Walnut Creek, Calif. — Central Garden and Pet reported a 32 percent drop in net income for the second quarter ending March 24, 2012, to $21.6 million ($0.45 per diluted share) from the year-ago $31.8 million ($0.51 per share). Sales were off only 4 percent, to $466.9 million from $485.7 million. The company said short-term execution issues hindered the company’s ability to fully meet demand. The company reiterated that it expects results in the second half to be better than the first half. “Strong early demand for some of our products occurred at the same time we were consolidating some of our plants and distribution facilities,” Gus Halas, Central president and CEO, told analysts. “This, along with other supply issues, resulted in execution glitches that delayed fulfilling orders for some customers. I am confident that the operational issues we encountered are temporary in nature, and we are addressing them as fast as possible.” The company said it does not believe it lost any customers as a result of the delays, which were particularly in the garden segment. The company said since the beginning of the fiscal year it has closed one manufacturing plant and five warehouses, meeting its earlier goals. It has also downsized another distribution center. It expects to close another two or three facilities during the remainder of the year, and take some $120 million in costs out of the company over the next few years. Wall Street was not too happy with the company’s results, with shares dropping 10 percent to a $9.71 close on May 3 after the results were released. Six-month income was $8.7 million ($.0.18 per share) on sales of $769 million, down 62 percent from the year-ago $22.7 million ($0.37 per share) on sales of $767.4 million.
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USDA says corn and wheat production up, but prices down
In its latest World Agricultural Supply and Demand Estimates (WASDE) report released on May 10, USDA said corn production for 2012/13 is projected at a record 14.8 billion bushels, up 2.4 billion from 2011/12. USDA attributed the boost to a projected 5.1 million acre increase in harvested area, an early start to planting and emergence, and higher expected yields, which are projected at a record 166 bushels/acre – 2 bushels above the 1990-2010 trend.
The season-average farm price for corn is projected at $4.20-$5.00 per bushel, down sharply from the 2011/12 record projected at $5.95- $6.25 per bushel. USDA said that despite the lowest expected carry-in in 16 years, corn supplies for 2012/13 are projected at a record 15.7 billion bushels, up 2.2 billion from 2011/12. Total U.S. corn use for 2012/13 is projected up 9 percent from 2011/12 on higher feed and residual disappearance, increased use for sweeteners and starch, and larger exports. Projected corn use for ethanol is unchanged on the year as weak gasoline consumption limits domestic blending opportunities, USDA said.
Citing abundant domestic supplies, lower prices, and higher expected China demand, USDA said corn exports for 2012/13 are projected 200 million bushels higher than in 2011/12. U.S. corn ending stocks for 2012/13 are projected at 1.9 billion bushels, up 1 billion bushels from the current year projection. Projected corn ending stocks for 2011/12 were raised 50 million bushels to 851 million, with lower expected June-August feed and residual disappearance.
USDA’s outlook for the 2012/13 U.S. wheat crop is also for larger supplies, heavier use, and lower prices. All wheat production is projected at 2,245 million bushels, up 12 percent from last year’s weather-impacted crop and the highest since 2008/09. The all wheat yield, projected at 45.7 bushels per acre, is up 2 bushels from last year, but 0.6 bushels below the 2010/11 level. U.S. wheat supplies for 2012/13 are projected at 3,133 million bushels, up 5 percent from 2011/12.
The season-average farm price for all wheat is projected at $5.50-$6.70 per bushel, down significantly from the record $7.25 per bushel projected for 2011/12.
The forecast for 2012/13 winter wheat production is up 13 percent to 1.69 billion bushels, with a record yield of 47.6 bushels/acre projected, up 1.4 bushels from last year. USDA attributed the yield and production increases to a recovery for the hard red winter wheat crop in the Central and Southern Plains after last year’s drought. Hard red winter wheat production, projected at 1.03 billion bushels, is up a full 32 percent from 2011.
USDA said the large year-to-year increase in winter wheat production and attractive prices for wheat relative to corn are expected to raise summer wheat feeding. Total U.S. wheat use for 2012/13 is projected up 8 percent year-to-year on higher expected domestic use and exports. U.S. wheat exports for 2012/13 are projected at 1,150 million bushels, with larger supplies, more competitive prices, and an early expected start to this year’s harvest opening the door to higher demand for U.S. wheat during the coming months.
Global wheat supplies for 2012/13 are projected 2 percent lower on the year, as a 23.8 million ton reduction in foreign production offsets the increase in U.S. output. U.S. ending wheat stocks are projected at 735 million bushels for 2012/13, down 33 million from 2011/12 and 241 million below 2009/10.
The WASDE report projects soybean production at 3.205 billion bushels, up from the 2011 crop as higher yields more than offset lower harvested area. Harvested soybean area is projected at 73 million acres, and soybean yields are projected at 43.9 bushels/acre, up 2.4 bushels from 2011. With beginning stocks projected at 210 million bushels, 2012/13 soybean supplies are projected at 3.43 billion bushels, up 4 percent from 2011
Urea
U.S. Gulf: Compared with recent weeks, the urea barge market remained quiet. New granular trades for prompt were called $675-$690/st FOB, with claims that if you really wanted a barge you could pull $670/st FOB. This is in line with expectations that prices will significantly erode for forward barges. Nothing new was reported on prills.
Eastern Cornbelt: Most sources continued to quote the granular urea market at $740-$750/st FOB regional terminals to the dealer, but some Illinois sources said deals could be had at slightly lower numbers on a spot basis for limited volumes. An Indiana contact pegged the market solidly at the $750/st FOB mark in his location last week.
Western Cornbelt: Sources pegged the granular urea market at $730-$750/st FOB Western Cornbelt terminals last week, with most touting the market at the $740/st FOB level or higher. While some sources maintained that the Catoosa, Okla., urea market was still firm at $725-$735/st FOB, other said the market there had slipped to $715-$720/st FOB in the wake of softer NOLA barge prices.
Northern Plains: Urea remained in tight supply in the Northern Plains, with one Minnesota source describing inventories as “a few loads available here and there.” The market was quoted at $720-$750/st FOB in the region, with delivered tons pegged in the $765-$770/st range in North Dakota. Those prices reflected a slight drop from last report.
Great Lakes: Wisconsin sources pegged the granular urea market in a broad range at $740-$770/st FOB, depending on location. Michigan contacts tagged the dealer market at $750-$775/st FOB, with the low at Burns Harbor, Ind., and the upper end FOB Webberville, Mich.
Northeast: Pennsylvania sources tagged the granular urea market in the $704-$710/st FOB range last week, depending on location. Rains came to much of the Northeast region last week, dropping 1-5 inches across New England, up to two inches in western Pennsylvania, and 1-2 inches on Maryland’s eastern shore. The moisture was badly needed in Maryland and Delaware, where both states experienced their driest January-April period on record.
India: Sources report STC was not too happy with the results of the May 8 tender.
The lowest offer came from Titanium at $535/mt CFR, about $150/mt higher than what IPL paid just a few weeks ago. The average price of all the offers comes in $30/mt higher over the final IPL price.
The offer from Titanium put STC in a box. Had their offer been closer to the rest of the pack – in the $550s/mt CFR – STC could have purchased up to 1 million mt. Now, with Titanium at $535/mt CFR and the next lowest offer at $552/mt CFR from Swiss Singapore, STC may have to try to convince the Indian government that it will need permission to run a two-tier award.
But first it is trying to get others to match the Titanium offer. Area traders are skeptical it will work.
Results of the tender follow on pg. 6-7.
Sabic sent its regrets. Sources confirm that the turnarounds from the Saudi producer, combined with its contracts, left the company with no tons to offer. The offers from the Arab producers came as no surprise. In the run-up to the tender, many in the industry expected to see prices of $555/mt FOB. And indeed, the three producer
companies that did offer set their prices at $555-$556/mt FOB. Traders carrying Middle East tons backed up that level with offers around $557/mt FOB.
The closing of the tender was pushed back from the original issue date of May 4. In the original tender call, STC said it would not consider offers containing Iranian tons. As the May 4 deadline approached, the company saw a run-up in prices from Yuzhnyy to the Arab Gulf
Spot Barge Prices
STC awards 800,000 mt in urea tender
Sources report that India’s STC has issued awards to 10 companies for a total of 800,000 mt. Four more companies are still in talks with STC for an additional 200,000 mt.
The deals came after STC counter bid the traders at $535-$540/mt CFR based on the port of discharge. The original offers came in at $550-$567/mt CFR. Reportedly, the Arab producers are refusing to budge off their initial offers of $555-556/mt FOB.
Of the companies getting awards, many of them were offering Iranian tons either as the total of their offers or as part of a larger mix.
The purchase of 800,000 mt to 1 million mt is higher than industry sources were saying would be picked up in this round. STC has traditionally been a conservative buyer. The large quantity purchased, however is important. Sources report that India’s reserves of urea are drastically low.
For more details see the May 21 issue of Green Markets.
Koch eyes major N expansion
Koch Fertilizer said today that it has retained Black & Veatch, a global engineering, consulting and construction company, to help develop numerous projects to increase its North American production by more than two million tons annually through production enhancements and new capacity investments. Initial stages of these projects will focus on production enhancements within Koch Fertilizer’s nitrogen production facilities in Ft. Dodge, Iowa; Dodge City, Kan.; Beatrice, Neb.; Enid, Okla.; and Brandon, Manitoba.
“Undertaking these projects will allow us to better serve the needs of our customers. With crop production continuing to increase, the demand for fertilizer is also increasing,” said Steve Packebush, president of Koch Fertilizer.
Koch Fertilizer is also investing in its terminal distribution system. The business has several active projects, including adding an ammonia terminal in Conway, Kan., a dry and liquid fertilizer terminal in Stockton, Calif., and various other liquid and dry storage projects across the U.S. and Canada.
“Driven by rapid changes in technology and a shortened application period for fertilizer, we are proactively investing in our distribution network,” Scott McGinn, senior vice president for North America said. “We continue to focus on expanding our storage and distribution system to meet the supply demands of our customers and the market.”
Koch Fertilizer’s distribution system consists of more than 60 terminals within North America. A variety of products are moved through its distribution system, including ammonia, urea, liquid fertilizer, phosphate, potash, and sulfur-based products.
LSB reports 1Q results, gives Pryor update
LSB Industries Inc. said late May 9 that its maintenance-idled Pryor, Okla., urea plant will likely be down most of the second quarter, coming up by the end of June. In March, the plant went down for unplanned maintenance and on April 25, the company determined that the urea plant reactor’s stainless steel lining was non-repairable and had to be replaced. This replacement will take most of the second quarter.
The Pryor outage was a major factor in a drop in LSB second quarter net income to $14 million ($0.61 per diluted share) on sales of $190.2 million from the year-ago $20.6 million ($0.90 per share) on sales of $177.5 million.
USDA sees production surge, lower prices
In its latest World Agricultural Supply and Demand Estimates (WASDE) report released on May 10, USDA said corn production for 2012/13 is projected at a record 14.8 billion bushels, up 2.4 billion from 2011/12. USDA attributed the boost in production prospects to a projected 5.1 million acre increase in harvested area, an early start to planting and emergence, and higher expected yields, which are projected at a record 166 bushels/acre, two bushels above the 1990-2010 trend.
The season-average farm price for corn is projected at $4.20-$5.00 per bushel, down sharply from the 2011/12 record projected at $5.95- $6.25 per bushel. Citing abundant domestic supplies, lower prices, and higher expected China demand, USDA said corn exports for 2012/13 are projected 200 million bushels higher than in 2011/12. U.S. corn ending stocks for 2012/13 are projected at 1.9 billion bushels, up 1.0 billion bushels from the current year projection.
USDA’s outlook for the 2012/13 U.S. wheat crop is also for larger supplies and use, but lower prices. All wheat production is projected at 2,245 million bushels, up 12 percent from last year’s weather-impacted crop and the highest since 2008/09. The all wheat yield, projected at 45.7 bushels per acre, is up 2.0 bushels from last year, but 0.6 bushels below the 2010/11 level. U.S. wheat supplies for 2012/13 are projected at 3,133 million bushels, up 5 percent from 2011/12.
The season-average farm price for all wheat is projected at $5.50-$6.70 per bushel, down sharply from the record $7.25 per bushel projected for 2011/12.
The forecast for 2012/13 winter wheat production is up 13 percent with a record yield of 47.6 bushels/acre projected , which USDA attributed to a recovery in the hard red winter wheat crop in the Central and Southern Plains after last year’s drought.
U.S. all wheat exports for 2012/13 are projected at 1,150 million bushels, with larger supplies, more competitive prices, and an early expected start to this year’s harvest opening the door to higher demand for U.S. wheat during the coming months. U.S. ending wheat stocks are projected at 735 million bushels for 2012/13, down 33 million from 2011/12 and 241 million below 2009/10.
The WASDE report projects soybean production at 3.205 billion bushels, up from the 2011 crop as higher yields more than offset lower harvested area. Harvested soybean area is projected at 73 million acres, and soybean yields are projected at 43.9 bushels/acre, up 2.4 bushels from 2011. U.S. soybean exports for 2012/13 are projected at 1.505 billion bushels, up 190 million from 2011/12. Ending soybean stocks for 2012/13 are projected at 145 million bushels, down 65 million from 2011/12, leaving the stocks-to-use ratio at a historically low 4.4 percent.
The U.S. season-average soybean price for 2012/13 is projected at $12-$14 per bushel, compared with $12.35 per bushel in 2011/12.
Agrium reports 1Q results
Agrium Inc. reported a 9 percent drop in net income for the first quarter ending March 31, 2012 from the year-ago quarter. Net earnings were $155 million ($0.97 per diluted share) on sales of $3.63 billion, down from the year-ago $171 million ($1.09 per share) on sales of $2.95 billion.
First quarter 2012 results included a pre-tax loss of $13 million ($0.06 per share) on natural gas and other hedge positions and a pre-tax share-based payment expense of $64 million ($0.29 per share). Excluding these items, net earnings would have been $210 million ($1.32 per share) for the quarter.
STC tender indicates significant price change
Offers in the STC urea tender that closed today confirmed higher prices across the board, including steeply higher Iranian levels. The lowest offer came in at $535/mt CFR, about $150/mt higher than what IPL paid just two months ago. The average price of all the offers comes in $30/mt higher over the final IPL price.
Industry sources had expected to see the Arab producers come in around $555/mt FOB. And indeed, the three producers companies that did offer set their prices at $555-$556/mt FOB. Traders carrying Middle East tons had offers around $557/mt FOB.
When STC first issued its tender, it would not consider offers containing Iranian tons. At the last minute, however, the company changed the closing date from May 4 to May 8 and allowed Iranian material to be included. The change made a difference. The lowest offer came from Titanium based on Iranian product at $535/mt CFR. Other offers of openly declared Iranian tons range from $563/mt CFR to $579/mt CFR. Offers of Yuzhnyy and Middle East tons started in the upper $550s/mt CFR.
The prices offered in this tender seem to indicate that the days of ultra-cheap Iranian urea are over. The Titanium offer was far outside the norm for this tender, even from other offers based on Iranian material. One observer wondered if Titanium would be able to obtain the necessary product at that price.
Emmsons got stuck between IPL and the Iranian suppliers with its price award from the last tender. Sources report that Emmsons was unable to make good on its award of 500,000 mt.
Last week industry watchers said STC would not only have to make up for the half-a-million tons Emmsons did not deliver but also at least an equal amount to keep supplies at levels designed to prevent panic among local distributors and political figures.
A number of Chinese tons were offered in the tender. It is unclear to sources if the tons are left-over quantities from the last export window that remained in bonded warehouses or if the tons will be shipped after July 1 when the Chinese export duty drops to 7 percent from its current 110 percent. The prices — $527-$563/mt FOB — seem to indicate no one is working with older tons.
Based on the offers, the Yuzhnyy price moved into the $550s/mt FOB, the Middle East – Arab producers – moved into the mid-upper $550s/mt FOB and China into the $540s/mt FOB.
Once STC concludes its talks with the offering companies, new and higher prices around the producing world will be posted.