All posts by webster@kennedyinfo.com

CF announces additional suspensions

Breaking Industry News

Additional nitrogen supply curtailments were announced by CF Industries Holdings Inc. on April 17. CF notified customers on Tuesday that is was unable to load urea at its Inola, Okla., warehouse due to an interruption in supply availability. CF said the interruption was effective immediately and would last until further notice.

CF also alerted customers on April 17 that the company’s Verdigris, Okla., plant would not be loading anhydrous ammonia trucks until further notice, again citing an “interruption in supply.” CF said the Verdigris ammonia interruption would commence at 6 p.m. on April 17.

Just one day earlier, CF had announced that UAN was being allocated at its Courtright, Ont., facility, and urea was being allocated at the company’s Medicine Hat, Alberta, plant. CF attributed both allocations to interruptions in supply availability. CF also reported on April 16 that its Woodward, Okla., facility was out of service due to power outages caused by tornadoes in that area on April 15.

CF’s Verdigris plant has two ammonia plants with a total combined production of more than 3,200 tons per day, with some 2,400 tons of that upgraded to UAN under optimal production rates. The Verdigris plant is the largest UAN production facility in North America, with the capacity to produce more than 5,600 tons per day of UAN-32.

CF announces further N allocations

Breaking Industry News

CF Industries Holdings Inc. on April 16 notified customers that it will start allocating urea at its Medicine Hat, Alberta, plant, effective immediately, due to an interruption in supply availability. The notice asked customers to avoid scheduling any loading at the facility until the allocation notification has been sent out.

The Medicine Hat alert followed an earlier notice to CF customers on April 16 that the company was allocating UAN at its Courtright, Ont., facility, and that CF’s Woodward, Okla., nitrogen complex was temporarily out of service due to a loss of power caused by tornadoes that passed through that location on April 15. The tornadoes caused no direct damage at the Woodward complex, CF reported.

The nitrogen fertilizer complex at Medicine Hat is Canada’s largest, with annual production capacity of 800,000 mt of urea and approximately 1.1 million mt of ammonia, some of which is upgraded into urea. CF has a 66 percent interest in Canadian Fertilizer Ltd., which owns the Medicine Hat complex. Combined annual fertilizer capacity from the facility’s two ammonia plants and one urea plant is approximately 1.5 million mt and is shipped by rail and truck to the northern U.S. Cornbelt and to western Canada. Viterra Inc. owns the minority stake in the plant.

TFI responds to report on farm pollution in drinking water

Featured, News

A report released this month by the Environmental Working Group (EWG), Troubled Waters: Farm Pollution Threatens Drinking Water, claims that farm runoff of nitrogen and phosphorus is causing a “cascade of harmful consequences” to drinking water, lakes, and rivers, and calls upon Congress to address remedies for these “potent pollutants” in the new Farm Bill.

The report produced a quick response from The Fertilizer Institute on April 12, which said U.S. farmers are growing corn with record efficiency, but work still needs to be done to help farmers implement conservation and stewardship practices.

EWG, a non-profit environmental organization headquartered in Washington D.C., said in its report that nutrient overload in surface and groundwater is “a significant water quality problem” in the four states that the report focuses on – Illinois, Iowa, Minnesota, and Wisconsin.

The report says nitrate “is directly toxic to human health,” citing links to blue baby syndrome in infants and an increased risk of thyroid cancer in adults. The report blames phosphorus runoff for “explosive blooms of aquatic algae,” some of which produce the cyanobacteria toxin that can be deadly to pets, livestock, wildlife, and people.

“Toxins produced by cyanobacteria can harm the nervous system, cause stomach and intestinal illness and kidney disease, trigger allergic responses and damage the liver,” the report states. “Even after a brief exposure, cyanobacterial toxins can cause skin rashes, eye irritation and breathing problems.”

The report says the problem is amplified when utilities try to combat these pollutants by treating drinking water with chemical disinfectants such as chlorine. “Treating algal contamination this way gives rise to carcinogenic disinfection byproducts,” the report states, and adds “hundreds of thousands of dollars annually to water utilities’ treatment costs.”

The EWG report claims that USDA economists estimate that removing nitrate alone from drinking water costs more than $4.8 billion a year. “The cost of dealing with algal blooms is particularly daunting,” the report says. “The total capital cost of water treatment that would address cyanobacterial blooms and cyanotoxins, can range between $12 million and $56 million for a town of 100,000 people.”

EWG argues in the report that the best way to confront these pollution issues is to address them upstream at the farm level, and to do so through the farm bill. “This year’s debate over renewing the federal farm bill is a referendum on America’s commitment to protecting our drinking water supplies at the source,” the report says. “With the exception of large animal feeding operations, farm businesses are exempt from the pollution control requirements of the federal Clean Water Act, and few states have authority to compel farm businesses to adopt practices that reduce the amount of farm pollution reaching our rivers, lakes and bays.”

The report presses Congress to take several steps with the new farm bill. First, to reform farm subsidies by ending direct payments, reducing subsidies for farm insurance programs, and refusing to create new farm entitlement programs “that encourage all-out production to the detriment of the environment.” Second, to renew the “conservation compliance” provisions of the 1985 farm bill by re-linking wetland and soil protection requirements to crop insurance programs, and by requiring farm businesses that receive subsidies to update their conservation plans. And third, to strengthen conservation incentive programs and provide adequate funding to expand “collaborative conservation” tools among groups of farmers working together to protect drinking wate

CHS 2Q earnings off 60 percent; fertilizer unit reports increased volumes, crimped margins

Featured, News

CHS Inc. reported a 60 percent decline in net income attributable to CHS for the second quarter ending Feb. 29, 2012, to $78.5 million from the year-ago $194.6 million. Revenues for the quarter, however, were up 14 percent, to $8.8 billion from $7.7 billion.

Decreased income plagued all CHS units, including its Ag Business, which includes crop nutrients, grain marketing, oilseed processing, and country operations, which consists of locally controlled retail service centers. CHS said product margins declined for its CHS wholesale crop nutrients and grain marketing. Overall, merchandise margins increased for retail operations, while grain margins decreased. This, combined with increased operating expenses from acquisitions and expansion, resulted in lower earnings. While the company’s oilseed processing business reported improved margins, earnings decreased, primarily from recent acquisition costs.

Ag Business income before taxes was $36.1 million on revenues of $6 billion, compared to the year-ago $86.9 million on revenues of $5.2 billion. Operating income dropped to $46.4 million from $82.9 million.

Earnings from the wholesale crop nutrient business decreased $21.8 million from the year-ago quarter, mainly due to decreased product margins, which included the effect of lower of cost or market adjustments of $7 million. Second-quarter wholesale crop nutrient revenues totaled $513 million, up from the year-ago $427.5 million. Of the $85.4 million increase (20 percent), CHS said $49.7 million was related to increased average fertilizer selling prices and $35.7 million related to increased volumes.
The average sales price of all fertilizers sold reflected an increase of $46.19/st (11 percent) over the year-ago period. Wholesale crop nutrient volumes were up 8 percent over the year-ago quarter. The costs of fertilizer sold went up to $510.2 million from $405.9 million. Of the net $104.3 million (26 percent) increase, the average cost per ton went up $66/st, or 16 percent.

CHS statistics also showed higher valued fertilizer inventories and fewer purchase and sales contracts as of Feb. 29, 2012. As of that date, crop nutrient inventories were valued at $423.6 million, up from the year-ago $381.5 million. Also on that date, the company had 1.46 million st in crop nutrient purchase contracts and 1.7 million st in sales contracts, versus the year-ago 1.63 million st and 2.2 million st, respectively.

Earnings for country operations, which includes the CHS retail and elevator businesses, decreased $14.2 million during the second quarter from the year-ago period.
For the grain side of the business, CHS is expecting decreased volumes during fiscal 2012, primarily from large crops harvested in the Black Sea, South America, and Australia, which it believes will reduce grain exports and reduce CHS earnings. In addition, CHS said the fall harvest produced short crops in the U.S., which may also negatively impact CHS volumes.

Energy earnings were down, at $42.1 million versus the year-ago $107.2 million. Refining margins declined, though propane and renewable fuel operations reported increased earnings.

The Corporate/Others segment also saw a decline, to $11.6 million from $20 million, due to lower margins in the financing business, as well as decreased margins within the company’s two food-related joint ventures.

CHS six-month earnings were up 25 percent, to $494.7 million on revenues of $18.6 billion, compared to the year-ago $396.3 million on revenues of $15.8 billion. The CHS Energy segment took the credit for boosting company results as it posted income before taxes of $439.4 million for the six-month period, versus the year-ago $164.4 million. This was attributed to higher refining margins during the first quarter. The Ag Business was off 35 percent, to $157.5 million from $241.6 million, while Corporate/Other was also do

Strong demand continues to limit fertilizer availability

Featured, News, UAN

Heavy preplant demand continued to deplete fertilizer inventories and create supply outages for ammonia, UAN, and urea at many Midwest terminals last week.

One industry source said more Midwest ammonia terminals were out of product than had spot tons for sale last week, and another said many terminal that source tons by barge instead of pipeline were completely drained as the week advanced.

CF Industries Holdings Inc. sent out an alert to customers on April 11 that it was unable to load UAN and anhydrous ammonia at its Peru, Ill., terminal, citing “an interruption in supply availability.” CF said the interruption would only last from April 11 until 6 a.m. April 12, but the company indicated to customers that ammonia was not available for the April 12-13 shipping period at Frankfort and Mt. Vernon, Ind., Spencer, Iowa, and Mankato, Minn.

CF also alerted customers on April 10 that it was unable to load urea at its Pine Bend, Minn., terminal due to “an interruption in supply availability.” CF said the interruption would be in effect from Wednesday, April 11, until further notice.

Earlier in the month, CF had notified customers that it was not able to load anhydrous ammonia out of its Aurora, Neb., terminal until further notice, and that UAN loading at Woodward, Okla., had also been suspended until further notice (GM April 9, p. 1). Some industry sources reported last week that Woodward was producing again, but remained behind schedule on shipments.

“CF Industries has an extensive fertilizer production and distribution system which is designed to serve our customers’ needs,” CF said on April 12 in response to a Green Markets inquiry about the status of those facilities. “In the course of our daily activity, we communicate with those customers on a regular basis so that we can continue to serve them well. We do not view our routine customer communications as rising to the level of media announcements, and as such, have no comment.”

Koch Nitrogen did not respond to questions about its Beatrice, Neb., facility, where the company reported on April 3 that UAN truck loading had been suspended until further notice.

Unseasonably warm weather in March gave many Midwest growers the green light for fieldwork a full three weeks earlier than normal, sources said. That early demand, coupled with production hiccups at some plants and the reluctance of farmers and dealers to commit earlier to spring tons, has left the distribution chain particularly vulnerable to outages this spring, sources reported.

“We’ve had an extended run, starting in early March, and we haven’t had much bad weather,” reported one Iowa contact last week. “There’s still stuff rolling out the door every day, and we’ll keep selling for the next 30-40 days.”

Some sources acknowledged that much higher spot prices had “throttled back demand” in some locations last week, but most continued to describe movement as hot and heavy. The looming ammonia and UAN sidedress run on corn, as well as the upcoming rice application season for urea, were likely to keep the pressure on nitrogen inventories. “There’s still a lot of nitrogen to be applied up north and for rice topdressing,” said one source.

“Dry nitrogen and ammonia have been sucked down,” added another Midwest contact on April 12. “UAN is really just cranking up now, but I can’t help but think it’ll follow the other nitrogens.” UAN was already following urea in terms of price increases, with terminal and NOLA barge values ramping up quickly in recent weeks.

Exactly 10 years ago, the domestic industry was also reeling from limited nitrogen supply and rapidly firming prices during the busy planting season (GM April 15, 2002), but that supply situati

Sulfur

Market Watch, Sulfur, Tampa, U.S. Imports, Vancouver, West Coast

Tampa: There was no settlement as of late last week on new prices for second-quarter molten sulfur contract deliveries to Tampa. Suppliers were seeking a small increase, while phosphate producers were trying to get a rollover from the first quarter, or possibly do better.

Oil sands producers were said to be having problems that will delay deliveries of some sulfur south from Canada, although the interruption was only temporary.

A news report said Valero’s refinery at St. George’s Parish was shut down after losing power. The plant was knocked offline a week earlier as a result of a lightning strike, but repairs were underway and it was expected to return to normal operation within a couple of days.

Refinery operating capacity rates fell about 1 percent last week from the previous week.

Vancouver: Price increases in China had stalled by last week, but sources said other destinations were up somewhat. Based on freight rates, Vancouver prices for sales to China were around $185/mt FOB, but up to $200/mt FOB for some other delivery points.

West Coast: Spot prices for prill on the West Coast continued tracking Vancouver last week.

U.S. Imports: February imports were off 6 percent, to 176,568 st from the year-ago 187,171 st. However, July-February imports were up 2 percent, to 1.57 million st from 1.54 million st.

Potash

California, Eastern Cornbelt, Market Watch, Pacific N.W., Potash Muriate, U.S. Gulf, Western Canada, Western Cornbelt

U.S. Gulf: Barge prices were reported at $480-$485/st FOB.

February potash imports were off 45 percent, to 597,131 st from the year-ago 1.09 million st. July-February imports were off 23 percent, to 5.82 million st from 7.57 million st.

Eastern Cornbelt: The potash market was quoted at $525-$535/st FOB regional warehouses, depending on grade and location. One source said growers in his location were wrapping up dry fertilizer applications last week and preparing to focus heavily on planting.

Western Cornbelt: Potash was pegged at $525-$542/st FOB regional warehouses, with the upper end quoted for white granular tons in Missouri on a spot basis. Iowa sources quoted red granular potash at $525-$540/st FOB last week, depending on location.

California: Muriate of potash remained flat at $590-$610/st DEL in California, depending on grade and location. The sulfate of potash (SOP) was unchanged at $695-$705/st FOB, and potassium nitrate was steady at $1,020/st FOB for bulk tons and $1,090/st FOB for bags.

Pacific Northwest: Potash was tagged at $580-$590/st rail-DEL in the Pacific Northwest, down from last report. Potash pricing at Utah mine locations ranged from $530-$540/st FOB, depending on grade.

K-Mag was said to be in very tight supply, with the market in Washington quoted at $426-$431/st FOB.

Western Canada: Potash pricing in Western Canada remained at $607-$632/mt FOB regional warehouses, depending on grade and location. The market to Canadian customers FOB Saskatchewan mines was pegged in the $592-$603/mt FOB range.

Phosphates

California, Central Florida, Di-Ammonium Phosphate, Eastern Cornbelt, Market Watch, Mono-Ammonium Phosphate, Pacific N.W., U.S. Exports, U.S. Gulf, U.S. Imports, Western Canada, Western Cornbelt

Central Florida: With farmers looking for phosphate for their spring crops, traders were going to terminals to make buys to meet the needs of the dealers to whom they sell, rather than getting railcars from Central Florida last week.

Producers – mainly Mosaic – were using railcars to move product to their own warehouses and terminals, or were using their production for export sales. Export prices have been moving up during the past couple of weeks, and that was a much more attractive market than the domestic. It appeared that trend will continue.

Meanwhile, phosphate producers were in the process of negotiating new molten sulfur prices for the second quarter, which may move up just a little due to slightly higher world prices.

The Central Florida DAP price range continued unchanged last week at $460-$465/st FOB. One source said he had heard some DAP may be available as low as $450/st FOB, but that could not be confirmed.

CF Industries was posted at the $460/st FOB mark, and Mosaic was also at around $460/st FOB. MAP was listed at a $20/st premium to DAP by Mosaic in Central Florida, about the same difference as from traders. However, MAP was virtually unavailable in Central Florida.

A source said PCS Sales was selling MAP produced at White Springs at $505/st FOB, while prices at Aurora in North Carolina were $525/st FOB for MAP and $520/st FOB for DAP. The company, however, would not confirm those prices and said only that it was selling at prices comparable to the market.

U.S. Gulf: Dealers held off on buying until their bins began to hit the bottom, even though it was an early spring and the USDA estimated about 96 million acres of corn would be planted this year. Many traders reacted and held off on their buys as a result.

Last week, a strange situation resulted. NOLA DAP barges that were already on the water were bringing as much as $30/st FOB more than a barge to be loaded within the next couple of weeks.

Normally, NOLA phosphate barges that load within two weeks are considered prompt, but that was not really the case last week – and may not be for the balance of the season. Fear that the later product will not be sold before the end of the season, and that prices will decline, was driving the situation. And as a result, that may happen.

Depending on where the barge was at the time of sale, a NOLA barge could take as long as four weeks to reach its destination, and phosphate needs to be on the ground before planting begins. Farmers in some areas will be faced with the decision of waiting to get phosphate or planting without it. If they go without, their yields will suffer.

Although terminals were doing fairly well in terms of activity, they had still not hit the kind of stride that would be expected under the current scenario. Most terminal operators had raised prices somewhat, but not to the level they will within the next few weeks when the fertilizer hits the fan. Terminal prices for DAP will have to rise to meet the higher price for NOLA DAP barges.

The big differential for MAP over DAP, which had been as much as $35/st FOB, basically evaporated by late last week – even for domestic product. MAP prices at the top of the two ranges were even and only $7/st FOB different at the bottom. A lack of demand was cited as the reason for the lower price.

Crop prices began drifting a little south last week, moving down across the board. Prices for corn futures were lower compared to the previous week, falling from $5.4725/bushel to $5.465/bushel for December 2012. The corn price for December 2013 was $5.4625/bushel, decreasing from $5.4875/bushel the previous reporting period. Soybeans for November 2012 moved down to $13.7475/bushel from $13.78/bushel the previous week, and beans for November 2013 decreased to $12.5375/bushel fr

Ammonium Sulfate

Ammonium Sulfate, California, Eastern Cornbelt, Market Watch, Pacific N.W., U.S. Imports, Western Canada, Western Cornbelt

Eastern Cornbelt: Sources tagged the ammonium sulfate market at $415-$445/st FOB in the Eastern Cornbelt, reflecting another increase. Sources also talked of limited inventories in the region last week. Effective April 6, Honeywell’s granular ammonium sulfate firmed to $445/st FOB Danville and Wisconsin terminals at Prairie du Chien and Amherst Junction, with mid-grade moving to $415/st FOB Danville and Byron, Ill.

The ammonium thiosulfate market was quoted at $370-$380/st FOB in the region.

Western Cornbelt: Granular ammonium sulfate pricing had reportedly firmed to $410-$445/st FOB in the Western Cornbelt, with the low reported on a spot basis in Missouri. Honeywell’s granular ammonium sulfate postings moved on April 6 to $445/st FOB in the Midwest, with mid-grade listed at $415/st FOB, where available.

For the third time since February, American Plant Food Corp. has announced an increase to its ammonium sulfate postings. Effective April 16, APF’s granular ammonium sulfate postings in Texas will firm $10-$15/st from April 2 reference prices and $35/st from March 1 postings, moving to $360/st FOB Freeport, $370/st FOB Galena Park, $385/st FOB Fort Worth, and $395/st FOB Littlefield. Coarse ammonium sulfate postings will move to $345/st FOB Freeport, $355/st FOB Galena Park, $370/st FOB Fort Worth, and $385/st FOB Littlefield, and standard grade postings will firm to $340/st FOB Freeport and $380/st FOB Littlefield. APF’s N-Pac Compacted posting will firm on April 16 to $375/st FOB Galena Park. Outside of Texas, APF’s granular ammonium sulfate postings will firm on April 16 to $390/st FOB Mermentau, La.

The ammonium thiosulfate market was pegged at $365-$385/st FOB in the Western Cornbelt region.

California: Ammonium sulfate pricing was reported in a broad range at $350-$400/st FOB, depending on grade and supplier. One source pegged the standard grade ammonium sulfate market in the Central Valley at the $370/st FOB mark last week, while another said standard grade postings were slated to firm at midmonth from $362/st to $380/st FOB at some locations.

Effective April 16, APF’s granular ammonium sulfate posting FOB Woodland, Calif., will firm to $395/st. Effective April 12, IRM’s postings FOB Chico, Calif., moved to $400/st for Tranzform, $380/st for Western Standard, and $350/st for Western Premium ammonium sulfate.

Pacific Northwest: Ammonium sulfate was in tight supply, according to sources, and pricing was up some $20/st from last report. Effective April 12, IRM’s postings for Tranzform and Western Premium ammonium sulfate firmed to $400/st FOB and $410/st DEL in Oregon, Washington, Idaho, and Montana. Postings for Western Standard ammonium sulfate moved on that date to $380/st FOB and $390/st DEL in those four states.

Western Canada: Granular ammonium sulfate was quoted in a broad range at $475-$505/mt DEL in Western Canada, depending on location and supplier.
U.S. Imports: February ammonium sulfate imports were off 6 percent, to 27,373 st from the year-ago 29,065 st, while July-February imports were off 18 percent, to 177,316 st from 216,979 st.

Ammonium Nitrate

Ammonium Nitrate, California, Market Watch, Pacific N.W., U.S. Gulf, Western Cornbelt

U.S. Gulf: While some were still calling business at $370/st FOB, most were in agreement that product was very hard to find. So hard to find, in fact, that one deal last week was reported to have been struck at high as $435/st FOB. Sources also indicated that some inland prices have moved up and reflect this higher trade.

And as indicated by the DOC, imports so far this year are off, and sources tell Green Markets that domestic producers – the two that remain – are deluged.

February ammonium nitrate imports were off 43 percent, to 68,037 st from the year-ago 118,900 st. July-February imports were off only 8 percent, to 482,925 st from 523,858 st.

Western Cornbelt: Ammonium nitrate pricing in the Western Cornbelt was ratcheting up in the wake of higher urea and UAN values. Sources tagged the nitrate market in the $450-$480/st FOB range in the region last week, with the low reported in Iowa and the upper end in the Missouri market. Sources also quoted a $480/st FOB level out of the Tulsa, Okla., market late in the week.

California: CAN-17 was unchanged at $300-$320/st FOB in California, depending on location, with good movement reported. No current prices were reported for ammonium nitrate in the state.

Pacific Northwest: Ammonium nitrate was steady at $424/st DEL in Montana. CAN-17 was unchanged at $291/st FOB Kennewick, Wash.