Omaha — According to news report, several Asian trading firms, including Mitsui & Co., Marubeni Corp., and Noble Group, are reportedly eyeing Gavilon Group LLC, the Omaha-based commodity trading firm. Gavilon announced in January that it had hired Morgan Stanley to explore “strategic alternatives” to further its growth and create additional value for shareholders (GM Jan. 30, p. 1). None of the companies provided comment, but industry sources noted that the deal would give the Asian firms a significant presence in the U.S. agriculture markets. In addition to its fertilizer and energy enterprises, Gavilon boasts the third largest U.S. grain marketing network behind Archer Daniels Midland (ADM) and Cargill. Both ADM and Cargill have also been mentioned as potential buyers of Gavilon, as have U.S.-based Bunge Ltd. and Swiss-based Glencore International PLC, which just announced its acquisition of Viterra Inc. Gavilon was formed in 2008 when ConAgra Foods Inc. completed the sale of its commodity trading and merchandising operations – including its lucrative fertilizer trading business based in Savannah, Ga. – to an investor group led by Ospraie Special Opportunities Fund (GM June 30, 2008). Gavilon has grown to some 300 facilities and regional offices worldwide, with approximately 2,000 employees engaged in origination, storage and handling, transportation and logistics, marketing and distribution, and risk management services related to agriculture, fertilizer, and energy supply. Gavilon’s largest acquisition came in 2010, when it acquired grain and fertilizer company DeBruce Companies, Kansas City, Mo. (GM Oct. 25, 2010). Gavilon’s largest shareholder is hedge-fund firm Ospraie Management LLC; Orascom Construction Industries of Egypt is another major investor.
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Yara uncovers further unacceptable payments
Oslo — An external investigation initiated by Yara International ASA on April 8, 2011 (GM April 18, 2011), has uncovered unacceptable payments from the company’s joint venture in Switzerland, Yara reported on March 23. Yara said the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) has been notified of the new findings. “We will get to the bottom of this,” said Jørgen Ole Haslestad, Yara president and CEO. “Such breaches of Yara standards are unacceptable, but I am satisfied that Yara initiated the external investigation, enabling us to uncover these new incidents. At the same time, I am naturally both upset and disappointed that we have made additional findings.” In parallel with the launch of the corruption investigation last year, Økokrim was informed that possible offenses could have taken place prior to October 2008 in connection with the establishment and follow-up of Yara’s ownership in Libyan Norwegian Fertilizer Company (Lifeco). The investigation is still ongoing and was extended in May 2011 to cover other projects, including India. Jan Fougner, a partner in the law firm Wiersholm, is heading the investigation, and Yara’s board of directors is following up through a separate committee. Yara said it is cooperating closely with Økokrim throughout the investigation to bring forward all relevant information. The new findings are based on documents made available by Økokrim. Further investigations are now taking place to clarify how such payments have been carried out and authorized, Yara said. The main findings will be published when the investigation report is finalized.
Minemakers clarifies status of Wonarah sale
West Perth — Australian mining company Minemakers Ltd. confirmed last week that it remains in ongoing discussions to sell its Wonarah rock phosphate reserves in Australia’s Northern Territory to NMDC Ltd., a minerals exploration company that is fully owned by the Government of India. In a March 19 statement, Minemakers Executive Chairman Andrew Drummond said NMDC “has very recently made it clear that it continues to have a strong interest in the Wonarah Project.” Referring to news reports that NMDC is set to buy the Wonarah rock phosphate reserves for about $15 million and that NMDC management has said the acquisition will be completed by the end of next month, Drummond said, “Minemakers wishes to clarify that discussions to date with NMDC have been conducted on the basis of NMDC acquiring a 50 percent stake in the Wonarah Project for a consideration which includes a cash component materially higher than the reported $15 million. In addition, no definitive timetable has yet been established for completion of the Joint Venture Agreement with NMDC, although Minemakers remains committed to working towards an agreement as soon as possible.” The Wonarah rock phosphate project is 100 percent owned by Minemakers, and is Australia’s largest undeveloped rock phosphate project.
Ameropa completes deal for Romanian producer
Binningen, Switzerland — Ameropa Holding AG, the Swiss-based international grain and fertilizer trader, has finalized a transaction to take an indirect majority stake in Romanian fertilizer producer Azomures SA, according to a March 22 statement from Azomures. In an agreement that was signed last November, Pelican Fertilizers GmbH, a unit of Ameropa, acquired a 75.88 percent stake in Azomures, which is directly held by Eurofert Investments LLC and Azomures Holdings LLC. Financial details of the transaction were not disclosed.
Higher sales prices boost RentechÆs profits
Los Angeles — Fueled by higher sales prices, Rentech Nitrogen Partners LP, which manufactures and sells ammonia, UAN, and urea at its plant in East Dubuque, Ill., reported net income of $10.5 million for the quarter ended Dec. 31, 2011, more than double the $4.3 million in net income reported in the prior year quarter. The company generated operating income of $22.6 million and EBITDA of $25.9 million for the 2011 quarter, compared with $14.6 million and $17.2 million, respectively, in the prior year. The reduced EBITDA was attributed to a scheduled biannual plant turnaround at East Dubuque in the fall of 2011, which included roughly 15.5 days of plant downtime in October 2011. Revenues for the latest quarter were $63 million, compared with $43 million for the comparable period in the prior year. Higher sales prices in 2011 also boosted the company’s gross profit margin on product shipments to 46 percent for the period, up from 38 percent in the 2010 quarter. “Rentech Nitrogen reported exceptional results, which benefitted from strong product pricing,” said D. Hunt Ramsbottom, Rentech CEO. “We continue to see robust fundamentals driving nitrogen demand, especially in our core market of the Mid Corn Belt region. We expect natural gas prices to remain at low levels, which will continue to positively impact product margins.” Ramsbottom said the company implemented several production efficiency-related improvements at the plant during the October turnaround, which resulted in record production rates and lower natural gas usage. Rentech produced 63,000 st of ammonia during the latest quarter, of which 30,000 st was available for sale as ammonia, 28,000 st was upgraded into UAN, and 5,000 st was upgraded into other nitrogen products. Average prices for ammonia and UAN during the quarter were $684/st and $307/st, respectively, compared to $512/st and $193/st, respectively, for the comparable period in the prior year. Rentech delivered 55,000 st of ammonia, 65,000 st of UAN, and 10,000 st of other nitrogen products during the quarter, compared with 44,000 st, 79,000 st, and 10,000 st, respectively, during the comparable period in the prior year. Rentech said it has secured strong product pricing in its spring forward sales book. Product prices have strengthened recently, it noted, and the company anticipates further nitrogen price appreciation as the spring season develops. Rentech noted that its board of directors has approved a change of the company’s fiscal year-end to Dec. 31 from Sept. 30. With this change, Rentech’s 2012 fiscal year began on Jan. 1, 2012, and will end on Dec. 31, 2012.
Rentech details East Dubuque expansion project
East Dubuque, Ill. — Rentech Nitrogen Partners LP reported that the ammonia capacity expansion project currently underway at its East Dubuque plant remains within budget and on schedule, to be completed by the end of 2013. The project is designed to increase ammonia production capacity by approximately 23 percent, or 70,000 st annually, and includes the addition of a 20,000 st ammonia storage tank. The expansion will bring Rentech’s annual ammonia production capacity to approximately 370,000 st, and will increase on-site ammonia storage capacity to 60,000 st. Rentech also has access to 15,000 tons of leased ammonia storage in Niota, Ill. The additional ammonia production is expected to be sold primarily as ammonia, but could also be available for upgrade to other products. Rentech said it continues to expect the expansion project to generate a return of greater than 20 percent, given current expectations for pricing of products and costs of natural gas. In February, Rentech secured a $100 million multiple draw term loan to finance the entire projected cost of the ammonia production and storage capacity expansion. GE Capital served as administrative agent and GE Capital Markets served as sole lead arranger and book-runner on the financing, which also included a $35 million working capital credit facility. Simultaneously with the closing of the capital expenditures facility and the working capital facility, Rentech Nitrogen terminated the bridge loan facility provided by parent company Rentech, Inc., that was put in place in December 2011. The company has drawn approximately $8.5 million on the capital expenditures facility to repay the outstanding principal under the bridge loan facility and to pay fees associated with the new credit facility.
Senate transportation bill clarifies HOS exemption
Washington — The Agricultural Retailers Association (ARA), the Agricultural and Food Transporters Conference (AFTC) of the American Trucking Associations, the National Council of Farmer Cooperatives (NCFC), and The Fertilizer Institute (TFI) applauded the U.S. Senate’s passage on March 14 of the Surface Transportation bill. The bill included an amendment introduced by Sens. Amy Klobuchar (D-Minn.) and Pat Roberts (R-Kan.) and co-sponsored by Sens. Claire McCaskill (D-Mo.), Ben Nelson (D-Neb.), Mike Johanns (R-Neb.), and Richard Lugar (R-Ind.) that resolves questions regarding the applicability of the agricultural hours of service (HOS) exemption. Specifically, the legislation clarifies that the agricultural HOS exemption is applicable to drivers transporting agricultural commodities within a 100 air-mile radius; drivers transporting farm supplies for agricultural purposes from a wholesale or retail business to a farm or other location where the farm supplies are intended to be used within a 100 air-mile radius from the distribution point; or drivers transporting farm supplies from a wholesale location to a retail location so long as the transportation is within a 100 air-mile radius. “We appreciate the leadership demonstrated by Senators Klobuchar and Roberts through their introduction of this important amendment to the Surface Transportation Bill,” said Daren Coppock, ARA president and CEO. “The Senate’s passage of this legislation helps ensure that agricultural retailers are able to supply farmers with the products they need in an efficient manner during critical times of the year.” Added TFI President Ford B. West, “TFI is very pleased with the passage of this important legislation and we are grateful for the efforts of Senators Klobuchar, Roberts, and others who offered their support of the agricultural hours of service exemption. We hope the House will work quickly to pass similar legislation.”
Enviros sue EPA over Dead Zone inaction
New Orleans — In two separate legal actions, environmental groups are challenging what they claim is the U.S. Environmental Protection Agency’s (EPA) refusal to address nitrogen and phosphorus pollution that is stimulating excessive growth of algae, which severely depletes oxygen levels and chokes off marine life in the Gulf of Mexico and other aquatic ecosystems. “The ecology and economy of the Gulf of Mexico have paid the price for EPA’s endless dithering about Dead Zone pollution,” said Matt Rota, director of science and water policy with the non-profit Gulf Restoration Network. “The most meaningful action the EPA can take is to set limits on the amount of these pollutants allowed in the Mississippi River watershed so that the fish and the fisheries can recover.” As members of the Mississippi River Collaborative represented by the Natural Resources Defense Council, these interests are challenging EPA’s denial of a 2008 petition to the agency asking EPA to establish quantifiable standards and clean up plans for Dead Zone pollution. Separately, several conservation groups are seeking to compel EPA to finally respond to an even older petition – a 2007 request that EPA modernize its decades-old pollution standards for sewage treatment plants and include the Dead Zone pollutants nitrogen and phosphorus in those standards. “Decisive EPA action on Dead Zone pollutants is a decade overdue,” said Glynnis Collins, executive director of the Illinois-based Prairie Rivers Network. “Illinois is the biggest contributor of pollution that creates this yearly crisis. With little action coming from the state, we clearly need an external push to be a more responsible neighbor.” There was no comment from EPA. Robin Craig, an environmental law expert at Florida State University College of Law, said nutrient pollution is “definitely on EPA’s radar as the next step forward in implementing water quality protection.”
4Rs part of Ohio basin nutrient reduction plan
Columbus, Ohio — Officials from the Ohio Department of Agriculture, the Ohio Department of Natural Resources, and the Ohio Environmental Protection Agency (OEPA) have finalized a plan to reduce excess agriculture nutrients from affecting or entering the western basin of Lake Erie by adopting the fertilizer industry’s 4R Nutrient Stewardship program (the right fertilizer source at the right rate, the right time, and in the right place). The program was first announced in October 2011 (GM Oct. 24, 2011). OEPA Director Scott Nally said Ohio’s agricultural community is “not being singled out,” but stressed that “fertilizer is a contributing source to the problem” and action was needed on the part of the agriculture community as a result. “Our agencies worked with Ohio’s agricultural community to identify the best ways to decrease this nutrient loading into Ohio’s water bodies,” said Ohio Department of Agriculture Director David Daniels. “The farmers, private companies, agricultural organizations, agri-businesses, environmental organizations, and academic institutions were all asked to provide their best input, ideas, advice and guidance. That was the foundation for developing these initial recommendations.” In addition to endorsing the 4Rs developed and promoted by The Fertilizer Institute, the agencies are calling for a voluntary statewide “Certified Nutrient Stewardship Program” for farmers, giving the Department of Agriculture authority to better train Ohio farmers about applying commercial fertilizer, expanding the regulatory authority of the department to collect more specific geographical data on where fertilizer sales are currently made, clarifying the authority of Natural Resources to aggressively pursue habitual bad actors, and expanding the department’s authority to development nutrient management plans. In addition to continuing to stress the use of the 4R nutrient management methodology, the division of soil and water resources will be tasked with coordinating an extensive education and outreach effort, as well as developing a roadmap for implementing the other policy recommendations. The three agencies also agreed to utilize a three-tiered, statewide structure for prioritizing the implementation of any recommendations, based upon the condition of any given watershed in Ohio. “There is no question that there are a variety of factors that are contributing to the increased frequency of harmful algal blooms in Lake Erie, and many of Ohio’s other streams and water resources,” said OEPA Director Nally.
Strict new Maryland nutrient regs on hold; ag interests say they pose a threat to industry
Maryland officials apparently aren’t in any hurry to adopt strict new statewide nutrient management regulations that were met with strong opposition from agriculture interests, who fear the changes would lower yields for crop farmers and take thousands of acres out of production for livestock operators.
“They’re on hold at least until after the state general assembly ends its session next month,” Maryland Department of Agriculture (MDA) spokeswoman Julie Oberg told Green Markets. “Gov. Martin O’Malley has had his scientific advisory committee reviewing the proposals and will be discussing them with his BayStat cabinet.” Oberg said there is no set timeframe for adopting what she described as changes that would make the regulations more effective at protecting water quality and easy to implement, adding that it was unlikely that new regulations would be out in the near future.
Meanwhile, critics, including the Maryland Farm Bureau, have been very vocal. “We are sincerely disappointed at the direction that is being taken, which will turn our site-specific farm management tool into a one-size-fits-all prescription for farming,” Farm Bureau President Patricia Langenfelder wrote O’Malley. Langenfelder warned that one stipulation could result in the costly removal of thousands of acres from production because “fencing every mile of stream that meanders through a pasture is not economically feasible and constitutes a ‘taking’ of agricultural land without compensation.
“Frankly,” the letter continued, “it appears to the farm community that the most recent proposal to change nutrient management guidelines is designed to simply ‘check off boxes’ in the state’s TMDL requirements rather than as reasonable, economically feasible, practices that take into consideration the varying factors on each farm in the state.” Langenfelder said farmers are frustrated by the whittling away of their ability to make farm-specific decisions while meeting nutrient reduction goals, adding that the speed at which Maryland is placing mandates and restricting farm practices makes it impossible for good scientific research and cost/benefit analysis to be conducted.
The changes causing these concerns involve defining additional management practices that may be required related to crop production; the storage and handling of organic sources of nutrients; prohibiting the application of organic sources of nutrients in winter months; setback requirements for the application of crop nutrients, including fencing for livestock; and new guidance for the use of soil amendments and soil conditioners on agricultural land.
Langenfelder reminded the governor of a pledge in the summer of 2010 not to put Maryland farmers at a disadvantage compared to growers in other states. “I can assure you this proposal will do exactly that,” she said. “We are calling upon you now to uphold your pledge.”
The proposed regulations, finalized this past summer, were the result of almost two years of an interactive process involving a broad-based group, said MDA Assistant Secretary Royden Powell. MDA had planned to publish the proposed changes Dec. 2 in the Maryland Register, but MDA spokeswoman Oberg reported that objections from both sides of the issue have delayed that date.