“We see everything lined up to having a really terrific spring planting season with good crop fundamentals,” CF Industries Holdings Inc. Chairman, President, and CEO Stephen Wilson told analysts Aug. 6. Wilson said 2011 nitrogen consumption should be up 2-2.5 percent and phosphate up 4-4.5 percent. He expects corn acreage to be somewhere north of 90 million acres.
As for the fall, “The market seems to be strong in all of our products today, and that’s because we’re looking forward to an early harvest.”
CF told analysts that it would no longer release quarterly data regarding the status of its Forward Purchase Program (FPP). In the past, CF would release information on forward nitrogen and phosphate sales when it released its quarterly earnings. CF said it originally began releasing the FPP information because it was a new company and it wanted to provide investors with insight into risk mitigation actions in the context of high and volatile natural gas costs. Now, said CF, it is a much larger company, and it has a very different and more stable risk profile. In addition, it believes the forward order position is competitively sensitive information.
“With respect to natural gas, we maintain our discipline of essentially backing forward orders with committed gas so that we lock in our margin and we mitigate the risk associated with being exposed on one side or the other,” said Wilson. He said CF would never get into a gas position that exceeded its physical need for gas, adding that the company bought some options to cap its gas exposure in the months of Aug.-Oct. just to be prudent with respect to hurricane risk.
CF reiterated that it does plan to continue to use the FPP as a marketing tool, and doesn’t expect the patterns it has shown in the past to be much different than those in the future.
Wilson also noted that the company’s Woodward, Okla., expansion is expected to come online soon. Woodward, which came to CF via Terra Industries Inc., was expected to see its UAN expansion come up by the end of 2010 (GM May 12, 2008). When asked by Green Markets to quantify the date, a company spokesman said that the facility is supposed to be up by the end of the year. The $180 million expansion will consist of the addition of a 1,500 st/d Weatherly-design UAN facility. The project will affect the Woodward facility’s annual output as follows: ammonia capacity will remain at 440,000 st; because the plant will upgrade more of its ammonia production to UAN, ammonia available for sale as a finished product will decrease from 310,000 to 100,000 st; UAN capacity will increase from 300,000 to 825,000 st (32 percent nitrogen basis); and the expansion will require the addition of approximately 10 employees.
Wilson said the company has plenty of material to take care of traditional CF and Terra customers, as well as to respond to opportunities in the marketplace. He assessed the legacy CF customer as being a large wholesale customer that is relationship-driven. Wilson said Terra had a substantial number of smaller customers downstream, also with very good, long-term relationships. He also noted that Terra had a substantial percentage of its business from the industrial market. “We have a full range of nitrogen products now, and we have multiple locations at which to produce them. And we’ll be looking to put every ton to its highest and best use.”
CF was asked if it could supply its Florida neighbor – The Mosaic Co. – with phosphate rock should Mosaic have to buy rock this fall due to the court injunction against Mosaic mining its new permit in Hardee County (GM Aug. 9, p. 14). “We do not have excess rock production,” said Wilson. “And certainly, the production that we have right now is earmarked for Plant City and on to our customers.”
Addressing its potential nitrogen complex in Peru, CF said the current hurdle is whether there will be a natural gas pipeline to its potential plant site. “There’s been no work on that and we, obviously, are dependent upon that. We wouldn’t make a decision on a project in the absence of that, and no one would lend us any money for the project even if we wanted to make a decision.”