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Wet weather impacts Viterra 3Q fertilizer performance; Australian assets give company sales boost

News

Wet weather significantly crimped Viterra’s fertilizer sales in Western Canada for the third quarter ending July 31, 2010. This after early seeding boosted the company’s second-quarter performance (GM June 14, p. 1).

“Weather in Canada has been very unusual, with significant rainfall that hampered this year’s crop cycle, as illustrated by our third quarter,” Mayo Schmidt, Viterra president and CEO, told analysts. “It was a difficult quarter for Agri-Products in North America.”

Third-quarter fertilizer revenues were down at C$343.3 million ($319.8 million North America) from the year-ago $479.0 million, while volumes were also down at 699,000 mt (653,000 mt North America, 46,000 mt Australia) from 757,000 mt. Volumes were down 104,000 mt in North America from year-ago levels, due primarily to the reduced seeded acreage in Western Canada. Western Canada fertilizer margins per mt declined 6 percent due to a less favorable pricing environment.

Viterra Agri-Products Senior Vice President Doug Wonnacott told analysts that the decline in third-quarter acreage caused some fairly competitive activity at the retail level, resulting in some significant price erosion, most significantly for glyphosate and chemicals. Fertilizer prices were down about $140/mt on average.

C$ M 3Q-10 3Q-09 YTD-10 YTD-09
Fertilizer 343.3 479.0 627.8 793.5
Crop Prot. 297.0 331.2 338.8 359.7
Seed 82.3 101.5 205.9 183.2
Wool 58.4 – 218.2 –
Finance Prod. 6.3 4.5 18.3 12.6
Equipment 31.6 26.9 65.4 54.3
Agri-Product Total 818.9 943.2 1,474 1,403

The Agri-Products segment had overall third-quarter sales of $818.9 million, compared to the year-ago $943.3 million. The decline was attributed to the impact of excessive rain on seeded acreage in Western Canada, offset somewhat by additional revenues from Australia and contributions from seven retail operations acquired in Western Canada in the past year. EBITDA was $105.8 million ($106.6 million North America, negative $909,000 Australia), down from the year-ago $147.5 million.

Company-wide, Viterra reported net income of A$63.5 million ($.17 per share) on sales of $2.49 billion for the third quarter, compared to the year-ago $120.7 million ($.51 per share) on sales of $2.22 billion.

“Our results this quarter are in line with our July 8th seeded acreage update,” said Schmidt. “While spring conditions in Western Canada were far from ideal, yields on existing crops are encouraging. It is our view that given current yield projections from field staff, Western Canadian production could be in the 44 to 45 million mt range compared to the ten-year average of approximately 49 to 50 million mt.” However, he noted that for this to be achieved the Canadian Prairies will require frost-free days in September and good harvest conditions well into October.

Third-quarter results included a one-time after-tax refinancing cost of $17.7 million and about $9.1 million of additional after-tax amortization costs, which were associated with the purchase price allocation review of the Australian assets.

Nine-month fertilizer sales were $627.8 million ($582.1 million North America), down from $793.5 million. Volumes were up, at 1.38 million mt (1.29 million mt North America, 89,000 mt Australia) from the year-ago 1.27 million mt. Gross fertilizer margins increased slightly during the period, reflecting improved phosphate margins, which more than offset lower nitrogen selling prices.

Nine-month Agri-Products EBITDA was $123.8 million ($123.2 million North America, $589,000 Australia) on sales of $1.47 billion, versus the year-ago EBITDA of $124.6 million on sales of $1.4 billion. The year-ago result included a $28.1 million fertilizer write-down.

Company-wide nine-month net earnings were $92.6 million on sales of $6.3 billion, versus the year-ago $114.0 million on sales of $5.2 billion.

The increase in consolidated sales for both the quarter- and nine-month periods was primarily due to revenue contributions of $558.5 million in the third quarter and $1.9 billion in the first half from Viterra Australia. The results were partially offset by lower third-quarter Agri-product sales in North America.

“Viterra’s consolidation and expansion initiatives over the past three years allowed us to secure a foothold in leading countries of origin in advance of some of our competitors,” said Schmidt. “Global agriculture has once again taken center stage, driven by the solid long-term fundamentals that underpin the growth prospects for agricultural production and demand around the world.”

Noting that Russia has stopped exporting wheat and that last year it exported 14 percent of the world’s wheat, Schmidt said the world is now focused on food shortages.

In the fourth quarter, Viterra expects many farmers will apply crop protection products to eliminate unwanted plant growth on fallow land. It says this typically takes one to three applications of a glyphosate herbicide at a total cost of $5-$10 per acre.

Viterra said that depending on the weather, it is hoping for normal ammonia application rates in the fourth quarter. Wonnacott expects good dry fertilizer movement to warehouses and retail outlets in the fall. “With the expectation of rising prices we’ve seen a fair bit of activity there. And as a result … movement of dry fertilizer to farm should be fairly good.”

Wonnacott expects strong fall application of both ammonia and urea in the U.S., as well as upward price movement. He also expects DAP prices to continue to strengthen during the quarter.

CSB warns: too many ammonia releases

Ammonia, News

The head of the U.S. Chemical Safety Board (CSB) issued a warning that the industry is experiencing too many anhydrous ammonia releases. The warning came as a three-member CSB team began an investigation of an incident at a refrigeration plant near Mobile, Ala., last month (GM Aug. 30, p. 14) that caused more than 130 individuals to seek medical help and left four of them hospitalized for an extended period. “We are seeing too many ammonia releases in our daily incident reviews,” declared CSB Chairperson Rafael Moure-Eraso, who was nominated by President Barack Obama to the board only last March 2010 and confirmed by the Senate in June.

“Though many are ‘small’ releases, a high consequence accident that causes multiple injuries to members of the public is a serious one that warrants our examination. Our team (deploying at Theodore, Ala.) will be examining the events that led to the release and ways that the community can be better protected in the future.”

Based on the CSB’s monitoring of media reports, there were four high consequence incidents in 2009 involving the release of anhydrous ammonia, which led to a total of six fatalities: May 14, American Cold Storage, Louisville, Ky., two fatalities; June 20, Mountaire Farms, Lumber Bridge, N.C., one fatality; July 15, Tanner Industries, Swansea, S.C., one fatality, and Nov. 16, CF Industries, Rosemount, Minn., two fatalities.

As for the recent Alabama release, Mobile County Commissioner Mike Dean has called for meetings to allow the public to express their concerns over the danger of such incidents, and said the area needs a better emergency warning system. He also requested $180,000 to allow the county to rejoin an emergency calling system to alert citizens about emergencies and dangerous weather.

Minemakers, JDCP partner on new phosphate technology; industry veteran leads new tech company

News, Phosphate

Australian-based junior phosphate company Minemakers Ltd. has invested US$1 million to buy a 6.67 percent equity stake in JDCPhosphate Inc. (JDCP) of Bartow, Fla., a developer of a proprietary kiln-based phosphoric acid technology known as improved hard process (IHP). Half of the investment is in cash, and the other by way of an issue of Minemakers fully paid shares.

“We have been assessing the potential of the dry kiln process, and the applicability of Wonarah phosphate to it, for some time, and are delighted to have settled these agreements with JDCP,” said Minemakers Managing Director Andrew Drummond. “Wonarah phosphate seems particularly suited to the process, and there are likely to be large savings in capital, operating, and freight costs when it is applied to it. This is obviously a very exciting new development for the company and Wonarah.” He said the deal should provide considerable cost advantages for exporting into Asian markets compared to conventional phos acid production, and he noted significant much-reduced byproduct issues associated with the process.

JDCP says its breakthrough technology will significantly reduce production costs, increase tolerance for certain phosphate ore impurities, increase acid quality, and reduce the environmental footprint. In addition to licensing, JDCP plans to provide design, technical, and maintenance support services to its licensees, and to engage in internal phos acid production to the extent required to evaluate and test market the acid, and products containing the acid, at commercial scale.

IHP has been designed to process low-grade phos rock, silica, and petroleum coke to produce a relatively pure and concentrated form of phos acid (around 70 percent P205) suitable for use in solid and liquid fertilizers and in technical and industrial applications. JDCP expects that IHP will significantly increase the usable reserves of phosphate ore around the world.

JDCP is led by long-time fertilizer industry veteran Theodore “Tip” Fowler, who serves as CEO. Fowler has served as president of Freeport McMoRan Sulphur Co., as well as senior vice president of Agrico Chemical Co. and IMC-Agrico JV. In addition, he has been president of Fertiberia SL in Spain, president of Commercial Carrier Transportation in Florida, and vice president of development with Crescent Technology in New Orleans.

Among those on JDCP’s advisory board is Malcolm Scott, former president of phosphate companies U.S. Agri-Chemicals and Conserv. He has also been vice president, Florida region, for CF Industries.

The IHP patent was granted to Dr. Joseph Megy, who started JDCP to develop the technology and serves as the company’s chief technology officer. Megy holds over 20 patents and has successfully developed factories to produce products for the aluminum industry. He holds a BS in Mathematics and a PhD in Chemistry and Chemical Engineering from Oregon State University, and has completed advanced studies at MIT. For more information, see www.phosphatesustainability.com.

Fowler, who signed on with JDCP in November 2009, outlined several advantages of the process for Green Markets. The process does not use sulfuric acid. It has no byproduct phosphogypsum or other high volume wastes, with minimal emissions and water usage. The process uses lower grade rock, recycles more product, and can produce more product. In addition, there is less need for beneficiation or upgrading. While the process does use petroleum coke, it is a low-cost product with stable pricing.

Fowler said the technology is scalable, meaning that while it can easily serve a smaller deposit with a 200,000 mt/y plant, extra units can be built depending on the deposit size. In addition, he said it can be utilized with existing deposits where the low grade rock was not useable in the wet process. He estimated that the process could add significantly to the reserves of existing phosphate producers, including those in Florida. Fowler said that while North American producers have yet to invest in JDCP, they will be closely watching the results of its demonstration plant. The plant, which is expected to cost $30 million, is expected to take one year to build, with high hopes it will be complete in 2012. Although JDCP is still procuring financing, it has located a site in Polk County, Fla. In addition to the Minemakers investment, JDCP has received three Small Business Innovation Research grants from the U.S. Department of Agriculture, the latest being for approximately $300,000.

Subject to further testing in the U.S. this year and subsequently in a demonstration plant, Minemakers will be granted a license to construct a dry kiln processing plant in Wonarah using the JDCP process. Minemakers will be granted the exclusive Australian rights to construct and operate an acid plant with the IHP technology for a period of up to seven years. A licensing fee will be payable on each ton of phos acid produced, and JDCP will receive a fee set related to the capital cost of each module and its associated infrastructure. Licensing rights to the process will also be available to Minemakers’ other phosphate projects, including its Namibian marine deposits. Tests on these samples will occur in the next few months.

Minemakers said the process provides specific benefits to its Wonarah rock, including: low-to-medium grade Wonarah rock is suitable without upgrading; the process needs silica, and the Wonarah rock has higher-than-average siliceous content, with additional silica available nearby; the process will produce 70 percent phos acid, which sells at a premium; it will be cheaper freight-wise to ship the condensed downstream product rather than phosphate rock; the lower overall costs of the process; and initial capital cost estimates, including crushing and grinding circuits and tailings and storage facilities, is US$150 million for a 200,000 mt/y plant. The current product sales price is put at US$500/mt Darwin.

In other news, Minemakers recently entered into a memorandum of understanding with the Verte Group by which Asian loan funds will be targeted for the development of the Wonorah deposits.

The Wonarah phosphate reserves, located in the Northern Territory, are Minemakers’ key asset, and the company touts it as Australia’s largest undeveloped rock phosphate project. Indicated and inferred resource estimates for the entire volume of the modeled phosphatic units total 1,105 million mt @ 18 percent P2O5. The project is adjacent to the Barkly Highway and is situated less than 300 kilometers from the north-south (Darwin-Adelaide) standard gauge railway, with spare capacity. This would also allow Wonarah product to be transported relatively cheaply to the Port of Darwin, which has been expanding its export capabilities.

Fire destroys Synagri plant in Quebec

News Briefs

Levi, Quebec-A major fire that broke out at about 2:30 a.m. Sept. 8 caused a total loss to building and contents at the Synagri facility here, but the fertilizer, seed, and chemical company is already rebounding by relocating temporarily not far away from the burned-out site. Because of the heavy smoke, the fire department had about 50 people evacuated from nearby residences. Others were advised to stay inside their homes if they were bothered by the smoke. A nearby high school was closed as a precaution. “Nobody was in the building at the time, so there were no injuries,” reported General Manager Jean-Claude Brulotte. “Everything was destroyed, so we have to decide about rebuilding,” Brulotte told Green Markets. “Right now we have relocated about 50 kilometers, or 30 miles, away, still on the south shore of the St. Lawrence River.” He said phone lines have been transferred and customers are already being served from that location. Brulotte said the cause of the fire is still under investigation, but that it started in the maintenance shop that was part of the building, indicating a possible electrical problem or something else that was being worked on at the time. There was no estimate of the losses. Afterwards, Brulotte noted, “we took care of the environment by pumping up all the water used by the firemen and storing it to be safely disposed of later.” Because it’s a slow time in agriculture, Synagri, which blends dry fertilizer and also sells seeds and agricultural chemicals, currently has about 15 employees, compared with 30 to 35 during the spring rush.

Sasol to divest five units by August 2011

News Briefs

Johannesburg-Sasol Nitro, a division of Sasol Chemical Industries Ltd., plans to sell its regional fertilizer blending plants before August 2011. The units are identified as Bellville, Durban, Kimberley, Potchefstroom, and Endicott. Earlier this summer, Sasol agreed to the sale as part of an agreement with the Competition Commission (GM July 26, p. 10). Sasol Nitro says it has it received significant interest regarding the possible sale. It is now embarking on a process to formally invite interested parties to submit proposals for the purchase of one or more of the blending plants. Details of the divestiture process will be published in national and local press, and on Sasol’s website (www.sasol.com). Interested parties are invited to respond to these notices on or before Sept. 13, 2010. Sasol Nitro intends to increase its focus on upstream activities of its fertilizer value chain, which was supported by investments in several new fertilizer production facilities at its Secunda operations. Sasol Nitro will continue with the production of limestone ammonium nitrate (LAN), ammonium sulfate, and a range of ammonium nitrate and ammonium sulfate-based liquid and granular NPK fertilizer blends.

Illegally storing acids nets 30 months

News Briefs

Beckley, W.Va.-A 43-year-old Beckley man has been sentenced by a federal judge to 30 months in prison and ordered to pay $133,819.12 to the U.S. Environmental Protection Agency (EPA) for storing hazardous waste, including sulfuric acid and chromic acid, without a permit. Rodney Hoffman pled guilty in April, admitting to his involvement with chrome plating at Mills Plating shop. Hoffman cleaned out plating tanks and stored the waste materials onsite without a permit, knowing the waste was hazardous. The hazardous waste, stored in open containers and vats, was abandoned at the shop when the plating operation was moved. According to court documents, the waste materials were illegally stored from October 2006 until February 2007, when they were discovered by the West Virginia Department of Environmental Protection. Subsequently, EPA expended over $133,000 conducting a cleanup of the site. Evidence presented at sentencing revealed that Hoffman was previously convicted for violating the Clean Water Act.

Florida told to make more phos reductions

News Briefs, Phosphate

Tallahassee-Declaring that clean water standards for phosphorus are not being achieved in all parts of the Everglades and that further reductions of phosphorus pollution are needed in the area south of Lake Okeechobee, the U.S. Environmental Protection Agency (EPA) has directed the state of Florida to take specific measures to restore water quality in compliance with a federal court decision to protect these areas. On April 14, Judge Alan Gold of the Southern District of Florida, acting on lawsuits by the Miccosukee Tribe of Indians and the Friends of the Everglades, directed EPA to give clear and comprehensive instructions to Florida right away. Actions spelled out in the determination call for, within the next 60 days, amending existing permits at the court’s directions for discharges to the Everglades by the state and the South Florida Water Management District. In addition, as a longer-term action, instructions were given for conducting environmental assessments, preparing engineering designs, and constructing new marsh treatment areas. EPA has already identified a comprehensive set of actions and milestones needed to meet clean water standards in the Everglades, including a significant expansion of marsh treatment areas that decrease phosphorus levels in the runoff water before it is released to the Everglades. The excess phosphorus being released into the Everglades is reportedly coming from runoff, primarily from farms to the north.

2,800 fish killed by Iowa ammonia release

Ammonia, News Briefs

Lacona, Iowa-Investigators from the Iowa Department of Natural Resources (DNR) have completed their count and reported nearly 2,800 fish were killed from the anhydrous ammonia release caused last month by a supply line rupture at South Central Cooperative here (GM Aug. 30, p. 13). They concluded that the runoff from firefighters spraying down the ammonia plume to prevent vapors from harming residents reached the streams with high ammonia levels and caused the fish kill. The kill proceeded downstream as the polluted water flowed into Cotton Creek and then White Breast Creek east of Lacona. Most of the fish were shiners, minnows, and gizzard shad. However, there were also numerous game fish found dead, including channel catfish, sunfish, white bass, and drum. The value of the fish was established at $12,892, but there was no word if the co-op would be held responsible. South Central removed the underground tile line that allowed runoff to reach the stream and built a trench to collect any ongoing runoff following rainfall. DNR officials said they will be working with the co-op to prevent future problems.

Tests find plants take up drugs in biosolids

News Briefs

Toledo-Drugs and other contaminants often contained in biosolids can be taken up by the plants in fields and gardens where the material is used a fertilizer, according to research findings published in Environmental Health News. A team of University of Toledo scientists used sludge and wastewater from a treatment plant in Oregon, Ohio, to analyze for three different types of pharmaceuticals and two anti-microbial chemicals, and found that with the exception of one, all of the chemicals accumulated in the plant tissues. The anti-depressant fluoxetine was not detected, but the greatest accumulation was observed for the anticonvulsant carbamazepine and anti-microbial triclosan and triclocarban, which are typically found in anti-bacterial soaps and toothpastes. The histimine diphenhydramine was also detected. The greatest accumulation of all chemicals was found in soybeans exposed to soils treated with biosolids. The two anti-microbial chemicals, triclosan and triclocarban, were found to have the highest concentrations in the leaves of the soybean plants relative to the root, suggesting these chemicals had a greater potential to move upward in the plant tissues.

Agencies zero in on hypoxia problems

News Briefs

Washington-Concerned that hypoxia has increased nearly 30-fold since 1960, several key environmental and scientific agencies with the U.S. government are calling for research and policy changes that could help reverse this growing problem in coastal water. Incidents of hypoxia were documented in nearly 50 percent of the 647 waterways assessed for the 163-page Scientific Assessment of Hypoxia in U.S. Coastal Waters delivered to congressional leaders. “The nation’s coastal waters are vital to our quality of life, our culture, and the economy. Therefore, it is imperative that we move forward to better understand and prevent hypoxic events which threaten all our coasts,” warned Nancy Sutley, chair of the Council on Environmental Quality, and John Holdren, director of the Office of Science and Technology Policy. According to the report, federal research programs are addressing many aspects of the problem of hypoxia, and coordination among the relevant governmental entities is increasing. As a result, some areas are now in better condition than they were a few decades ago. But overall, management efforts to stem the tide of hypoxia have not made significant headway, in part due to increased development and population growth in coastal watersheds. The report, produced by an interagency working group of the National Science and Technology Council’s Committee on Environmental and Natural Resources, also notes that climate change may be causing or exacerbating the problem. “This report contains the latest and most in-depth science assessing the environmental impact of low-oxygen dead zones, and EPA is proud to have played a key role in developing the study,” said U.S. Environmental Protection Agency Administrator Lisa Jackson.