOSPHATE
Central Florida: Prompt phosphate sales out of Central Florida were virtually a thing of the past by last week, with the exception of a few truckloads. Just as producers were beginning to catch up with sales made early in the year, the summer fill program offered by Mosaic and the forward sales by CF will help insure low inventories until fall. In addition, the export season will be in full swing by summer, so supplies have no chance to really build.
The Mid-Atlantic, Northeast, and upper Midwest continued to receive wet weather in the form of rain, ice, and snow. Traders said that will create a short season for them in those areas and will undoubtedly hurt sales.
“The Northeast is frustrating and it will take a toll on our business,” one trader said. “Some fields will not be planted and some fields will not be fertilized, and that will cut into sales.”
After a prolonged drought, Florida finally received some rain last week, which will help, but April is historically that state’s driest month. Water supply authorities have imposed strict watering bans, and drinking water supplies on the Southeast coast were in danger of being contaminated by salt water. If that occurred, the drinking water supply would take a decade or more to recover.
For the first couple of weeks Mosaic’s summer fill program saw little action, but that changed last week. In Central Florida, Mosaic’s price for the fill program of June through August was $360/st FOB, which was $10/st FOB less than Mosaic’s current asking price of $370/st FOB. CF, which was matching Mosaic’s fill program prices, upped their forward sales for June through August by $5/st FOB to $365/st FOB. Although CF, like Mosaic, had little available for prompt sales, its new asking price last week was $390/st FOB. The programs appear to have put a benchmark price on phosphates – at least through the end of summer.
Last week, Mosaic was making a few truck sales at $380/st FOB, but the amounts were said to not be significant.
With a lack of prompt sales, the Central Florida DAP price index last week remained at a flat $370/st FOB. PotashCorp’s Central Florida reference price remained at $380/st FOB. In Texas, Agrifos was earning $430/st FOB for truck loads.
U.S. Gulf: Winter retained its icy grip on the upper Midwest last week, along with areas to the east, and that has had a chilling effect on fertilizer sales, including phosphates. Estimates, also known as best guesses, were that the area will begin to dry within the next two weeks, and then sales should be strong. However, the resumption of aggressive sales may not have much of an effect on prices. Most warehouses have had a chance to refill and barges were waiting in place, hoping to find a home before the demurrage charges kill the profit margin. Traders noted that warehouses will have to buy additional quantities before the end of the season, but those operations were holding off making a decision until product begins moving. Iowa was said to be the closest to putting crops, mostly corn, into the ground.
When Mosaic first announced its summer fill program, it did not spur much interest. However, that changed last week. With summer on the horizon, buyers began making their move to secure their supplies. The program offered two choices. First, buyers could place their order and pay the Green Markets low on the index at the time of loading; or, second, they could elect to pay the fill price of $385/st FOB. Most had chosen to lock in the $385/st FOB price due to concerns that inventories will be low in the summer and prices higher.
CF increased its forward pricing from $385/st FOB to $390/st FOB.
With the wet weather in the North, sales slowed to a trickle last week. While the bottom of the NOLA DAP barge index was unchanged at $400/st FOB, the top of the range declined for a second week in a row to $405/st FOB. Buyers should have no problem finding barges at the bottom end of the range.
Eastern Cornbelt: DAP and MAP were generally tagged at $425/st FOB Ohio and Illinois River terminals on the low end, with the upper end of the market quoted at $435-$440/st FOB in Ohio out of inland warehouses. One source said MAP is trading at $4/st under DAP in some locations, but not in others due to particularly tight supplies. Forward contract MAP was being offered for May at $431/st FOB Cincinnati.
The only spot quote for TSP last week was $418/st FOB Maumee, Ohio, and most of that tonnage was reportedly moving to the industrial market. 10-34-0 was also in tight supply in the region, with the market quoted at $325-$350/st FOB. Some Illinois sources talked of spot sales as low as $305/st FOB, but business at that level was not confirmed.
Western Cornbelt: DAP and MAP were unchanged at $420-$435/st FOB regional warehouses. An Iowa source tagged the common dealer market at $425/st FOB Mississippi River terminals last week. Forward contract DAP for May was available from one supplier for $428/st FOB St. Louis, Mo., and $431/st FOB Inola, with MAP at $428/st FOB Inola. 10-34-0 remained in very tight supply, with the regional market pegged at $335-$350/st FOB for available tons.
Northern Plains: DAP and MAP were pegged at $415-$425/st FOB regional warehouses, with most dealer quotes reported at the $420/st FOB mark or higher. Delivered MAP in North Dakota was quoted at $420-$430/st and in very tight supply. One regional supplier was offering forward contract tons for May FOB Pine Bend at $434/st for DAP and $431/st for MAP.
10-34-0 was in very tight supply as well, with some suppliers sold out of product last week. The market was tagged at $320-$330/st FOB in the region, with the low in Minnesota for the most recent confirmed sale and the high FOB Leonard, N.D. Delivered 10-34-0 in central North Dakota was tagged as high as $370/st from Canadian shipping points.
Great Lakes: DAP was $425-$443/st FOB in the region, with the low in Wisconsin and the high quoted as the dealer price out of Michigan warehouses. MAP was tagged at $425-$440/st FOB, with the high again in Michigan to the dealer.
10-34-0 was quoted in a broad range at $305-$340/st FOB in the region, with the upper end in Michigan. Tons were very tight, however, with one Michigan source commenting that none were available on the spot market last week. Wisconsin sources quoted the 10-34-0 range at $305-$330/st FOB, depending on supplier and location.
Northeast: DAP and MAP were up from last report. Warehouse pricing was quoted at $442-$447/st FOB, with the upper number reflecting dealer reference pricing FOB Philadelphia and E. Liverpool. Delivered MAP in southern Pennsylvania was reported at the $457/st level last week. 10-34-0 was quoted at $280-$305/st FOB, with the upper end out of terminals in upstate New York.
U.S. Export: PhosChem made total DAP/MAP sales of 55,000 mt into Brazil, Mexico, and Venezuela, all at $433-$434/mt FOB. The slight decline in FOB prices was due to somewhat higher freight rates. In addition, Oakley made sales of DAP and MAP from Russia into those areas at $470/mt DEL for DAP and $472/mt FOB for MAP. The FOB prices and quantities were not available.
Pakistan asked PhosChem for pricing last week, and appeared to be ready to begin buying. India was said to be close to deciding its phosphate subsidy and was expected to be a major buyer this year.
China, which has been very active in the export market recently, was said to be planning to impose an export tax on its phosphate, which was expected to be about 20 percent. The purpose of the tax was to insure its own farmers have sufficient supplies. It was unclear whether the export tax would be imposed on sales already made but not loaded, or simply on new orders. Regardless, that will create new opportunities for other producing nations and more stress on inventories and prices in this country.
The export price range last week fell slightly due to higher ocean freight rates, from $435-$436/mt FOB to $433-$425/mt FOB.
POTASH
U.S.: February potash imports were up 23 percent, to 938,335 st from the year-ago 760,642 st. July-February imports are up 6 percent, to 6.75 million st from 6.39 million st.
Potash Import & Chemical Corp. (PICC) advised customers April 16 that, effective with shipments on May 1, 2007, it will be raising SOP prices by $10/st at all U.S. warehouses. PICC cited the continued escalation of costs and a tight global supply.
Eastern Cornbelt: Potash was tagged at $218-$224/st FOB regional warehouses, depending on grade and location. Agrium’s 60 percent red premium potash postings, effective April 9, included $229/st rail-DEL in Illinois, Indiana, and Ohio, $221/st FOB Rock Island, Ill., and Mt. Vernon, Ind., $223/st FOB Danville, Ill., and $224/st FOB Garrett, Ind., Seymour, Ind., and Toledo, Ohio.
Western Cornbelt: Potash was quoted at $212-$222/st FOB regional warehouses, depending on grade and location. Agrium’s 60 percent red premium potash postings included $231/st rail-DEL in Iowa, Missouri, and Nebraska for shipments from April 9 forward. Agrium’s warehouse postings for that shipping period included $221/st FOB Dubuque, Iowa, and Kansas City.
Northern Plains: PCS Sales announced new potash prices on April 5 for a shipping date of June 1 forward. New postings FOB Saskatchewan mines include standard at $208/st, soluble and granular at $213/st, and white granular at $218/st. Those levels reflect a $20/st increase from previous postings at the mine, for all grades. It was unclear whether new orders could still be placed at the previous levels, however.
Minnesota sources tagged the granular potash market at $220-$222/st FOB regional warehouses, and delivered potash was pegged at $225-$230/st in North Dakota. Agrium’s 60 percent red premium potash postings, for shipments from April 9 forward, included $229/st rail-DEL in southern Minnesota, $227/st rail-DEL in northern Minnesota, and $220/st FOB Shakopee, Minn.
Great Lakes: Potash was quoted at $222-$227/st FOB in the region, with the low in Wisconsin and the upper end quoted for white granular potash in Michigan. On a delivered basis, Wisconsin sources tagged the market at $228-$234/st, depending on grade and location.
Agrium’s 60 percent red premium potash postings, for shipments from April 9 forward, included $229/st rail-DEL in Michigan and Wisconsin, and $224/st FOB Saginaw, Mich., and Toledo, Ohio.
Northeast: Delivered potash was up from last report, with the regional market quoted at $233-$246/st, depending on grade and location. Coarse potash was generally pegged in the $233-$240/st DEL range, while 62 percent soluble potash ranged from $246/st DEL in Pennsylvania to reportedly as high as $259/st DEL to some New England locations. The potash market FOB E. Liverpool was tagged at $226-$331/st, depending on grade.
Agrium’s 60 percent red premium potash postings, for shipments from April 9 forward, included $237/st rail-DEL in Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, West Virginia, Alabama, Georgia, Kentucky, Tennessee, Florida, and the Carolinas. Agrium’s warehouse postings for that shipping period include red premium potash at $235/st FOB Mulberry, Fla., and Lewistown, Pa.
SULFUR
Tampa: Accountants were beginning to get edgy last week as negotiations for second quarter sulfur contracts, which will become retroactive to April 1, continued to drag on. Most sulfur suppliers settled with major phosphate producers at a price of $5.50/lt up from the previous quarter. Reports are that Mosaic has settled the majority of its contracts at the $5.50/lt increase.
Despite this news, sources say at least one major supplier is still holding out for higher prices. The exact amount sought by the supplier was not known, but a source said he understood it to be in the double digits. While that amount appeared staggering, some in the sulfur industry believe it was justified – but probably not attainable. Sulfur supplies remain very tight along the Gulf Coast, and that situation did not appear to be easing last week. Most refineries have returned to service from their annual turnarounds and were producing fuel, but less sulfur was being produced because more sweet crude was being used. The price of sweet crude, which contains less sulfur and other contaminants, was closer to that of sour crude.
On the West Coast, sulfur supplies were extremely low. Many sulfur suppliers there and on the Gulf Coast have been unable to meet all of the needs of their customers. A supplier said phosphate companies and other customers have been making almost daily calls to determine whether their needs will be met. The driving season begins in the summer, and refineries will be cranking out as much gasoline as possible to meet the demand – at a high price, of course – but sulfur will continue to suffer with the use of sweet crude. If an agreement is reached with ExxonMobil at a price higher than the $5.50/lt bump others have agreed to, all prices are likely to match the new price. Until a final settlement is reached, the Green Markets sulfur index will not change.
Martin was scheduled to load two sulfur prill vessels in Beaumont for a total of between 33,000 and 34,000 tons for delivery to Brazil. The product was supplied by Shell and ExxonMobil.
Vancouver: CN workers have been ordered back to work while negotiations for a new union contract continue. That will help to ease the sulfur shortage in Vancouver, but spot prices remain extremely high. It appeared likely contract prices will be affected in the next round of negotiations. Vancouver lost about three months worth of sulfur shipments during the hard Canadian winter and the CN strike, and cannot recapture that business.
Prices for spot sulfur sales from Vancouver had a wide range last week. On a delivered basis, which is the normal method for sulfur sales, they ranged between $100/lt and $130/lt. Freight rates make determining a Vancouver FOB price difficult. Some of the freight is on long-term contracts, while others are spot, or based on backhaul. In general, freight rates were running between $50mt and $60/mt, which would make the Vancouver FOB prices somewhere between $50/mt and $70/mt, assuming the lower prices were using the cheapest freight available.
MARKET NOTES
India: KRIBHCO and Yara have agreed to a 50-50 joint venture that would buy local production facilities, source material offshore, and introduce Yara’s fertigation products, principally NPKs, into the Indian market.
In other news, three profit-making public sector fertilizer companies have expressed interest in taking over the sick units of Fertilizer Corp. of India (FCI) and Hindustan Fertilizer Corp. Ltd.(HFC). The companies that have shown interest are RCF, NFL, and KRIBHCO. “These would be essentially brownfield expansions utilizing the existing infrastructure. The existing plants are almost scrap and new plants with latest technologies would be set up,” officials said.
According to rough estimates, the new plants would involve investment of around Rs 16-17bn each because of available infrastructure at the sites. Of the eight sick units, HFC’s units are located in Durgapur, Haldia, and Barauni, while the FCI units are at Gorakhpur, Singri, Ramagundam, Talcher, and Korba.
The FCI plants have a total accumulated loss of Rs 120.59bn and the HFC units together have an accumulated loss of Rs 96.75bn, taking the total to Rs 217.34bn. Of this, around Rs 170bn is in interest due to the Central Government. The sources said that, “Now that there is approval from the Cabinet, the rehabilitation package for each plant would be worked out and placed separately before the Cabinet for case-by-case approval.”
According to projections made by the Department of Fertilizers, the new plants could be made operational in three years from now since the national gas grid is already in place and the Petroleum and Natural Gas Ministry has assured the supply of natural gas from 2009-10 onwards.
The government is looking at Kuwaiti companies Al Qurain Bobiyan and Petrochemicals Industries Co. as possible minority investors in the revamp.
The DOF is looking at the revamp as the solution to the country’s urea gap, believing it could almost entirely eliminate the gap.
Urea demand for the period 2007-08 is estimated at 25.6 million mt against local production of about 20 million mt. This leaves a gap of nearly 6 million mt to be filled by imports from international markets.
DOF has pegged urea requirements for the April-September, 2007 (Kharif season) at 13.2 million mt, up 10 percent from 11.9 million mt a year ago. The requirement for DAP is estimated at 4 million mt, and that of KCl at 1.65 million mt. In the last Kharif season, farmers consumed about 3.2 million mt of DAP and 1.3 million mt of KCl.
A DOF official said the government already has about 2 million mt of urea, 1.1 million mt DAP, and 1.4 million in KCl stocks for the kharif season. “Fertilizer supply will not be a problem this year, as we have adequate stocks to meet the expected requirement,” the official said. He said the deficit in DAP will be easily made up after taking into account imports and indigenous production. In the last kharif season, India imported about 1.8 million mt of DAP. This season, DAP imports are seen to be lower, at about 730,000 million mt in the wake of high carryover stocks.
The official said states have been asked to maintain a fertilizer buffer this year to ward off any shortages. “We have promised states we will ensure they have 75 percent of their total fertilizer requirement at the beginning of each month. The balance 25 percent will be given to them by the 15th of every month.” He said the states would have to closely monitor fertilizer sales at the district and zonal levels to ensure equitable distribution.