All Posts from January 18, 2019

FSA Temporarily Reopens During Shutdown; Revised WOTUS Rule Likely Delayed

Featured, News

USDA on Jan. 16 announced that about 800 Farm Service Agency (FSA) offices will reopen temporarily to perform certain limited services for farmers and ranchers. USDA said it had recalled about 2,500 FSA employees to open offices in all 50 states on Jan. 17, Jan. 18, and Jan. 22 during normal business hours. The offices will be closed on Jan. 21 for the Martin Luther King Jr. holiday.

USDA said FSA staff will be available to assist agricultural producers with existing farm loans and to ensure that the agency provides 1099 tax documents to borrowers by the IRS deadline. USDA also said farmers who have loan deadlines during the lapse in federal funding are not required to make payments until the government shutdown ends.

“Until Congress sends President Trump an appropriations bill in the form that he will sign, we are doing our best to minimize the impact of the partial federal funding lapse on America’s agricultural producers,” said USDA Secretary Sonny Perdue. “We are bringing back part of our FSA team to help producers with existing farm loans. Meanwhile, we continue to examine our legal authorities to ensure we are providing services to our customers to the greatest extent possible during the shutdown.”

Other agencies were also taking steps to address the lengthy shutdown. The U.S. State Department on Jan. 17 instructed all U.S. diplomats in Washington and elsewhere to return to work after the MLK holiday, saying it had found money for salaries from “existing funds as well as other available fiscal authorities,” enabling the department “to shift existing balances” to restart payroll funding.

“While the department has done its best to address matters essential to achieving U.S. national security and foreign policy objectives during the ongoing lapse, it has become clear as the lapse has continued to historic lengths that we need our full team to address the myriad critical issues requiring U.S. leadership around the globe and to fulfill our commitments to the American people,” the department said.

The U.S. House of Representatives on Jan. 10 passed an Ag Appropriations Bill with a bipartisan 243-183 vote, which would have provided $23.2 billion in discretionary funding for Fiscal Year 2019, allowing FSA, the National Agricultural Statistics Service (NASS), and nutrition assistance programs to reopen. Senate Majority Leader Mitch McConnell (R-Ky.), however, has refused to bring up any individual House-passed government funding bills for a vote.

While the three-day reopening of FSA offices certainly helps, USDA provided a list of services that would not be available during the agency’s limited operations, including new direct or facility loans; new farm loan guarantees; new marketing assistance loans; dairy margin protection program services; and disaster assistance programs.

Included on the denied services list are new applications for Market Facilitation Program (MFP) payments and certification of 2018 production for MFP payments, a program that includes tariff aid to soybean farmers hurt by the trade war with China. While Jan. 15 had been the original deadline for producers to apply for MFP, USDA has extended the application deadline for a period of time equal to the number of business days FSA offices end up being closed, once the government shutdown ends.

USDA said producers who applied for MFP and certified their 2018 production by Dec. 28, 2018, should have already received their payments.

Recent customs data shows that China’s December soybean imports dropped 40.1 percent from last year, due largely to reduced purchases from the U.S., its second-largest supplier. China’s soybean imports for all of 2018 fell for the first time since 2011, and imports for December were at their lowest since December 2011.

Corn growers and ethanol producers were also bracing for a delay in EPA’s final rule to allow summertime sales of gasoline blended with as much as 15 percent ethanol. President Trump announced his plan to allow year-round sales of E15 last October, but the shutdown has reportedly furloughed 90 percent of EPA’s staff – some 13,000 employees – and the originally planned May deadline for the rule now seems unlikely.

The shutdown has also delayed the rollout of a new Waters of the U.S. (WOTUS) rule. The “Revised Definition of the Waters of the United States,” which was announced by EPA and the Army Corps of Engineers on Dec. 11 (GM Dec. 14, 2018), would significantly narrow the types of water bodies that fall under Clean Water Act (CWA), replacing the contentious 2015 WOTUS rule developed by the Obama-era EPA.

The agencies published a notice on the revised WOTUS rule in the Federal Register on Dec. 28, but a public hearing scheduled for Jan. 23 in Kansas City, Kan., has already been cancelled due to the shutdown, and the rule’s official publication will likely be delayed as a result.

The Fertilizer Institute (TFI), the Agricultural Retailers Association (ARA), the National Corn Growers Association (NCGA), the National Association of Wheat Growers (NAWG), and the American Farm Bureau Federation (AFBF) all voiced support for the revised WOTUS rule, while The National Resources Defense Council, the National Audubon Society, and the Center for Biological Diversity have expressed strong opposition.

Regardless of the delay, legal experts have warned that the revised WOTUS rule is certain to be challenged in court (GM Dec. 21, 2018). Another headwind for the proposal, according to Bloomberg Law, is a number of incoming Attorneys General voted in as Democrats in November who are replacing Republicans in states where water quality is a key issue, including Michigan and Wisconsin.

AFBF President Zippy Duvall hailed the revised WOTUS rule at the organization’s annual convention in New Orleans this week, an event that also hosted President Trump on Jan. 14. Bloomberg reported that Trump enjoyed enthusiastic support from the Farm Bureau audience, assuring the 7,000 in attendance that his trade and immigration policies will benefit U.S. agriculture in the end, as will his administration’s regulatory and tax reforms.

Petrobras Resumes Sale Process for ANSA N Assets

Brazil, Featured, News, Nitrogen

State-owned Petróleo Brasileiro SA (Petrobras), Rio de Janeiro, said on Jan. 17 that it will resume the competitive process for the sale of its 100 percent ownership stake in nitrogen fertilizer plant Araucária Nitrogenados S.A. (ANSA), in Paraná state, following a decision to proceed by its Executive Board.

Petrobras was forced to suspend the divestment process for the nitrogen fertilizer plant, and for certain other major asset sales, following a Federal Supreme Court’s ruling in July that privatization deals must be authorized by the country’s Congress (GM July 6, 2018).

Petrobras said it had taken into consideration the opinion of the Federal Audit Court, and had concluded that the group meets the requirements placed in the scope of the analysis by the Federal Supreme Court since “it holds a legislative authorization to sell its subsidiaries” and obey the constitutional principles when divesting.”

Petrobras in September 2017 (GM Sept. 15, 2017) put ANSA up for sale as a package with the still-to-be-completed nitrogen fertilizer complex, Unidade de Fertilizantes Nitrogenados III (UFN-III) in Três Lagoas, Mato Grosso do Sul state. Last May, Petrobras revealed that it had entered into exclusive negotiations with Russian fertilizer group Acron for a period of 90 days for the sale of its entire 100 percent stakes in the two fertilizer assets (GM May 11, 2018). Acron, for its part, has never confirmed publicly its interest in the Petrobras fertilizer assets.

The divestment position on UFN-III remains unclear, however. Shortly after the injunction was imposed (GM July 20, 2018), Petrobras insisted that as far as its fertilizer assets were concerned, the injunction applied only to ANSA, and that it was possible to continue “the discussions and negotiations regarding the technical aspects that are part of the UFN-III sale, aiming at a future conclusion of this transaction.”

In a December statement, however, the group confirmed that the divestment of UFN-III and ANSA were on hold (GM Dec. 7, 2018). Under its 2040 Strategic plan and 2019-2023 Business and Management Plan (BMP), Petrobras is hoping to raise as much as US$26.9 billion, through asset sales and partnerships, by 2023 to reduce debt.

Last week (GM Jan. 11, p. 25), Petrobras announced that it was initiating the leasing process for its two nitrogen fertilizer plants in northeastern Brazil, which are located at Camacari, Sergipe, and at Laranjeiras, Bahia. In early November, it pushed back the planned mothballing of the plants to Jan. 31, 2019 (GM Nov. 2, 2018).

Ultimately, Petrobras plans to exit the fertilizer sector. In December, it revealed that its 2019-2023 BMP included the “exiting of its fertilizer, LPG distribution businesses, and biodiesel and ethanol production interests.”

Uralchem to Invest in Zimbabwe Fertilizer Assets

Africa, Featured, News, Russia

Uralchem, Moscow, has signed a Memorandum of Understanding (MoU) with the Republic of Zimbabwe, under which Uralchem, either individually or jointly with Uralkali, intends to invest in one or more Zimbabwean agricultural companies, particularly the largest state-owned company in the sector, fertilizer holding company Chemplex Corp. Ltd.

The agreement was signed on Jan. 15 by Uralchem Chairman and Uralkali Deputy Chairman Dmitry Mazepin and Zimbabwe’s Minister of Foreign Affairs and International Trade Perrance Shiri. Investments will be made by the purchase of shares in the authorized capital of various companies or via investments in their fixed assets, Uralchem said in a statement.

The Russian company in November revealed that it plans to participate in the privatization of Chemplex. Zimbabwe’s Industrial Development Corp. (IDC) is looking to divest part or all of its 100 percent holding in the company, and last September retained Ernst & Young LP to assist it in arranging the sale or in finding a partner for Chemplex (GM Sept. 7, 2018). Initial reports in November said there was interest from 26 local and international companies, including Uralchem (GM Nov. 2, 2018).

Harare-based Chemplex controls Dorowa Minerals, which operates the country’s only phosphate mine, and ZimPhos, the country’s sole producer of sulfuric acid, aluminium sulfate, and superphosphates. Chemplex also holds a 50 percent interest in NPK manufacturer Zimbabwe Fertiliser Co., and a 36 percent interest in Zimbabwe’s sole ammonium nitrate manufacturer, Sable Chemicals Industries Inc. in Kwekwe (GM Feb. 9; June 15, 2018). In addition to fertilizer and chemicals, Chemplex is also reported to have stakes in mining and insurance.

The divestment is part of the country’s plan, announced in April, to either partially privatize or list some 35 state-owned firms on the Zimbabwe Stock Exchange. An earlier attempt to sell off Chemplex in 2015 proved unsuccessful.

This week’s MoU also provides for the supply of nitrogen, potash, and complex fertilizers to the markets of Zimbabwe and other African countries. Uralchem last year revealed its ambitions to establish a Russian hub in Zimbabwe, and perhaps also in Zambia, in possible cooperation with Uralkali, for the direct supply of mineral fertilizers to the two African nations and potentially their neighbors, where demand is expected to grow rapidly in the next several years (GM Feb. 9, 2018).

“The memorandum states that the agriculture development is the key priority for the Zimbabwean economy. The largest national corporations involved in the production of mineral fertilizers and agrochemicals, including the leading state-owned company Chemplex, aim to establish business relationships with Russian partners in order to enhance the economy of Zimbabwe and develop local businesses,” Uralchem said. “In turn, for Uralchem and Uralkali companies, the supply of mineral fertilizers to African countries is among the strategic development areas we are focusing on.”

OCP Confirms Plans to Build NH3, DAP Plants in Nigeria

Africa, Ammonia, DAP/MAP, Featured, Morocco, News

OCP Africa Fertilisers Nigeria Ltd. has reiterated the OCP SA group’s plan to establish an ammonia and DAP plant in the country. Work will begin this year, according to Vanguard News Nigeria, citing the subsidiary’s managing director, Mohamed Hettiti.

Hettiti did not comment on the production capacities, and said the location had yet to be finalized. He spoke only of a “big ammonia plant,” from which some of the output would be exported to Morocco for OCP’s use. Currently, the Moroccan group imports all its ammonia requirements.

OCP and the Nigeria Sovereign Investment Authority (NSIA) last June inked a Memorandum of Understanding (MoU) for the development of an industrial platform in Nigeria for the production of ammonia and related products (GM June 15, 2018).

The Moroccan producer has also been studying the development of a fertilizer plant in the country as a joint venture with Nigeria’s Dangote group. The two companies signed a partnership deal in late 2016 aimed at bolstering fertilizer production and business in Nigeria, and possibly including developing a joint integrated platform (GM Dec. 9, 2016), but it is unclear if this included ammonia production. Dangote already is close to completing an ammonia and 2.8 million mt/y urea plant of its own in the Lekki industrial area of Lagos.

Regarding the planned DAP plant, Hettiti said Nigeria is currently importing DAP. With its own DAP and ammonia production facilities, however, he said only the phosphate raw materials would need to imported from Morocco, according to the report. The main markets for the Nigerian-produced DAP would be the domestic market and neighboring countries, according to Hettiti.

OCP is also scheduled to build two fertilizer blending plants in the country, according to reports, with plans to deliver these by September this year. The facilities would be located in the southwestern Ogun and the northwest Kaduna states, and once in production would help reduce Nigeria’s NPK imports, Hettiti said.

OCP SA had not responded to Green Markets for comment by press time. The Moroccan group has spoken frequently in recent years of its commitment to Nigeria’s agricultural development initiatives. It established OCP Africa Fertilisers Nigeria as a wholly-owned subsidiary in 2016 (GM Feb. 26, 2016), and has been working with Nigeria’s government on the Presidential Fertiliser Initiative to establish blending plants to increase the availability of cheaper fertilizer for Nigeria’s farmers. As part of this initiative, OCP also inked an agreement with Nigeria’s Fertilizers Producers and Suppliers Association (GM Dec. 6, 2016; May 19, 2017).

The Andersons Completes Lansing Acquisition; Now 6th Largest Grain Business in North America

Featured, News

The Andersons Inc., Maumee, Ohio, announced that it has successfully completed its acquisition of Lansing Trade Group LLC, a longtime affiliate of The Andersons with 22 grain storage facilities and 54 million bushels of total licensed grain storage capacity. The Andersons previously owned approximately 32.5 percent of Lansing, and paid cash and stock valued at roughly $324 million for the remaining 67.5 percent.

The merger agreement was originally announced last October (GM Oct. 19, 2018), and closed effective Jan. 1. With the Lansing acquisition, The Andersons now becomes the sixth largest grain company in North America in terms of licensed grain storage capacity, tipping the scales at 198.7 million bushels. The Andersons previously operated 44 grain storage facilities with 144.7 million bushels of total licensed grain storage capacity.

“With the completion of this acquisition, we have significantly bolstered our position in the domestic agricultural marketplace,” said Patrick E. Bowe, president and CEO of The Andersons. “We are confident that acquiring these assets, and especially hundreds of very talented people, will allow us to compete more successfully, provide greater value to more customers across an expanded platform, and grow more profitably. We welcome the employees of Lansing Trade Group to The Andersons and look forward to completing a seamless integration process.”

Most of Lansing’s business operations will be merged with The Andersons Grain Group, forming a business division known as The Andersons Trade Group. The combined operation is being jointly led by Corey Jorgenson, president of The Andersons Grain Group, and Bill Krueger, president and CEO of Lansing Trade Group. Jorgenson will now serve as president, Assets and Originations, and Krueger as president, Commodities and Merchandising. The Andersons entered into a three-year employment agreement with Krueger.

The transaction also results in the consolidation of Thompsons Limited of Ontario, Canada, and related entities, which was jointly owned by Lansing and The Andersons. Additionally, the company assumed approximately $160 million of Lansing and Thompsons long-term debt.

Under the terms of the deal, The Andersons paid $201 million in cash, which included an initial working capital adjustment of $33 million, and issued 4.1 million unregistered shares valued at approximately $123 million. In addition, it issued approximately 280,000 unregistered shares, and may issue up to approximately 370,000 additional unregistered shares to replace existing unvested incentive compensation and fund employee retention payments. The aggregate shares issued, and to be issued, represent about 14 percent of revised total outstanding shares on a fully diluted basis, according to The Andersons.

The Andersons said it expects the transaction to be accretive to EPS within the first full year after closing, and to achieve annual run rate cost synergies of at least $10 million by year-end 2020. The company said it will shortly enter into a new $1.65 billion short- and long-term financing arrangement led by U.S. Bank that will replace the former separate Andersons and Lansing financing arrangements.

Environmental Protection Agency – Management Brief

Management Briefs

Andrew Wheeler, who currently serves as acting administrator of the Environmental Protection Agency (EPA), appeared before the Senate Environment and Public Works Committee on Jan. 16 to defend his nomination by President Trump to head the agency. Wheeler took over the acting administrator role last summer after the resignation of EPA Administrator Scott Pruitt (GM July 6, 2018). Wheeler was confirmed as EPA’s No. 2 last April by a 53-45 vote.

Wheeler fielded questions from senators on the renewable fuel standard, fuel economy,  greenhouse gas emissions, and lead pollution. Democrats on the committee also pressed Wheeler on EPA’s shutdown activities, and suggested that his confirmation be delayed while the government remains under a partial shutdown. Sen. John Barrasso (R-Wyo.) told reporters that senators will have adequate time to send and receive responses to questions for the record, “so that there’s not going to be a rush.”

Republicans in the midterm elections increased their margin in the Senate to 53-47, as two of the three Democrats who supported Wheeler – Sens. Heidi Heitkamp (N.D.) and Joe Donnelly (Ind.) – lost their re-election bids, Bloomberg Law reported. That leaves Sen. Joe Manchin (D-W.Va.) as the lone Wheeler-backing Democrat left.

Marubeni Corp. – Mangement Brief

Japan, Management Briefs

Marubeni Corp., Tokyo, reported on Jan. 15 that it has appointed its current president and CEO, Fumiya Kokubu, as its new chairman, effective April 1, 2019. Kokubu will take over the position from Teruo Asada, and will resign as president and CEO on that date. Kokubu has been with the company since April 1975.

As of April 1, Asada will work as a senior corporate advisor with the company, and will remain as a board member until June 2019. Masumi Kakinoki has been appointed Marubeni’s new president and CEO, effective April 1. Kakinoki currently serves as senior executive vice president and board member.

Marubeni’s U.S. assets include Gavilon and Helena Chemicals Co.

American Vanguard Buys Brazilian Micronutrient, Crop Protection Companies

Brazil, California, News, News Briefs, Specialty

Specialty and agricultural products company American Vanguard Corp., Newport Beach, Calif., on Jan. 10 announced the acquisition of two affiliated Brazilian limited liability companies, Agrovant and Defensive. American Vanguard said these combined businesses have become a rapidly growing supplier of crop protection products and micronutrients, with annual sales of approximately $20 million and a primary focus on the fruit and vegetable market segments. Financial terms of the transaction were not disclosed.

“Our acquisition of Agrovant and Defensive expands our access to the Brazilian agricultural sector, which at approximately $9 billion ranks as the largest crop protection market in the world,” said Eric Wintemute, American Vanguard CEO and chairman. “Similar to our expansion in Central America following the acquisition of Grupo AgriCenter in late 2017, this transaction provides American Vanguard with a solid platform for marketing AMVAC products, distributing products from third-party manufacturers, and providing support for the introduction of SIMPAS™ prescription planting systems in South America.”

Wintemute said the distribution franchise, located in the province of Sao Paulo, consists of 35 full-time employees, complemented by a group of experienced commissioned sales agents. John Redfern, the current CEO of Agrovant/Defensive, will remain directly involved in the business through 2021.

“Company management has been highly successful at driving significant revenue and earnings growth, while maintaining excellent control of working capital, credit risk, and debt financing,” Wintemute said. “In addition to Agrovant/Defensive’s existing strong position in fruits and vegetables, the company will continue its penetration of the extensive Brazilian soybean market. We also expect expanded involvement in the corn, cotton, and sugar cane segments, as well as the high-margin, fast-growing $2 billion micronutrients market.”

Canada Awards $1M to KSM for SOP Technology

Canada, News, News Briefs, Potassium Sulfate, Specialty, Sulfate of Potash Magnesia

The Canadian government has awarded C$1 million to KSM Fertilizers of Quebec to assist the company in becoming a low-cost producer of potassium sulfate (SOP) and magnesium sulfate (SOPM) fertilizers by using an innovative patented technology to extract magnesium compounds from mine tailings.

KSM plans to construct a demonstration plant that will produce 55,000 mt/y of SOP, SOPM, and potassium, plus hydrochloric acid as a byproduct. The company said the process applies lower temperatures to reduce energy consumption, corrosion, and operating, maintenance, and construction costs.

Sustainable Development Technology Canada (SDTC) gave KSM the $1 million in mid-December as part of C$2 million in total company financing to help KSM build and operate the plant at Thetford Mines, Quebec. The government and company anticipate that the plant’s clean technology will help cut greenhouse emissions.

KSM President David Lemieux said the company uses ore from mines to access magnesium. It takes potash and reacts it with sulfuric acid to create potassium sulfate. Remaining acid is used to extract the magnesium as magnesium sulfate, which is further combined into the potassium sulfate. The mining residue is used as a feed material in the process.

Lemieux noted that SOP and SOPM are not new products, but KSM plans to manufacture them in a more energy- and cost-effective way. KSM hopes to start the project in the first quarter of 2019 and run process demonstrations for a year. The Canadian government’s investment is a great step forward for KSM, he said, and provides the tools needed for the company to advance.

In its 2017 budget, the Canadian government provided more than $2.3 billion to help clean technology companies grow and expand, including $400 million to recapitalize the SDTC’s tech fund that supports the development and demonstration of early-stage clean technology projects, plus nearly $1.4 billion in new financing through the Business Development Bank of Canada and Export Development Canada. Experts expect the global clean technology market to grow to $2.5 trillion by 2022.

Invictus Terminates Merger Plan with GTEC

Canada, News, News Briefs, Specialty

Invictus MD Strategies Corp., the Vancouver-based cannabis and specialty fertilizer company, announced on Jan. 15 that it will not be pursuing a merger with GTEC Holdings Ltd., a vertically integrated cannabis cultivation company headquartered in Kelowna, B.C. The two companies signed a non-binding letter of intent (LOI) last November to pursue a merger, but both have agreed to terminate the LOI.

Invictus and GTEC will continue working together under an LOI signed last August, however, under which Invictus agreed to invest up to $2 million in GTEC to help the company develop and expand its retail strategy in Western Canada and Ontario. The LOI also gave Invictus the right of first refusal to fill up to 30 percent of any domestic or international cannabis purchase orders sought by GTEC or its wholly-owned subsidiaries from third-party licensed producers for a two-year period.

“Invictus is continually aiming to realize its vision of building a global cannabis company anchored on its Western Canadian roots, with a focus on satisfying patients’ and consumer’s needs in the medical and recreational markets, respectively” said George E. Kveton, president and CEO of Invictus. “We look forward to maintaining and further increasing our strong, strategic partnerships with companies like GTEC to support our five pillars of distribution, including medical, recreational, international, Licensed Producer to Licensed Producer, and retail.”

GTEC describes itself as a specialized craft cannabis company dedicated to cultivating premium quality cannabis in purpose-built indoor facilities. The company announced last year that it planned to open a minimum of 15 Cannabis Cowboy retail stores in Alberta by Oct. 17, 2018, along with one location in Saskatchewan.

“We look forward to continuing down the path of GTEC becoming one of Canada’s leading premium focused and vertically integrated cannabis companies, while maintaining a strong working relationship with the Invictus team” said Norton Singhavon, GTEC founder, chairman, and CEO. “2019 will prove to be an instrumental year for GTEC as we continue to execute on our vision and strategy within the premium cannabis market in Canada.”

Invictus’ holdings (GM June 30, 2017) include a 100 percent ownership of cannabis cultivator Acreage Pharms Ltd., located in West-Central Alberta, and a 50 percent investment in AB Laboratories Inc., Hamilton, Ont., which has its cultivation and sales license under Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR). In addition to ACMPR licenses, Invictus has an 82.5 percent investment in Future Harvest Development Ltd., a fertilizer and nutrients manufacturer based in Kelowna.

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