All Posts from June 14, 2019

USDA Lowers Corn Acreage/Yield Forecast; Analysts Expect Much Bigger Drop Ahead

Featured, News Briefs

USDA on June 11 offered its first official assessment of the impact of extremely wet weather and delayed planting on this year’s corn crop, slashing the average yield forecast to 166 bushels/acre and lowering the acreage assessment by three million acres.

“Corn production for 2019/20 is forecast to decline 1.4 billion bushels to 13.7 billion, which, if realized, would be the lowest since 2015/16,” the agency said it its June 11 World Agriculture and Demand Estimates (WASDE) report. “Unprecedented planting delays observed through early June are expected to prevent some plantings and reduce yield prospects.”

The WASDE’s corn yield forecast is down a full 10 bu/acre from USDA’s May forecast of 176/bu/acre, with the harvested acreage estimate falling to 82.4 million acres from the May forecast of 85.4 million acres. USDA’s estimate for planted corn acreage fell to 89.8 million, also down three million acres from the Prospective Plantings estimate of 92.8 million acres, but analysts expect that number to fall again when USDA’s Acreage report comes out on June 28.

“Merciless rains pounded the Plains and Midwest, triggering new rounds of flooding and leading to a record-slow planting pace for the nation’s corn and soybeans,” USDA said. “By June 2, only 67 percent of the corn and 39 percent of the soybeans had been planted, breaking the 1995 records of 77 and 40 percent, respectively. Late in the month, record flooding developed in the Arkansas River Basin, while rivers in parts of the middle Mississippi Valley surged to their second-highest levels on record, behind 1993.”

Corn futures rose more than 3 percent on June 11 after the report’s release, according to Bloomberg. “In this year’s successive reports, production estimates are more likely to be revised lower, supporting the nascent bull market in prices in our view,” said Mike McGlone, commodity strategist for Bloomberg Intelligence.

McGlone said planted corn acreage this year is more likely to be closer to 2015’s 80.6 million acres, “given the extremity of poor planting conditions” and the likelihood of farmers taking prevented planting insurance. “Muddy corn conditions, historic delays, and risks of a continuation of less than favorable weather, including frost risk, should keep the price recovery on track to test resistance near the 2014 high of $5.19 a bushel,” he added.

At the International Fertilizer Association (IFA) annual conference in Montreal on June 11-13, CF Industries Holdings Inc.’s “late planting result” for corn included an updated forecast of approximately 85 million acres, with average yields at roughly 162 bu/acre and a season-average farm price of $4.40/bushel or higher. At its first-quarter earnings call in early May (GM May 3, p. 27), CF Senior Vice President Bert Frost told analysts that the company was still estimating 92-93 million acres of corn in 2019.

USDA’s June 10 Crop Progress report estimated corn planting progress at 83 percent complete nationwide, some 16 percentage points behind the five-year average. The greatest deficits continued to be reported in the Eastern Cornbelt states of Illinois, Indiana, Ohio, and Michigan, where progress lagged by 27-46 percent, depending on location.

USDA Clarifies MFP, Prevented Planting Regs

Featured, News

USDA Secretary Sonny Perdue on June 10 issued a statement to clarify prevented planting insurance requirements for growers facing unprecedented planting delays due to wet weather. Perdue also addressed uncertainties about Market Facilitation Program (MFP) eligibility and farmer access to up to $16 billion in federal aid for trade war disruptions.

“I have been out in the country this spring and visited with many farmers. I know they’re discouraged, and many are facing difficult decisions about what to do this planting season or if they’ve got the capital to stay in business, but they shouldn’t wait for an announcement to make their decisions,” Perdue said. “I urge farmers to plant for the market and plant what works best on their farm, regardless of what type of assistance programs USDA is able to provide.”

Perdue reiterated that USDA will use up to $16 billion in MFP support and another $3 billion in disaster aid “to provide as much help as possible to all our affected producers.” He stressed that USDA is not legally authorized to make MFP payments to producers for acreage that has not been planted, but he said the agency is “exploring legal flexibilities” to provide a minimum per acre MFP payment to growers who filed prevented planting claims and chose to plant an MFP-eligible cover crop.

Even for those who lack crop insurance, USDA said growers who plant MFP-eligible cover crops on prevented planting ground “may qualify for a minimum amount of 2019 MFP assistance.”

In an FAQ that accompanied Perdue’s statement, USDA attempted to answer a number of more specific questions. At the outset, USDA urged growers to “plant what works best for your operation and what you would plant in any other year, absent any assistance from USDA.”

To qualify for a 2019 MFP payment, USDA said growers are required to plant a 2019 MFP-eligible crop, while producers who were unable to plant their crop “should work with their crop insurance agent to file a claim.” USDA urged growers to “comply with crop insurance requirements to remain eligible for a full prevented planting indemnity.”

While noting that the Additional Supplemental Appropriations for Disaster Relief Act of 2019 gives USDA the authority to compensate losses caused by prevented planting up to 90 percent, the agency cautioned that it still must operate “within finite appropriations limits.”

“It is highly unlikely that the supplemental appropriation will support that level of coverage in addition to crop insurance,” USDA said. “Congress appropriated $3.005 billion in assistance for a wide array of losses resulting from disasters throughout 2018 and 2019, requiring USDA to prioritize how it is allocated. The department plans to provide assistance on prevented planting losses within the confines of our authority.”

USDA also clarified that it has some discretion to consider disaster relief eligibility for producers who farm outside of a federally declared disaster area, but this is only on a “case-by-case basis.” USDA stated that it is “generally true that producers with qualifying losses in a Secretarial or Presidentially-declared disaster area” are only eligible for Disaster Relief Act assistance.

USDA said it is currently reviewing the prevented planting restrictions in the Federal Crop Insurance Act to determine what options growers have for haying and grazing cover crops, as well as other possible restrictions. “In the coming weeks, USDA will provide information on the Market Facilitation Program payment rates and details of the various components of the disaster relief legislation,” Perdue said.

Western Potash Ready for Mine Construction; Production Expected in Mid-2020

Featured, News, Potash, Saskatchewan, Vancouver

Junior miner Western Potash Corp., Regina, Sask., a unit of Western Resources Corp., Vancouver, B.C., announced on June 6 that it has entered into a lump-sum agreement with major Canadian construction firm Stuart Olson Prairie Construction, Calgary, to be the General Contractor for the construction of the company’s Milestone Phase I Potash Project, near Kronau, located 35 km southeast of Regina.

“The management and board of directors are very excited to partner with Stuart Olson to build this innovative and efficient new mine in Saskatchewan,” said Western Potash Chairman Bill Xue. “The project will benefit from the strength and experience of Stuart Olson, and we look forward to the next milestone, the start of production in mid-2020.”

Western Potash said the site is now ready for the start of full construction with Stuart Olson. It said preparation work has already been concluded, including an access road, site clearing and piling foundations, water well, water pipeline, and power infrastructure. The civil work of the crystallization pond has also been completed.

The company said Stuart Olson will begin mobilizing at the site this month. An anticipated maximum workforce of around 100 people is expected. Stuart Olson’s general contractor scope will include the construction of all above-ground facilities, including concrete, steel and pipework, installation of equipment, electrical and control system work, building work, and site finishing.

Phase 1 includes an annual capacity of 146,000 mt of granular potash, with a mine that the company said will be the “newest and most innovative, environmentally-friendly, and capital efficient new potash mine in Canada.” It said its advanced drilling techniques will initially target the high-grade potash bed by using selective dissolution, preferentially leaching potash to the surface.

The company said any salt is left underground, with no tailings pile, and that water consumption will be cut in half. The potash is then crystallized naturally in a pond, resulting in much lower energy consumption and a capital cost proportionately less than other solutions mines. Once Phase I is achieved, Phases II and III are much more aggressive, each with annual capacity goals of 1.4 million mt.

The company advanced major goals in 2018, including the financing and a nonbinding Memorandum of Understanding with a senior North American agriculture player for transportation and offtake (GM April 27, 2018). It later developed a nearby water well to supply Phase 1 that will use brackish water and not compete with the water needs of the local populace. The company also retained SNC-Lavalin, Toronto, for the final stage of project engineering.

This April, parent Western Resources completed a rights offering that brought in gross proceeds of C$11.2 million, which will be used for the project as well as general corporate purposes. Major stakeholders Tairui Mining Inc., a unit of Chinese investment firm Beijing Tairui Innovation Capital Management Ltd., as well as CBC (Canada) Holding Inc., a unit of China BlueChemical Ltd. and Benewood Holdings Corp. Ltd., were both major subscribers to the offering.

After its completion, Tairui’s Western Resources stake stood at 59.09 percent and CBC’s at 10.1 percent.

Study Measures Elevated Methane Emissions from NH3 Plants; TFI Questions Findings

News, News Briefs

The Fertilizer Institute (TFI) on June 12 told Green Markets that it questions the findings of a recently published report in the scientific journal Elementa, which states that methane emissions from ammonia fertilizer plants are “vastly “underreported and are 100 times greater than the fertilizer industry estimates.

Researchers from Cornell University and the environmental advocacy group Environmental Defense Fund (EDF) used a Google Street View car equipped with a high-precision methane sensor to monitor methane emissions from numerous ammonia fertilizer plants in the Midwest in 2016

The researchers said useful data to quantify “fugitive methane emissions” were collected at six of nine ammonia production facilities, including plants at Fort Dodge and Creston, Iowa; Beatrice, Neb.; Dodge City, Kan.; and Verdigris and Enid, Okla.

“Natural gas is largely methane, which molecule-per-molecule has a stronger global warming potential than carbon dioxide,” said John Albertson, co-author of the study and a professor of civil and environmental engineering at Cornell. “The presence of substantial emissions or leaks anywhere along the supply chain could make natural gas a more significant contributor to climate change than previously thought.”

The researchers said they discovered that, on average, 0.34 percent of the natural gas used in the plants is emitted to the atmosphere as methane. Scaling this rate from the six plants to the entire industry suggests total methane emissions of 28 gigagrams/year, which the report claims is 100 times higher than the industry’s self-reported estimate of 0.2 gigagrams/year, and also well above the EPA’s estimate of 8 gigagrams/year from all industrial processes in the U.S.

The report said when a concentrated methane plume was detected at each site, the emissions were measured through dozens of laps on public roads around the facilities. The report said these fugitive emissions were likely due to a number of factors, including incomplete chemical reactions during fertilizer production, incomplete fuel combustion, or leaks.

“We took one small industry that most people have never heard of and found that its methane emissions were three times higher than the EPA assumed was emitted by all industrial production in the U.S,” Albertson said. “It shows us that there’s a huge gap between a priori estimates and real-world measurements.”

But TFI told Green Markets that it questions whether the methane concentrations that were detected can be fairly attributed to the ammonia plants in question when the automobile-borne sensors were not in close proximity to those plants, and where there are other potential sources of emissions, including natural gas pipelines, natural gas metering stations, wetlands, water treatment ponds, oil and gas wells, injection sites, and other industrial locations that are registered EPA air emissions sources.

TFI also noted the “high stack heights” at ammonia production facilities, and questioned whether the ground-level methane detected in the study could be accurately sourced to the ammonia facilities, given the buoyancy effect of methane.

“The Fertilizer Institute and its ammonia-producing members deploy all available technologies and processes to ensure that fugitive methane emissions are kept to a minimum,” said Chris Glen, Director of Political Affairs and Communications for TFI. “For example, U.S. ammonia production facilities have procedures in place to quickly detect and remedy any potential leaks from facility equipment, including automated system monitoring equipment, human operators using mobile gas detectors, regular inspection of all facility areas, and aerial monitoring of facilities and facility-related emissions.”

Sirius Minerals Seals Take-Or-Pay Supply Deal with IFFCO

England, Featured, India, News, Polyhalite, Specialty

Sirius Minerals Plc, Scarborough, England, announced on June 12 that it has signed a take-or-pay supply agreement with Indian Farmers Fertiliser Cooperative Ltd. (IFFCO) for the supply of Poly4 in India, further boosting its contracted sales volumes ahead of the start-up of its polyhalite mining and processing project under development in North Yorkshire.

The volumes agreed to with IFFCO will ramp up to 1 million mt/y in year eight of the 11-year term, with an option, subject to mutual agreement of the parties, to increase this by an additional 250,000 mt/y to 1.25 million mt/y. The deal is for the exclusive supply and distribution of Poly4 throughout India. IFFCO has over 36,000 member cooperatives and access to over 55 million Indian farmers.

Sirius said pricing is based on a nutrient-linked formula on a CIF India basis. Volume commitments ramp up after Sirius’ first commercial production begins, and the initial terms include provisions for volume flexibility where, subject to certain conditions, IFFCO may roll forward a proportion of the minimum quantities between contract years. Similarly, subject to Sirius’ agreement, IFFCO may also elect to increase ramp-up volumes.

Under the deal, IFFCO has a break clause after year eight. There is also a 10-year extension option subject to mutual agreement by the two parties.

IFFCO’s Managing Director and CEO Udai Sanker Awasthi said the multi-nutrient characteristics of Poly4 are “well-suited” to Indian soils and crops.

The new deal takes Sirius’ total peak aggregate volumes now under contract to 11.7 million mt/y, or 13.4 million mt/y when customer volume options are included.

Sirius is targeting the extraction of the first polyhalite from the Woodsmith Mine by the end of 2021, but the delivery of the project on the current schedule remains subject to the timing of receipt of Stage-2 project financing.

The company in early May announced the launch of its “markets-led” Stage 2 project financing, under which it aims to raise a total of US$3.8 billion (including financing costs) to fund the polyhalite project to completion (GM May 3, p. 1). However, the securing of the proposed US$2.5 billion revolving credit facility element of the financing package agreed to with JP Morgan Securities LLC is contingent upon the completion of a full US$500 million bond issue before Oct. 30, 2019.

 

 

EuroChem Pushes Back Start of Production at VolgaKaliy; Plans $2.5 B of Further Nitrogen Investments

Ammonia, Featured, Methanol, News, Russia, Urea

EuroChem Group AG is delaying the start of commercial production at its VolgaKaliy potash operation in Russia’s southern Volgograd region. The group has come up against “geological problems” that do not affect the final parameters of the project but do affect the time frame, according to an Interfax report citing the group’s primary shareholder, Andrey Melnichenko, at last week’s St Petersburg International Economic Forum.

As late as last November, EuroChem was targeting first production at VolgaKaliy for the first half of 2019 (GM Nov. 30, p. 27).

VolgaKaliy produced its first test concentrate in July of 2018 and a total of 5,300 mt of product in the fourth quarter. A spokesperson for the group this week confirmed to Green Markets that EuroChem is continuing to test processes at the plant with batch production.

Melnichenko said the group expects the beginning of commercial production at VolgaKaliy next year, but it is too soon to be clear on what output might be, according to the report.

A EuroChem spokesperson told Green Markets the test mode will continue for some time, and “much depends on how quickly the problems are solved,” adding that he was unable to provide further clarification on expected production at VolgaKaliy next year.

The spokesperson declined to elaborate on the “geological problems” at the operation. VolgaKaliy’s cage shaft, which is not connected to the rest of the mine, was intentionally allowed to flood in 2015 as a result of a water inflow. A response plan was developed and executed, allowing engineers to sink the shaft partially and install an additional ring of tubing.

Like the processing plant, the two connected shafts are operating as planned in test mode. But while the two existing shafts are designed to produce 10-12 million mt/y of ore, their output is restricted by the regulator while in test mode; that restriction was 7.5 million mt/y as of late last year.

Meanwhile, EuroChem is continuing to ramp up production at its Usolskiy potash operation south of Berezniki.

“We believe we are on track at Usolskiy in terms of production, with an output of 1 million mt targeted for this year, and the full 2.3 million mt/y design capacity expected to be reached by the end of next year,” the spokesperson said. “Technically, the plant is still operating in test mode, but there will be a formal ribbon-cutting ceremony later this year.”

Usolskiy produced its first test tons of potassium chloride in March 2018 (GM March 16, 2018), with a total 250,000 mt produced by the end of last year.

Meanwhile, following the opening last week of a $1 billion new ammonia production plant – EuroChem Northwest, in Kingisepp, in Russia’s Leningrad region, with a 1 million mt/y production capacity (GM June 7, p. 1) – the group is now more than self-sufficient in ammonia, the spokesperson said.

He confirmed that EuroChem has plans to build further capacity. He added that the company has signed a memorandum of intent to build further production facilities for ammonia, and also for urea and methanol, with Russia’s Industry and Trade Ministry and Leningrad region authorities.

“The projects represent investment of about $2.5 billion, and we will take a formal decision [on the project] later this year. Time-wise, this is probably a four-year project,” said the spokesperson.

In terms of production capacity, the plants will be capable of producing about 1 million mt/y of ammonia, 1.2 million mt/y of urea, and up to 1.7 million mt/y of methanol, he said.

Meanwhile, EuroChem has decided to go ahead with the building of a fertilizer transshipment terminal in the Russian Baltic seaport of Ust-Luga, a project it halted in 2017. According to Melnichenko, the group plans to raise the handling capacity to 5.5-5.7 million mt/y, up from the originally planned 5 million mt/y. The new terminal is expected to be launched in 2022-23.

The EuroChem spokesperson told Green Markets that the company is continuing its discussions about investment participation in the construction of a dry bulk cargo terminal in the Russian Black Sea port of Taman. There had been reports late last year that EuroChem had abandoned these plans, according to Bloomberg, citing RBC.

Plans for the long-envisaged new terminal, being developed under the auspices of Russian export marine terminal owner OTEKO-Portservice LLC, include capacity to handle the transhipment of 30 million mt/y of cargo, including 5 million mt/y of sulfur and mineral fertilizers (GM May 27, 2016). The remaining capacity would be mainly for coal and iron ore handling.

 

 

Nutrien – Management Brief

Management Briefs, Saskatchewan

Nutrien Senior Vice President of Sales Chris Reynolds has announced the following changes to the sales leadership team.

Troy Erny, Vice President, Feed & Industrial Sales, will be retiring, effective July 15, 2019, after a 35-year career with Nutrien and legacy companies spanning both the fertilizer and industrial business segments.

Derek Hardy will be moving into the role of Vice President, Feed & Industrial Sales, effective June 17, 2019, reporting to Reynolds. He joined Nutrien in 1999 in their Customer Service Department and has held roles of increasing responsibility over the past 20 years in Fertilizer and Industrial Sales, as well as in Product Management.

John Fowler will join the team as Senior Director, Sales, AgCentral Region, effective June 17, 2019. Most recently, Fowler held the position of Director, Sales, Industrial Nitrogen ,and since 2002 has worked for Nutrien in Customer Service, Product Management, and Fertilizer Sales.

Kelly Davey will be taking on the role of Director, Sales, Industrial Nitrogen, effective June 17, 2019. She began her career with Nutrien at the Saskatoon office in 2008 as a Market Research Manager and has held roles of increasing responsibility in Product Management and Industrial Sales.

OCP SA – Management Brief

Management Briefs

OCP SA Chairman and CEO Mostafa Terrab is set to become the first chairman from the African continent of the International Fertilizer Association (IFA) in its 90-year history.

Terrab succeeds Rakesh Kapur, Joint Managing Director of IFFCO, India, as Chairman of IFA.

Sustainable nutrient use, science-based approaches to plant nutrition, and capacity building are among Terrab’s top priorities for his chairmanship, IFA said in a June 13 statement. He will hold the position for two years.

Announced at this week’s IFA annual conference held in Montreal, Canada, Terrab’s chairmanship follows an extensive strategic assessment by the industry carried out under the chairmanship of Kapur on how it can further contribute to the world’s broader sustainable development goals.

“The global fertilizer industry remains committed to environmental stewardship and stakeholder relationship building,” said IFA Director General Charlotte Hebebrand. “We are excited to continue on this important path under Mr. Terrab’s Chairmanship.”

 

Five Sue over April Ammonia Leak

Ammonia, News, News Briefs

Five people have brought suit over an April 25 ammonia leak near Beach Park, Ill., that sent 37 to the hospital, including 11 firefighters and three police officers (GM May 3, p. 27; April 26, p. 1). According to the local press, the last of the seriously injured was released from the hospital on May 5.

A tractor was reported to be pulling two ammonia tanks from a retail location in Pleasant Prairie, Wisc., to an Illinois farm some 40 miles north of downtown Chicago when the leak occurred. The defendants were identified as Wisconsin-based John Kevek Farms Inc. and the tractor driver, Warren Reck. They could not be reached for comment.

“As a result of this toxic spill, each of our five plaintiffs, including first responders, were exposed to dangerously high levels of anhydrous ammonia and immediately began to feel the effects,” said attorney Antonio Romanucci, as quoted in the Daily Herald. “While they have all been treated, several are still suffering and in need of regular medical attention – especially as the long-term effects of the exposure are still in question.” His Chicago-based firm, Romanucci & Blandin LLC, announced on April 26 that it was retained by one of the plaintiffs.

Fertoz Ltd. – Management Brief

Australia, Management Briefs, Specialty

Australian-based organic phosphate company Fertoz Ltd. announced on June 11 that fertilizer industry veteran Ron Wilkinson has joined its board of directors as a non-executive director. He was with Agrium Inc. for 20 years (1996-2016), serving as President of the Wholesale Business Unit from 2004-2015 and as adviser to the CEO in 2016.

Wilkinson is a chemical engineer, and earlier worked for Exxon Chemicals and Sherritt International. He has served on the board of Itafos Ltd., Toronto, a conventional phosphate fertilizer company with major assets in the U.S. and Brazil, since 2018.

 

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