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Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Asia, Black Sea, California, Central Florida, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Nitrogen Solutions, Pacific N.W., Phosphate, Potash, Southern Plains, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, Western Canada, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: The Tampa ammonia price rolled over again last week, with sources saying major players have decided on business of $310/mt DEL for the second half of November. Sources speculated such would be the case after PotashCorp opted to continue at $312/st mt for tons to Ineos. Some last week suggested that sellers were lucky to get a rollover, as some players thought there was a little too much ammonia in the market.

Eastern Cornbelt: Sources continued to quote the anhydrous ammonia market at $345-$355/st FOB regional terminals. Agrium’s anhydrous ammonia postings moved on Nov. 9 to $355/st FOB Niota, Ill., and Terra’s reference price at Courtright, Ont., firmed again on Nov. 8 to $370/st FOB. List prices from the co-op were reported in the $355-$365/st FOB range in the region last week, with forward contract offers for December ranging from $375-$385/st FOB, depending on location.

Western Cornbelt: Sources reported little change to the spot fertilizer markets last week, and fall movement was reported in all three states. Ammonia pricing was unchanged at $330-$345/st FOB regional terminals. Terra’s postings firmed again on Nov. 8 to $350/st FOB Whiting, Iowa, Port Neal, Iowa, Blair, Neb., Greenwood, Neb., and Mankato, Minn.

Southern Plains: Enterprise Products Co., which operates the Midstream Magellan ammonia pipeline, told Green Markets last week that the pipeline was back in operation as of Nov. 8 at noon near Clay Center, Kan. It suffered an outage due to a leak Oct. 25. Enterprise said no major injuries were reported from the incident and only a few residents had to be evacuated. Local reports were that some eight cattle were killed by fumes.

California: Anhydrous ammonia remained at $395-$400/st DEL in the state.

Pacific Northwest: Delivered anhydrous ammonia remained at $335-$345/st in Montana, and roughly $345-$365/st in Washington and Idaho. Forward contract ammonia for December was reportedly being offered at $370/st FOB Washington terminals from one supplier, with aqua ammonia quoted at $96.50/st FOB in Washington for December.

Western Canada: Anhydrous ammonia pricing remained at $444-$479/mt DEL in the region.

Black Sea: Asian sources report the market is tight but stable. Observers note that demand from the United States has not moved in ways producers would like. As a result, they say, prices have not shifted. Sources still peg the price in the mid-$240s/mt FOB, with producers arguing there will soon be a move upward.

As the month opened there were strong indications that an upward movement in the market could have taken the price to $250/mt FOB, but as of late last week that effort appears to have stalled. Even though producers are talking up $248/mt FOB as the new price level, sources in Asia say the top price they can nail down is $245/mt FOB. On top of that, sources say the loading of older tons committed just below that level is still going on.

Asian sources are putting the market at $242-$245/mt FOB.

Reportedly, November is sold out and December is looking good. Still, observers note that the strong demand from the United States that usually comes at this time is missing. Until the Americans return in strength, said one Asian trader, there is little hope the price will move up.

Middle East: Sales are going well based on strong demand from India. Sources say the producers are sold out for November and most of December.

Producers have been talking about moving the price up, but are hard pressed to point to any business justifying the talk. Now, say sources, rumors are circulating that PIC/Kuwait sold a cargo to Mitsui at $260/mt FOB, which – if true – would represent a $15/mt jump in prices.

Obviously, producers are promoting this deal as an indication of things to come. At the same time, buyers and traders are wary of agreeing that this is a new benchmark. One trader commented the deal might have been a prompt spot. Reportedly, Mitsui had a charter vessel in the area and came up short of tons for a regular customer.

One trading house said the price is possible given the tight nature of the spot market in the area and Asia. With most of the Middle East tons committed to long-term contracts and with Indian buyers taking as many tons as can be shaken loose, sources say any other deal would carry a hefty premium.

Reportedly, the ammonia will be going to an Asian buyer. One source suggested a Korean company is the buyer, but could not say definitively if indeed that was the final destination.

Another observer noted that while arguments can be made for a sale to Asia, an equally strong argument could be made for India.

Adding fuel to the fire of a price increase, one trader noted that Nitrochem did a deal to IFFCO at $315/mt CFR. Taking $55/mt off for freight, that $260/mt FOB price looks about right.

Sources peg freight to India’s west coast from the Arab Gulf at $40/mt and up, and to the east coast at $55-$60/mt. These prices, said one source, do not take into account the discounts that chartered vessels have, so using the delivered price into India to nail down the actual FOB price is chancy at best.

Adding to the tightness in the region are reports that SAFCO 4 is still focusing on urea instead of ammonia production.

Indonesia: The KPI/Mitsubishi plant is slated to go down Nov. 18 for 7-10 days. The routine turnaround will be the second this year for the facility. Sources say the plant operators are not happy about the need for the turnaround. The shutdown will involve mostly routine inspections at this time. No tweaking of the system is scheduled at this time, unlike the March shutdown.

The company is hoping that all that is needed are slight adjustments so that the plant can get back up and running quickly. The proposed shutdown period will result in the loss of 10-15,000 mt of ammonia production.

Because of the March shutdown and strong regional demand, Mitsubishi has not been able to build strong reserves.

Asia: China continues to demand more and more ammonia. New facilities up and down the eastern and southern coast are looking for additional tons. Asian sources say the Chinese demand is largely driving the shortage of material in the region.

The need for ammonia in China is offsetting a current reduction in demand from Korea and Taiwan. Sources say the downstream demand in these two territories is off slightly from projected levels. One source said the reduction in demand is not major. He said buyers in both countries are still taking all the contracted tons they booked, but no one is looking for extra material at this time.

The Australian Burrup material is playing into the local market. It is supplying about 80,000 mt to the Philippines, which covers slightly less than half of that country’s needs. Another 80,000 mt usually comes from Indonesia – mostly Kaltim – and the rest has to come from spot purchases.

Burrup tons are also said to be finding their way into India, but demand in that country is so great that all it has done is hold off major price increases from India’s usual main supplying region, the Middle East.

UREA

U.S. Gulf: Price ideas spanned a broad range in the prompt urea granular barge market last week. Many said barges traded hands early in the week within the $225-$228/st FOB range. By the end of the week, others were claiming that barges had stair-stepped up to $235-$240/st FOB. Some players were very skeptical that the highest end of this range was achieved for prompt material, suggesting it might be more in line for forward and/or paper material.

One problem with the higher numbers, said sources, was that inland prices have not been keeping up with the strong NOLA market. However, it is trying, according to some, with the Inola/Catoosa market, reportedly moving from $255/st FOB to $260/st FOB last week, though this is not near enough to keep in line with the recent jumps at NOLA.

Eastern Cornbelt: Granular urea was quoted at $255-$265/st FOB, up slightly from last report, with list prices from one regional supplier reported in the $265-$275/st FOB range in early November. Agrium’s granular urea postings moved on Nov. 8 to $275/st rail-DEL in Ohio, Indiana, and Illinois, and $280/st rail-DEL in Michigan. Warehouse postings moved on that date to $270/st FOB Garrett, Ind., and $275/st FOB Saginaw, Mich.

Western Cornbelt: Granular urea was quoted at $250-$255/st FOB in the region, with the low out of spot Mississippi River locations. Agrium’s granular urea postings moved on Nov. 8 to $270/st rail-DEL in Minnesota, Wisconsin, and the Dakotas, with warehouse postings moving on that date to $265/st FOB Shakopee, Minn., and North Dakota locations at Alton, Carrington, Colfax, Marion, and Scranton.

California: Granular urea was unchanged at $310-$320/st FOB and $320-$330/st DEL in the state.

Pacific Northwest: The granular urea market continued to be quoted at $265-$275/st DEL in the Pacific Northwest region, and $255-$260/st DEL in Montana. Effective Nov. 8, Agrium’s Washington warehouse postings for granular urea moved to $275/st FOB Glade, Kennewick, Warden, and Wilson. Delivered postings moved on that date to $262-$267/st in Montana and Wyoming, depending on location; $280/st in Washington, Oregon, Idaho, and northern Nevada; $285/st in northern and central Utah; and $290/st in southern Utah.

Another regional supplier was offering forward contract urea for December at $270-$275/st DEL in Montana, $285/st DEL in Washington, Idaho, Oregon, and Utah, and $295/st DEL in Wyoming.

Western Canada: Granular urea pricing was pegged at $340-$360/mt DEL in the region, up from $325-$345/mt DEL at last report.

India: In a move that surprised the industry, MMTC came back to the market with a tender to close Nov. 14. The company issued the tender after last week’s edition of Green Markets went to press. In a move that has become familiar, MMTC did not say how many tons it was ready to buy. Sources say, however, the company is looking to take 300,000 mt by the end of the year.

The emphasis on the tender is for delivery to smaller ports. This, said one trader, means that panamax vessels will not be in play.

Sources say the major ports in India are backed up with vessels unloading grain and fertilizer. As a result, the conventional wisdom was that only the smaller ports could handle additional orders. One trader, however, said that even that move doesn’t work. He notes that IPL and MMTC are both holding off on many of their Middle East tons because the smaller ports are just as congested as the big ones.

The call for tons to be delivered December and early January to smaller ports indicated to some a desire to take Chinese urea. Product from China is bagged and can be shipped in smaller vessels more easily than tons from the Black Sea and even the Middle East. At the same time, importers looking to take Chinese urea must have the cargoes loaded and out of the ports by the end of December to avoid paying a higher export duty.

Still, some in the industry dismiss the idea that MMTC is gearing the tender to accommodate Chinese product.

One source said the Chinese producers are facing a problem of getting the tons from factory to port. Access to railcars has become problematic, said one trader. Moreover, without the railcars the urea can’t get from factory to port. Therefore, say sources, that ends the idea that Chinese material is the target of the MMTC tender.

Observers who are less than kind are wondering openly if there is some reason other than the need for urea to call a tender at this time. One source noted political and financial pressure to execute a tender could be in play. He noted that the need for product at this time is definitely not driving the call. The tons on their way to India now are more than enough for current needs, say sources. The cargoes still to be loaded and delivered next month and January are all buffer stocks for the next season. The reserves that are represented by those cargoes are more than enough to get the next season started and ensure plenty of urea into the season.

Supposedly, MMTC is looking for the same price they paid in their last tender. Industry observers say this will not happen. The Black Sea price has moved up as traders covered their shorts and other buyers stepped in on the heels of the last Indian business. The Middle East prices are poised to rise because their order books are full for the rest of the year. And Chinese sellers are not as anxious to sell – if they could get the product to the ports in a timely manner – as buyers might hope. All in all, if MMTC buys now, said one trader, they will have to pay significantly more.

Black Sea: Prices moved up. Buyers moved in early last week to nail down deals before short coverage and top-off buying moved things even higher.

Sources report Brazil bought tons at just under $220/mt FOB. By the end of the week, with shorts covered and large cargoes booked for India getting ready to be loaded, sources put the market at $221-$225/mt FOB.

Traders in Asia look at the movement with skepticism. One noted that much of the movement in material and pricing was traced back to a major trading house. The coverage of shorts and increased talks of higher prices would help that company recover potential losses if the price took a nosedive.

Adding to the upswing fever are reports that TCP/Pakistan will still go ahead with its tender for 100,000 mt. While that amount is not large, when compared to production potential in the area and when the Yuzhnyy tons are competing against other regional suppliers, sources say, the tender may be enough to keep the price from sliding.

Producers are booked into December. If MMTC scraps the tender it just called, the next time it will need tons will be February or March. By then, sources say, the Black Sea reserves will have built up to levels that could force another price drop as producers scramble to ease potential growing stockpiles.

Middle East: Despite the run-up in price in the Black Sea, sources say the Middle East remains stable. Granular and prills continue to sell at parity, and order books are full into next month.

One trader noted there is no opportunity for producers to raise prices, because they have no tons available. Any discussion of tons for this month or early next month is reportedly rhetorical. As a result, producers are asking top dollar for tons they don’t have to people who will refuse to pay that price.

Shipments from the area are mingling with cargoes from the Black Sea in the Indian ports. Sources say that some shipments are even being delayed, and that the orders that are booked for smaller ports are being held back. One trader noted that it makes no sense to load a vessel and rush it to India only to have it sit in the harbor while it waits its turn to unload.

China: The idea that Chinese material will work into India for the current MMTC tender is being dismissed by traders in the area. The current level of $226/mt FOB bagged does not work into India at this time, say observers.

To add to the doubts about Chinese product being put in play in the tender, another trader noted that the Chinese exporters have their own logistics problems to deal with. Just getting enough railcars to ship the product from factory to port is a major effort. Sources say the rail cars are being used to move imported goods inland. Getting the empty cars to the right factory in time for a vessel to load is often problematic.

There is still no word as to what Beijing plans to do about the export tax. For now, industry players are operating under the assumption that the export rate will go back up to 30 percent from the current 15 percent beginning the first of the year. That means that all orders must begin loading by the end of December to qualify for the lower tax rate.

Sources say the government is not expected to accept orders made in December but to be loaded in January as qualifying for the lower tax rate. In previous years the national customs office did accept that formulation. Sources said, however, that some exporters backdated deals to take advantage of the tax reduction. There was one report of tons being charged at the lower rate being loaded almost three months after the higher taxes were to have taken effect.

Indonesia: Apparently two of the three necessary ministers have approved the export of granular urea from Kaltim and PIM. The holdout, it seems, is the ministry of agriculture.

Sources say the Ministries of Finance and Industry have signed off on the export of about 500,000 mt of granular urea. The agriculture minister, however, is nervous – if the exports are allowed, Indonesian farmers may end up short as the application season approaches.

Apparently, the agriculture minister has not been fully briefed on the difference between granular and prilled urea, said one observer. Indonesian farmers have long preferred prills to granular. In the past, the farmers only took granular if it was offered at a heavy discount.

In the past couple of years, because of export bans and the inability to sell its granular product in the domestic market easily, Kaltim and PIM have reportedly blended granular with prills for the farmers. So far, there have been no complaints.

The desire to export is based largely on the desire to earn hard currency for feedstock, repairs, and improvement. Unfortunately for the companies, there is a glut of granular in the global market and granular no longer sells at a premium to prills. Still, said one observer, any hard currency income is better than none as long as the companies turn a profit.

NITROGEN SOLUTIONS

Eastern Cornbelt: UAN pricing was steady at $5.70-$6.07/unit FOB regional terminals, with the low out of spot river locations. Reference prices for UAN-28 ranged from $166-$175/st ($5.93-$6.25/unit) FOB in the region, depending on location.

Western Cornbelt: UAN remained at roughly $5.56-$5.94/unit FOB regional terminals, with the low out of spot Mississippi River locations and the upper end on the Missouri River.

California: UAN-32 pricing was unchanged at $205-$215/st ($6.41-$6.72/unit) FOB and $220-$225/st ($6.88-$7.03/unit) DEL in the state.

Pacific Northwest: UAN-32 remained at $203-$225/st ($6.34-$7.03/unit) DEL in the region, with the low for railed tons and the high for truck-delivered product.

Western Canada: UAN-28 pricing in the region moved on Nov. 8 to $216-$229/mt ($7.71-$8.18/unit) DEL, up from last month’s $207-$220/mt ($7.39-$7.86/unit) DEL.

AMMONIUM NITRATE

Western Cornbelt: Ammonium nitrate remained at $245-$250/st FOB in the region.

California: No market was reported for ammonium nitrate in the state. CAN-17 was quoted at a nominal $205-$210/st FOB in California.

Pacific Northwest: Ammonium nitrate remained at $275-$280/st rail-DEL in Idaho and Washington, and CAN-17 was unchanged as well at $215-$220/st DEL.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was steady at $155-$160/st FOB in the region.

Western Cornbelt: Granular ammonium sulfate pricing remained at $155-$165/st FOB.

California: Ammonium sulfate was tagged at $165-$170/st FOB and $170-$180/st DEL in the state, with the lower end of the ranges for standard or coarse and the upper end for granular sulfate.

Pacific Northwest: Ammonium sulfate was quoted at $159-$170/st FOB and $164-$175/st DEL in the region. Agrium posted a fill program for granular ammonium sulfate, with orders required by Nov. 10 and shipped by Dec. 15. Program prices, effective Nov. 1 in Washington, Oregon, Idaho, Montana, Utah, Nevada, and northern Wyoming, included $159/st FOB the warehouse and $164/st rail- or truck-DEL direct from the plant. On Nov 11, those postings move to $170/st FOB and $175/st DEL.

Western Canada: Granular ammonium sulfate was quoted at $260-$270/mt DEL in the region.

PHOSPHATES

Central Florida: Sales across the board, including Central Florida, increased last week as the Midwest began to dry. The long-awaited fall season went into full swing as farmers got to work planting what looks to be a much larger corn crop than the previous year. The U.S.D.A. projected between 84 million and 86 million acres of corn would be planted, as opposed to the 77.5 million acres the last time. In addition, corn prices increased from less than $2/bushel a couple of months ago to about $3.75/bushel late last week. Ethanol was said to be a major factor in the increased corn planting, and one recent estimate was that as much as 100 million acres would be planted within the next few years.

While sales to most points in the Midwest went up sharply last week, the one area that did not was the Northeast, which is served by rail from Central Florida and where dairy farmers were still hurting from higher operating costs and lower milk prices, although the price of milk was improving.

In the Midwest, warehouses experienced a rush – and many ran empty. Dismal forecasts for the fall season were being modified by many in the industry, and most expected the spring season to be a bumper for profit levels. Some terminals were planning on filling bins in the fall in order to have product on hand for the beginning of spring, which was a sharp contrast from the previous strategy of letting supplies fall to zero.

Although Mosaic hiked its asking price for DAP and MAP on the river by $5/st last week, it held the line in Central Florida in an effort to restore the normal price differential between the river and Florida, which has traditionally been between $10/st and $15/st FOB. It should be noted that while Mosaic intends to get the $5/st FOB bump on the river, that had not actually materialized as of last week.

DAP prices in Central Florida remained in the range of $218-$219/st FOB, but discounts vanished. As a result, traders for the area were planning to charge as much as $221/st FOB. Mosaic discounts MAP $4/st from the price of DAP, while CF has no price difference. PotashCorp’s Central Florida reference price was still at $245/st FOB. In Texas, Agrifos’ truck prices for DAP or MAP were $245/st FOB for either. That company also matches the rail prices of other producers.

U.S. Gulf: Early in the week NOLA DAP barge prices were mostly in the $216-$218/st FOB range, but after Tuesday, prices climbed up to the $218-$220/st FOB range for most sales. Warehouses along the Illinois River experienced heavy runs, and many of those terminals ran dry – even those owned by large operators and producers. What few barges were already on the water on the Illinois were quickly snapped up, and business out of New Orleans was quick to follow. Buyers were no longer haggling over price, but were more concerned about how fast the deliveries could be made. By this week, cheap barges will only be a fond memory, so expect to pay more.

Other areas that saw a significant increase in sales last week included Iowa, Nebraska, Ohio, and the Dakotas.

The sudden change of fortunes put a smile on the faces of almost everyone in the industry. Most thought the fall season would turn out much better than it appeared, and many believed the spring season holds great promise. Buyers were no longer afraid of having phosphate left in their bins at the end of the current season, because the rush to fill in the spring could leave them short of product. No one was projecting phosphate prices will go down. With Mosaic’s Faustina plant still out of operation and demand high, Mosaic was pushing to get the price of DAP up to something closer to the normal differential of the Gulf to the Central Florida price, somewhere between $10-$15/st FOB. Obviously, that will not happen all at once, but over an extended period. The Florida price will remain unchanged, but the price on the river will increase. At least, that’s the plan.

Sales on the river last week ran from as low as $215/st FOB to $221.50/st FOB, which established the range for NOLA DAP barges. It was very unlikely the lower end of the range will be available this week.

Eastern Cornbelt: DAP was unchanged at $253-$265/st FOB regional warehouses, with the low out of spot Ohio River locations. MAP was commonly quoted at $255-$265/st FOB and TSP at $235-$245/st FOB in the region, with the low on the river system and the upper numbers inland. 10-34-0 pricing remained at $255-$265/st FOB.

Western Cornbelt: DAP and MAP were unchanged at $255-$265/st FOB, and TSP pricing remained at $235-$245/st FOB in the region, with the low on the Mississippi River. 10-34-0 was quoted at $255-$260/st FOB in Nebraska and $260-$265/st FOB in Iowa.

California: MAP pricing remained at $315-$320/st FOB warehouse or DEL to the dealer, with the low for rail and the high for truck-DEL product. DAP was $5/st higher than MAP. 10-34-0 was up slightly to $252-$257/st FOB, and 16-20-0 was $235-$240/st FOB in the state.

Ortho-phosphoric acid was quoted at a solid $5.50/unit rail-DEL or FOB warehouse, with super-phosphoric acid at $5.50-$5.60/unit DEL or FOB in the state.

Pacific Northwest: DAP was unchanged at $312-$317/st DEL, with MAP quoted at $305-$310/st DEL. Montana prices were roughly $5/st less for both products. 16-20-0 remained at $235-$245/st DEL, and 10-34-0 was $240-$245/st FOB and $250-$260/st DEL in the region.

Delivered phosphoric acid pricing remained at $5.50-$5.60/unit for super and $5.50/unit DEL for merchant grade.

Western Canada: MAP was up slightly as of Nov. 8 to $385-$420/mt DEL in the region, a $5/mt increase from last report.

U.S. Export: With PhosChem’s sales to India and Pakistan last week, export DAP prices moved up a little. The sale to Pakistan was for 40,000 mt at $257/mt FOB, while the India deal was for 47,000 mt at $253/st FOB. Normally at this time of the year Australia is a big customer of North American phosphate, but a severe drought there has kept product in warehouse bins and off the dry fields. The Chinese co-op was still taking the phosphate it agreed to accept under its contract with PhosChem, but has held off on making spot buys.

The sales into India and Pakistan last week set the export DAP price range at $253-$257/mt FOB, compared to $250-$255/mt FOB the previous week.

India: Under its ongoing tender for 250,000 mt of phosphate rock (72-75 BPL), RCF has awarded the tendered quantity to JPMC ex Jordan at US$68.00/mt FOB for shipment November, 2006 through December, 2007.

POTASH

Eastern Cornbelt: Potash continued to be quoted at $197-$202/st FOB regional warehouses, depending on grade and location, with warehouse reference prices reported in the $204-$207/st FOB range in early November.

Western Cornbelt: Potash remained at $195-$200/st FOB regional warehouses. Reference levels were at $204-$210/st FOB, depending on location and supplier.

California: Potash was unchanged at $227-$233/st FOB, and potassium nitrate pricing remained at $485/st FOB for bulk and $540/st FOB for 50-pound bags. Sulfate of potash (SOP) was steady at $343-$348/st FOB for granular and $331-$336/st FOB on standard/soluble.

Pacific Northwest: Potash remained at $210-$230/st DEL, depending on grade and location. October postings ranged from $230-$242/st DEL in the region, with warehouse postings for coarse potash at $230-$237/st, depending on location.

Western Canada: Coarse potash remained at $242-$257/mt FOB, with the low at plant sites and the higher end out of regional warehouses. Granular potash remained at $245/mt FOB the mine.

SULFUR

U.S.: Last week sulfur marketers were struggling to find homes for the abundant supply of product they expect to have next year, and much of it was still homeless. One source said, “Canada is like a deer in the headlights, trying to figure out which way to go.” Those options include exporting more through Vancouver, exporting more to the U.S., blocking, and cease remelting, which hardly seems necessary. Some sulfur sellers came into the market during the past couple of years, when sulfur was actually profitable, and appeared to be having a difficult time of adjusting to the new reality. That will change. On the Gulf Coast, more sulfur will be used in the prillers for, hopefully, export, and some will likely be blocked next year. Watch for another price decrease for the first quarter of 2007, say many sources.

India: RCF has issued a tender for 9000 mt for arrival MBPT/ Dharamtar during December. The tender closes November 15. FACT has issued a tender for three lots of 15,000 mt for arrival Cochin during December 25-28, January 9-12, and February 1-4. The tender closed November 6, with bids to remain valid through November 13.

The Week in Fertilizer Stocks

Fertilizer Stocks
Company Symbol Price Week Ago Year Ago
Producer
Agrium AGU 28.84 28.40 20.28
CF Industries CF 20.70 20.18 13.53
Mosaic MOS 20.51 19.18 13.59
PotashCorp POT 137.47 132.58 83.44
Terra Industries TRA 9.58 9.20 6.13
Terra Nitrogen TNH 28.98 28.27 22.85
Distribution/Retail
Andersons Inc. ANDE 38.76 34.87 19.74
Lesco LSCO 7.21 7.13 15.81
Scotts SMG 49.16 49.08 45.585
UAP UAPH 24.25 23.50 19.29

Agrium earnings hit skids in 3Q; company upbeat for 2007

Featured, News

Agrium Inc. was not fibbing a few weeks ago when it downgraded its projected earnings per share (GM Oct. 23, p. 11). Agrium third-quarter earnings dropped to $1 million ($.01 per diluted share) on net sales of $821 million, versus the year-ago $72 million ($.54 per share) and $807 million, respectively. Nine-month earnings were $95 million ($.72 per share) on sales of $3.3 billion, versus the year-ago $229 million ($1.71 per share) and $2.5 billion, respectively.

Ironically, Agrium reported record earnings during the second quarter (GM Aug. 7, p. 1).

Forewarned of the change in fortunes, Wall Street reacted well to the Agrium news, with the stock actually going up 1.25 percent to close at $28.40 on Nov. 2.

In the third quarter, all major Agrium businesses were off, except for South American wholesale. Agrium cited several reasons for the shift, most of which it said are short-term problems.

Agrium said it had operational challenges bringing the new Vanscoy potash capacity online. However, it expects to be consistently operating the new 310,000 mt expansion by mid-November.

Nitrogen prices were off 10-15 percent in the quarter, while natural gas prices were down only 4 percent. This, along with unplanned outages, increased production costs.

Phosphate sales were low in the quarter, and profitability continued to be impacted by production and mining issues at the Kapuskasing phosphate rock mine, a strong Canadian dollar, and weak demand across North America.

On the retail side, Agrium said it had a reduction in fertilizer volumes as a result of a two-week delay in the start of the fall harvest and a six percent decline in chemical revenues, since the relatively high levels of disease and insect pressure in the U.S. in 2005 did not recur in 2006. Retail also reflected the inclusion of Royster-Clark losses, as that company traditionally reported a third quarter EBIT loss.

Agrium does expect to see more benefits from the R-C deal in 2007, citing synergies achieved in the last six months, including: consolidation of offices, resulting in the elimination of 140 positions; closure of 25 underperforming retail locations; identification and implementation of a new field organization structure; re-branding of R-C stores as Crop Production Services; and migration of administration office and most retail facilities to Agrium’s retail corporate accounting and point-of-sales systems.

Agrium began reporting its specialty products business as an earnings segment during the third quarter, including its existing ESN and Duration businesses, along with new acquisitions of Nu-Gro and Pursell. The unit had an EBIT loss of $3 million during the quarter, on sales of $25 million. Gross profits were $4 million.

Agrium is very upbeat about 2007, citing several factors: high corn and wheat prices; expectations of 4-6 million more acres of corn; strong nitrogen demand in India and Iran; high energy prices in Eastern and Western Europe; settled potash negotiations with major potash buyers; and tightened supplies due to the flooding problem at Uralkali.

Earnings Retail 3Q-06 Retail 3Q-05 N.Am. Whls. 3Q-06 N.Am. Whls. 3Q-05 S.Am. Whls. 3Q-06 S.Am. Whls. 3Q-05
Net Sales 342 283 422 490 71 61
EBITDA – 28 32 122 46 31
EBIT (9) 23 4 98 43 27
YTD-06 05 YTD-06 05 06 05
Net Sales 1,591 975 1,603 1,518 133 125
EBITDA 97 84 167 422 86 73
EBIT 75 71 79 341 76 61

New institute to replace PPI

Featured, News

The International Plant Nutrition Institute (IPNI), a new global, scientific, agronomic organization, has been recently established. The Potash and Phosphate Institute (PPI) has committed its scientific staff to IPNI. PPI, which will be fully integrated into IPNI by the end of 2006, will no longer exist.

IPNI will officially begin operations Jan. 1, 2007. It will immediately have scientific programs in place in North America, Central and South America, China, India, and Southeast Asia. IPNI anticipates promptly establishing such programs in Western and Eastern Europe, as well as in the Middle East.

“The new organization will be composed of fertilizer industry companies that are basic producers of nitrogen (N) and/or phosphate (P) and/or potash (K) and/or sulfur (S) for agricultural use,” said William Doyle, PPI chairman and Potash Corp. of Saskatchewan Inc. president and CEO. “Large retail organizations that will not qualify as basic producers of N, P, K, or S may qualify as associate members. The purpose is to help provide a coordinated scientific foundation for fertilizer nutrient use and to scientifically address associated environmental issues.”

Dr. Terry L. Roberts of Norcross, Ga., will serve as the first president of IPNI. Dr. Paul E. Fixen of Brookings, South Dakota, will be coordinator, Americas Group, and Dr. Adrian Johnston of Saskatoon, Saskatchewan, will be coordinator, Asia Group.

Founding members of IPNI are Agrium Inc.; Arab Potash Co.; Belarusian Potash Co.; Bunge Fertilizantes S.A.; CF Industries Holding, Inc.; Intrepid Mining, LLC; K+S KALI GmbH; Mosaic; PotashCorp; Saskferco; J.R. Simplot Co.; Sinochem Hong Kong Ltd.; Spur Ventures Inc.; SQM; Terra Industries Inc.; and Uralkali.

The Andersons reports records for 3Q, YTD

News

The Andersons Inc. on Nov. 1 announced third-quarter net income of $8.4 million ($0.51 per diluted share) and total revenues of $336 million, compared with a net loss of $0.6 million ($0.04 per share) on revenues of $289 million in the comparable year-ago quarter. For the first nine months of 2006, the company’s net income was $22.6 million ($1.41 per diluted share) on revenues of $995 million, compared with $10.8 million ($0.70 per share) and $913 million, respectively, in 2005.

The 2006 third-quarter and nine-month results both established new records, the company said, noting that all the earnings-per-share data had been adjusted to reflect the June 2006 stock split. During the third quarter, the company raised $81.6 million of additional equity to support its growth initiatives and strengthen its balance sheet.

Broken down by unit, the company’s Plant Nutrient Group incurred a third-quarter operating loss of $1.9 million on $39 million of revenues, compared with a loss of $0.8 million and revenues of $47 million in the comparable year-ago quarter. Citing higher energy and nutrient input costs, the company said farmers reduced the amount of nutrients applied to their fields this season. “This resulted in reduced wholesale and retail demand for plant nutrients and a deferral of pre- fall season purchasing,” the company said. “With volume down, the group’s third-quarter gross profit declined from last year.” Nine-month results for the segment included operating income of $1.9 million on revenues of $198 million, compared with $8.7 million and $211 million, respectively, in 2005.

The Grain and Ethanol Group saw third-quarter operating income of $12 million on revenues of $209 million, up $14.5 million and $50 million, respectively, from 2005. Year-to-date operating income for the segment was $15.7 million, compared with an operating loss of $2.1 million in the first nine months of 2005. Construction of an ethanol plant in Albion, Mich., in which The Andersons is a significant investor, was completed during the third quarter. Construction of another ethanol plant, located in Clymers, Ind., is underway and scheduled to start production by the end of the first quarter of 2007, the company said.

The company’s Rail Group reported third-quarter operating income of $4.9 million, down $0.9 million from last year, due in part to higher fleet maintenance costs. Third-quarter revenues for the segment were $27 million, up $4 million from last year. Nine-month results for the segment included revenues of $90 million and income of $16.1 million, compared with $59 million and $13.3 million, respectively, in 2005.

The company’s Turf and Specialty Group saw improved third-quarter and year-to-date results due to restructuring actions and other charges in 2005, while the Retail Group also posted higher revenues in the 2006 periods due to increases in same-store sales, along with higher gross margins and total gross profit.

“With our strong third-quarter income this year, one might conclude that our prospects for the full year had noticeably improved,” said President and CEO Mike Anderson. “There are several variables which could still swing either way. Supply and demand dynamics in the grain markets, including rainfalls that have delayed the fall harvest, will impact fourth quarter income. Accordingly, I believe that our previously-announced guidance of $1.90 to $2.10 for our 2006 full-year earnings per diluted share is still a reasonable expectation.”

Yara acquires Olmeca from SQM

News

Yara International ASA said Oct. 30 that it has acquired the Mexican fertilizer company Olmeca from Sociedad Quimica y Minera de Chile S.A. (SQM). SQM said the sale involved a payment of US$4.9 million, which will have a before-tax positive effect of about $1.1 million.

Olmeca had sales of 160,000 mt of fertilizers in 2005. Yara considers it an ideal vehicle to drive Yara’s market position in Mexico. Yara says Olmeca has an established commercial organization with strong presence in the market through its network of rented warehouses and sales outlets. Olmeca has a 4 percent total domestic market share and a 9 percent market share in the central region of Mexico, where it is most active. Olmeca has established a leading position in the specialty fertilizer segments for both fertigation and dry applied products. Total revenues exceeded $50 million in 2005.

“Mexico is the fourth largest fertilizer market in the Americas after the USA, Brazil and Canada,” said Yara President and CEO Thorleif Enger. “The acquisition of Olmeca contributes to strengthening Yara’s position in the Mexican fertilizer market and creates a strong foundation for increased sales to the cash crop segment.”

SQM said when it bought Olmeca in 1997 that there were no reliable distribution channels for fertilizer in Mexico, and that Olmeca was needed to introduce and to increase sales of SQM products. Today, SQM said that less than 25 percent of SQM’s specialty plant nutrients are sold in Mexico via Olmeca, and that the company is no longer a key distribution channel for SQM products.

Flood may take out Uralkali mine for good

News Briefs

Berezniki, Russia-Uralkali has confirmed the flooding of its number one mine in the Perm region (GM Oct. 30, p. 9), with an inflow first detected Oct. 19. While it has invited experts in for an assessment, it noted that there are transgressions to the water-protective stratum that may possibly lead to the loss of the mine. On Oct. 28, the company decided to move all workers to the surface, including those involved in pumping activities. This was due to the increased speed of the inflow, which reached 1,200 cubic meters per hour or more. The concentration of hydrogene sulphide increased as well. The company said that as a result of the closure, potash extraction will be off 20 percent. Uralkali’s production plan for 2007, providing 6.2 million mt KCl, can be reconsidered and reduced approximately by 1.2 million mt. Number one is the company’s oldest mine and was constructed in the 1930s. Uralkali said that number one’s reserves were near exhaustion, though it did say they may have lasted another 7-10 years.

Compass reports best 3Q; fert volumes up

News Briefs

Overland Park, Kan.-Compass Minerals reported that specialty fertilizer volumes rose five percent in the third quarter, with an average increase in selling prices of 11 percent. Volumes were 89,000 st with an average price of $287.57/st, versus the year-ago 85,000 st and $259.60/st, respectively. Nine-month volumes were off slightly at 281,000 st with an average price of $288.52/st, versus the year-ago 293,000 st and $252.88/st, respectively. Third-quarter fertilizer operating earnings were $6.3 million on sales of $25.7 million, versus the year-ago $6.4 million and $22.1 million. An increase in shipping and handling costs to $3.5 million, versus the year-ago $2.9 million, helped cause a slight reduction in earnings. Nine-month earnings were $22.5 million on sales of $81.1 million, versus the year-ago $20.6 million and $74.1 million, respectively. Compass reported that this was its first third quarter to make a profit while a public company. Compass-wide net earnings were $2.3 million on sales of $123.6 million, versus the year-ago loss of $4.8 million on sales of $107.5 million. Compass noted that its salt business completed its winter 2006-2007 deicing bidding during the quarter with an average increase in those prices of 10 percent. Nine-month net earnings are ahead of last year at $28.8 million on sales of $449.6 million, compared to $17.5 million and $459.2 million.

Magellan NH3 pipeline margins off, volumes up

News Briefs

Tulsa-Magellan Midstream Partners LP (MMP) reported a $1.3 million decrease in ammonia pipeline operating margins in the third quarter. The company cited higher expenses during the quarter. Operating margins were a $646,000 loss on sales of $3.5 million, versus a year-ago positive margin of $646,000 and sales of $3.7 million. Nine-month margins were in the plus column at $2.3 million on sales of $11.7 million, versus the year-ago $3.1 million and $10 million, respectively. Actual ammonia volumes on the system were up both in the quarter and year-to-date. Third-quarter volumes moved up to 159,000 st from the year-ago 149,000 st, while YTD was 537,000 st, up from 487,000 st. Company-wide, third-quarter net earnings were down, at $30.6 million on sales of $316.6 million, versus the year-ago $40.7 million and $314 million, respectively. Nine-month income was up, at $136.3 million on sales of $907.4 million, versus the year-ago $122 million and $828 million, respectively.