Washington-U.S. corn acreage is expected to be 86 million acres this year, according to statistics released at the USDA Outlook Forum Feb. 26. This is a surprise to many analysts, who had expected corn acreage to be off due to the economic slowdown and a struggling ethanol industry. USDA is projecting a record soybean crop at 77 million acres. Wheat acreage is put at 58 million acres and cotton at 8.5 million, both down. A full discussion of these figures will be included in the Green Markets 2009 Agriculture and Fertilizer Outlook on March 4. See page 3 for more information.
U.S. Gulf/Tampa:The markets were quiet last week, though there was some speculation that NOLA might see another uptick.
Eastern Cornbelt:Anhydrous ammonia pricing remained in the $450-$525/st FOB range, with the low for cash tons in Illinois.
Western Cornbelt: The anhydrous ammonia market was pegged at $425-$500/st FOB, with the low reported in Nebraska. Delivered ammonia to points in Missouri remained in the low-$400s/st from southern production points.
Southern Plains:The anhydrous ammonia cash market was reported at $315/st FOB Oklahoma production points on the low end, with the dealer market FOB Kansas pipeline terminals quoted in the $335-$355/st FOB range.
South Central:Anhydrous ammonia was tagged at $460-$480/st FOB regional terminals to the dealer, with the low reported at Memphis, Tenn., and the upper end FOB Henderson, Ky.
Middle East: Different stories are coming out about purchases made in the past two weeks. There are now reports that Transammonia concluded a deal with Sabic at $215/mt FOB, with the U.S. as the most likely destination. At the same time, reports circulated that Qafco – normally a leader in pushing prices down – settled with Mitsui at $260/mt FOB.
One Asian trader noted that the Trammo deal came before the Mitsui purchase, and Mitsui had a lot less flexibility in its need to load and ship the product.
The tighter constraints on Mitsui allowed Qafco to push up the price. One source said Qafco had to defer a loading for another client and demanded compensation for the “inconvenience” caused to that client.
Overall, sources expect to see prices continue to move up in the area as demand from Asia – and now, reportedly, the U.S. – strengthened.
The Arab Gulf producers remain one of the most stable suppliers of ammonia at this time. Sources continue to point to the closed Ukrainian plants in the Black Sea as evidence that any serious demand will have to be covered from the Middle East in the near future.
With increased demand, the price is expected to keep moving up.
Black Sea producers reportedly need their market to hit $325/mt FOB before they can consider restarting their facilities.
A Black Sea price of $325/mt FOB means the Middle East can push its prices to about $350/mt FOB before facing serious competition on a global scale.
Helping push the Middle East price higher are reports that Indian buyers will be stepping in for more tons under their long-term arrangement with the Arab Gulf producers. The real issue for the producers will be to correctly judge how strong the Indian market will be.
Some sources point to the Asian buying as refilling tanks that are now hitting empty. Unless the global economy picks up by April, buying could slacken as May approaches. Industry observers note that with product and freight prices low, industrial buyers can take advantage of the market to top off their tanks. They can hold onto the ammonia for use when and if it is needed.
A number of the industrial buyers in Korea and Taiwan stayed out of the market for a while because of reduced demand for their products. Buyers who can still operate are doing so at reduced levels. And so their ammonia consumption is also reduced. The purchases being made this month and next are designed to replace what was slowly used.
Looking back at the Middle East market, sources say Transammonia got a good deal from Sabic. Few say such a good deal could be found again.
Sources add that while Mitsui was forced to pay top dollar for its cargo, the producers now have it in their minds that $260/mt FOB should be the starting point for any future talks. Observers say that is not likely right away.
For now, the price remains pegged at $250-$260/mt FOB.
Black Sea: Ukrainian producers remain closed. The cost of making ammonia is too dear for the current market. Industry sources say the current market peg of $210-$220/mt FOB is about $100/mt too low. The production cost for the producers is estimated at $320-$325/mt FOB. The increase in the production cost comes largely from an increase in natural gas prices from Russia.
Sources report a deal with the Russian firm Nitrochem at $210/mt FOB. That deal was reportedly the sale of tons in storage, looking for a buyer.
Sources report that the soft global ammonia market and increased production costs have affected many companies. An Asian trader noted that Nitrochem usually produces about 200,000 mt/year. So far, the company is on track to produce only half that amount.
Area producers might be able to come back on line once demand pushes the price beyond the break-even point.
One trader figured the price will rise steadily in the next few weeks. Asian demand is strong, and buyers from the U.S. are now reportedly ready to start making some serious deals.
Reports that the Trinidad facility is sold out could lead some U.S. buyers to look for the best deals further afield. Right now the Middle East producers are the only ones up and running who can satisfy the U.S. demand.
Once demand and limited supply push the price up, the Black Sea suppliers could once again have an impact on the market.
India: Sources report that buyers are looking to get what tons they can as soon as they can. Demand in India is moving up with phos acid deals concluded and DAP demand heading up. The phosphate producers are looking to the Middle East for their ammonia supplies. For the time being, say sources, there is little push-back from the buyers against the higher price expectations of the producers.
Reportedly, the buyers are convinced the price will continue to rise for at least the next 6-8 weeks. For now, the buyers are taking what tons they can before the increase curve becomes more vertical.
UREA
U.S. Gulf: Most players last week put recent prompt granular trades within the $305-$307/st FOB range. While sellers are quoting $307-$310/st FOB for the next round of business, buyers are eyeing $300-$305/st FOB. Overall, it was a very quiet market.
Eastern Cornbelt: The granular urea market was reported at $355-$365/st FOB regional terminals for cash tons, reflecting a slight drop from last report.
Western Cornbelt: The market was tagged at $350-$355/st FOB to the dealer, reflecting a slight drop from the prior week. The dealer market FOB Pine Bend, Minn., was reported at the $360/st mark last week.
Southern Plains: Several sources described urea movement as steady throughout February. Dry conditions limited fieldwork in parts of Texas in late February, but other sources said pre-plant activity was underway on corn and cotton ground in some areas, and growers were also topdressing wheat.
Granular urea was pegged at $340-$345/st FOB the Tulsa market, with most quoting the $345/st level as the common dealer price last week. Supply remains adequate, but one source said urea and dry phosphate inventories at regional warehouses are “not very deep,” a situation that has been exacerbated by the shutdown of Koch’s urea plant at Enid, Okla.
South Central: The granular urea market was pegged at $335-$345/st FOB regional terminals to the dealer, down just slightly from last report. The only fertilizer activity was some movement on pastures in the region.
Southeast: Granular urea was pegged at the $350/st mark FOB port terminals to the dealer. One Carolina source also quoted rail-delivered urea at $360/st last week.
Pakistan: In an unusually fast move, the Pakistan finance ministry released the funds for TCP to buy about 130,000 mt of urea from the last tender at a price of $322/mt CFR. They were looking for 200,000 mt.
Industry observers had expected a more drawn-out process and possible scrapping of the tender because TCP had been saying it wanted to buy at the last-done price of $284.90/mt CFR. Offers in the tender indicated that no one was going to be offering at that level. A summary of the tender offers is below.
Company
Origin
Quantity (mt)
US$/mt CFR
Remarks
Sabic
Saudi Arabia
60,000
322.00
Two lots
Multicommerce
Open
30-35,000
324.90
Transfert
Open
30-40,000
328.00
30-40,000
325.00
Option
Helm
Open
25-40,000
335.00
Keytrade
Open
30-40,000
336.90
30-40,000
341.90
Seller’s Option
Dreymoor
Open
25-30,000
342.00
25-30,000
Option
Transammonia
Open
25-30,000
345.47
25-30,000
Seller’s Option
Toepfer
Open
25-30,000
358.25
25-30,000
Option
Swiss Singapore
Regrets
The offerings, as expected, were limited to one or two cargoes. Sources had expected most traders to take conservative positions during a time when the market direction is not firmly agreed to.
There was always a possibility that TCP could scrap the tender if the TCP team and the finance ministry believed the offered prices were too high. TCP first tried to get Sabic to lower its prices. Failing in that endeavor, TCP started moving down the list trying to get the other offering companies to match the Sabic number of $322/mt CFR. Only Multicommerce and Transfert came through for TCP with one cargo each.
With freight from the Arab Gulf pegged at $10-$15/mt, sources say the Sabic offer reflects the soft side of earlier Middle East pricing expectations.
Freight from the Black Sea to Pakistan is pegged at $40-$50/mt. Assuming that all the other offers are for Black Sea tons, the Yuzhnyy range is placed at $275-$310/mt FOB.
Few in the industry believe the Yuzhnyy market has moved much beyond $290/mt FOB.
Sources now expect to see another tender from TCP within a week or so.
Industry observers have noted in previous weeks that much of what is being bought under this tender and what is still expected to be purchased is for reserve tons.
During the past month opposition politicians have been complaining that many of their constituent farmers are not getting the amount of urea they feel they need at a price they can afford. Sources say rather than face a hostile agricultural voting bloc, the government is pressuring TCP to make sure there is plenty of urea in the country.
Outside the country, sources say the shortages that are occurring in select areas of the country are not due to a shortage of the product, but rather inadequate transportation facilities. Eventually, said one source, the urea gets to the local markets. Government subsidies, he added, ensure the price will not hurt the farmers.
Middle East: Sabic set the pace for sales into Pakistan. The final agreed-to price was $322/mt CFR. With freight rates pegged at $10-$15/mt, sources now put the Middle East market at $305-$310/mt FOB. In other words, said one trader, the market has not moved at all.
Prior to the closing of the TCP tender Feb. 21, the Middle East producers had been telling traders and direct buyers the new opening price for any material was $320/mt FOB. Sources report that rather than be caught with material at or near that level, no one made any bids.
One trader said it would have been the height of folly to make a bid just as the TCP tender results were being made public. He advised waiting for the results and then seeing how the market moves.
Following the release of the tender results, he said he was justified in his earlier assessment. After the awards were made, he was even more pleased he held to his views.
Demand for Middle East material is steady and strong, say sources. The Sabic deal with Pakistan will not seriously affect other contracts the producer has, nor will it substantially create a shortage in the area.
The only ones strongly in the market are some of the smaller buyers in Southeast Asia. And even with many of them, getting from offer to signed deal is a difficult process.
Black Sea: Industry sources are assuming that Multicommerce and Transfert will be supplying Pakistan with tons from Yuzhnyy. If that is the case, say sources, the netback on the $322/mt CFR deals is $270-$280/mt FOB. Sources say this is a bit softer than the paper trades that have been going on most of the month of February.
Demand for urea into Latin America and Europe will help put a floor under the prices, say sources. But few see opportunities for a major jump in prices any time soon.
Southeast Asia: Sources report CFC and CCF in Sri Lanka have not yet made any awards in their tenders from a couple of weeks ago. One Asian trader noted this delay is not unusual. The Sri Lankan firms are known for calling tenders just to test the market. He was not critical of the companies. He pointed out gleaning an actual trend in the current market is difficult. The issue, he said, is not just will the price go up or down, but how fast.
People in the area are still reeling from the drop in prices that took place during the last quarter of 2008. Many buyers are still sitting on material in their warehouses that was delivered at $900/mt CFR.
As the reserves dwindle, new purchases are made at the current lower price to help average out the final sale price to local vendors. This means, said one trader, that many countries are buying hand-to-mouth. When a warehouse inventory drops low enough to take another cargo, the buyer will first assess the local demand. If tons are still needed, the buyer will take one cargo, mix it with the existing tons at an average price and then wait for the next opportunity to occur for a purchase.
Traders who have worked in the area a long time say this process is way outside the normal buying patterns in the area.
NITROGEN SOLUTIONS
Eastern Cornbelt: UAN-32 pricing to the dealer was quoted at $265-$285/st ($8.28-$8.91/unit) FOB regional terminals.
Western Cornbelt: The UAN-32 market was quoted in a fairly broad range at $250-$280/st ($7.81-$8.75/unit) FOB regional terminals to the dealer, with the low in St. Louis, Mo., and the upper end reported in Iowa. One Missouri source quoted the dealer market in his location at the $275/st ($8.59/unit) FOB level last week. Those levels reflect a slight drop from last report.
Southern Plains: UAN-32 was tagged at $230-$250/st ($7.19-$7.81/unit) FOB regional terminals, with several sources touting the upper end of that range as the more common dealer price for prompt tons in late February.
South Central: UAN-32 was quoted at $250-$265/st ($7.81-$8.28) FOB regional terminals from prompt tons to the dealer, reflecting a slight drop from last report, although there was little new business to test the market.
Southeast: The UAN-30 market was generally quoted in the $240-$250/st ($8.00-$8.33unit) range FOB regional terminals, down slightly from last report, with some suppliers reportedly referenced at the $260/st ($8.67/unit) FOB mark.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate was steady at $275-$305/st FOB, with the upper end reported in Missouri.
Southern Plains: Ammonium nitrate was pegged at $250-$260/st FOB Catoosa, down slightly from last report.
South Central: The ammonium nitrate market remained at $275-$280/st FOB regional terminals to the dealer, with the low end FOB Memphis.
Southeast: Ammonium nitrate pricing was down significantly from last report. Sources quoted the Tampa market at $320-$350/st FOB, with the upper end for truck business in Florida and the low quoted by out-of-state sources based on netbacks. Carolina sources also reported rail-delivered nitrate tons coming from the river system at the $310/st level. Sources reported some movement on citrus crops, but described it as “modest” due to price resistance from growers.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was quoted at $175-$225/st FOB in the region, reflecting a slight increase from last report.
Western Cornbelt: Granular ammonium sulfate was reported in a broad range at $175-$245/st FOB in the region, with the upper end reported in Iowa for confirmed new sales. Several sources said product is potentially tight, with some suppliers not taking orders for 5-6 weeks. Delivered ammonium sulfate prices also ran the gamut; one supplier reportedly remained at $157.50/st DEL to the Midwest but was on allocation, while another supplier raised its delivered price into the region to the $235/st level in late February. Agrium’s reference price for granular ammonium sulfate was also slated to firm on March 1 to $235/st DEL in North Dakota, Minnesota, and Wisconsin.
Southern Plains: The granular ammonium sulfate market remained at $200-$250/st FOB Texas shipping points, with the low FOB Freeport and the upper end FOB Plainview. Other postings FOB Plainview included coarse grade ammonium sulfate at $240/st and standard grade at $230/st.
South Central: Granular ammonium sulfate was reported at $200-$210/st FOB in the region.
Southeast: Granular ammonium sulfate was quoted at $165-$175/st FOB mark in the region last week as new postings take effect. DSM is on allocation, and is firming its postings some $20/st in the Southeast market. As a result, granular ammonium sulfate is moving to $175/st FOB Augusta, Ga., and $214/st DEL into Florida, and standard grade is now posted at $149/st FOB Augusta and $178/st DEL in Florida. Sources said Honeywell’s granular ammonium sulfate posting is moving to $180/st FOB Hopewell, Va., as of March 1.
Western U.S.: Effective March 1, Agrium’s granular ammonium sulfate postings will firm to $235/st DEL in Washington, Idaho, Oregon, Nevada, Montana, and Wyoming, and to $230/st FOB warehouses in Washington, Oregon, Idaho, Nevada, and Utah.
PHOSPHATES
Central Florida: Business out of Central Florida picked up last week, as both traders and producers generally make more sales and at higher prices. After inventories dipped a bit the previous month, production was on the upswing – with the exception of PCS Sales, where production facilities remained shut down. Sulfur suppliers said Mosaic had increased the amount of sulfur they were receiving, but could not be certain if that necessarily reflected a direct correlation to increased production of phosphate products. Another possibility was the company was filling its capacity while the price was still $0.00/lt, which would be wise.
Farming activity in Florida and Georgia was well underway last week, and sales of phosphate into those markets were said to be very good. In addition, phosphate railcar sales into Ohio, Indiana, and the Northeast were also up last week, as some product was moving into the fields. For points in the Midwest, one source noted that if product had not been shipped by Easter, it would be too late for the season.
The general trend for phosphates during the past month has been up, and with the spring season just beginning, that will likely continue in the near future. Traders out of Central Florida were making sales of railcars around $325/st FOB for DAP and $10/st FOB more for MAP, although a few sales were made as low as $312-$313/st FOB. Mosaic was getting $315/st FOB for DAP, and CF posted a price of $320/st FOB. Mosaic charges $10/st FOB more for MAP than DAP, and CF has a premium of $20/st FOB for MAP.
The Central Florida DAP price range moved from $310-$320/st FOB to $312-$325/st FOB based on sales last week. PCS Sales had no published price. The price from Agrifos remained at $350/st FOB for trucks and $345/st FOB for rail shipments.
U.S. Gulf: Although generally steady, sales on the Gulf river system slowed last week after a flurry of activity following the announcement of PhosChem’s sale to India the previous week.
Several sources said farmers were still evaluating the markets and had not made a decision on what to plant. The corn-ethanol situation was growers’ biggest concern. A number of ethanol plants have closed or gone bankrupt, and the price of corn sagged into the mid-$3/bushel level early last week, but made resurgence later in the week to the low-$4/bushel range. In areas farther south, some farmers were hedging their bets and planting half corn and half soybeans, but beans were not bringing top dollar, either. As a result of the trepidation of farmers, dealers were still uncertain how much of what products they should use to fill. Urea was selling well, and DAP was moving out of terminals and warehouses at a decent rate, but no clear picture has emerged. How that shakes out will determine the success of the spring season for the phosphate industry.
In Oklahoma, which is normally the first area to start the season, DAP sales were steady and supplies were running low. The weather has been warmer than normal, which was good, but dry, which was bad. The wheat crop was taller than usual, but in poor condition, according to sources. Temperatures in the Midwest were pleasant – as high as the low 70s last week – but a cold front was expected on the weekend.
Warehouse prices for phosphates depended on location and some inland prices were lower than on the rivers, again depending on location. A low price of $365/st FOB was found on the Arkansas, but listings as high as $385/st FOB were reported in the northern regions.
The NOLA DAP barge price range last week moved up from a low of $310-$320/st FOB the previous week to $318-$325/st FOB.
Eastern Cornbelt: The DAP market was steady at $365-$385/st FOB regional terminals, with MAP at a roughly $15/st premium. An Illinois source pegged the warehouse market in his trade area at $370/st FOB for DAP and $380/st FOB for MAP. 10-34-0 pricing remained in a broad range at $650-$825/st FOB in the region, with the low in Illinois and the higher numbers further east.
Western Cornbelt: Prior to winter precipitation late in the week, some areas reported dry spreading activity on frozen ground in the region. One source said soil moisture profiles were saturated as the month ended, but dry spreading activity was steady throughout the month in his location, with phosphate volumes exceeding potash by a two-to-one margin.
DAP was quoted at $360-$370/st FOB most regional warehouses to the dealer, with MAP tagged at $375-$385/st FOB. One source said the only thing moving out of regional warehouses was prepay and early bookings, with minimal new sales taking place. The 10-34-0 market continued to be quoted in the $625-$700/st FOB range in the region.
Effective March 1, Agrium’s phosphoric acid postings will firm to $1,050/st rail-DEL in Iowa, Minnesota, Nebraska, Wyoming, and the Dakotas for both super phosphoric acid (SPA) and merchant grade acid (MGA).
Southern Plains: DAP was quoted at $350-$360/st FOB Catoosa, Okla., with MAP pegged at $370-$375/st FOB to the dealer. Agrium’s phosphoric acid postings will firm on March 1 to $1,050/st rail-DEL for both SPA and MGA in Colorado, Kansas, New Mexico, Oklahoma, and Texas.
10-34-0 pricing covered a broad range, from $500-$600/st FOB, with the low in south-central Texas. Most other locations in the region were reportedly holding to the $575-$600/st FOB range for new tons to the dealer. Those levels were down from last report.
South Central: The DAP market was tagged at $345-$355/st FOB regional warehouses, with MAP at a $10-$15/st premium. TSP was $25/st lower than DAP, or $320-$330/st FOB to the dealer. One source said he expects brisk phosphate movement this spring, especially since rates were cut some last year.
Western U.S.: Agrium’s phosphoric acid postings will firm on March 1 to $1,100/st rail-DEL for both SPA and MGA in Arizona, California, Idaho, Montana, Nevada, Oregon, Utah, and Washington.
U.S. Export: After its sale of 1.25 million mt to India the previous week, PhosChem reported no new sales last week. However, Transammonia made a sale of 6,000 mt into Latin America at a price of around $380/mt FOB.
Export sales have picked up since the beginning of the year, but were still trailing the year before. Still, the prime time for exports will not begin for more than a month.
Based on the most recent sales, the export price range last week moved up from $365-$367/mt FOB to $367-$380/mt FOB last week.
POTASH
Eastern Cornbelt: Most sources tagged the potash market in the $700-$750/st FOB range in the region from brokers or resellers, with no new sales to test the market. Based on some February dry spreading activity on frozen ground, one dealer reported moving about four pounds of phosphate to every one pound of potash.
Western Cornbelt: Potash out of regional warehouses was tagged in the $700-$750/st FOB range to the dealer, depending on grade and location, with most sources touting the low end of that range as the common dealer price from secondary sources.
Southern Plains: Reference prices for potash FOB Carlsbad, N.M., remained at $794-$800/st, depending on grade. Out of regional warehouses, the potash market was pegged at $700-$730/st FOB from secondary sources. Sources said some were pulling tons ordered last fall for spring, but new sales were few and far between.
South Central: Potash was pegged at $700-$750/st FOB regional warehouses to the dealer, with minimal business to test the market. “I’m not sure what the number would have to be to spark interest,” said one source, who added that spring application rates for potash could be off by 50 percent or more.
Southeast: Sources continued to peg the potash market at $810-$840/st DEL in the region. “At these numbers, there’s not a whole lot that will be moved,” said one source. Another noted that the only material changing hands is dealer-to-dealer, as retail sales are all but nonexistent.
SULFUR
Tampa: Sulfur remained in an oversupply situation last week and that is not likely to change soon, but conditions were far less desperate than the previous couple of months. Refineries were producing only slightly less than normal and some were conducting turnarounds, which helped. Dumping excess sulfur into landfills was continuing.
Prill production was running full out last week, which was assisting in reducing the excess inventory, but as much as 170,000 mt of prill will be moving out of Martin’s Beaumont facility in less than a month. Four vessels were in line to load there, and two more were believed due after the middle of March. Most of the prill being produced was headed to China.
As more of a balance between supply and demand re-establishes itself in the coming month or so, the chances were that quarterly prices would increase from their extreme of $0.00/lt for the next quarter. However, not by much.
Transportation was not a problem last week, as railcars were rotating close to normal. Mosaic was said to be increasing the amount of sulfur it was receiving. Phosphate production was on the increase, but phosphate companies were taking advantage of the low price to fill storage facilities.
West Coast: Contracts for refiners to prillers were settled by last week. Those in Southern California will see a price of around $0.00, while for those in the northern part of the state the price dipped under the new contract to -$20/mt FOB.
Vancouver: Sulfur suppliers had not reached new semester contracts with Brazil last week; it was unlikely the $200/mt price will hold for the new term.
MARKET NOTES
India: IFFCO will set up a fertilizer and chemicals plant in Qatar in partnership with Qatar Fertilizer Co. (QAFCO) under a joint venture. An agreement to this effect was signed by IFFCO Chairman Dr. U.S. Awasthi and QAFCO’s acting Managing Director Yousef Al-Kuwari in New Delhi Feb. 24. IFFCO will hold a 49 percent stake in the jv. It will be entitled to buy the entire production from the plant at market price and mutually-agreed terms and conditions. Speaking after the signing of the agreement, IFFCO’s chairman said, “This agreement is in line with a series of Memoranda of Understanding signed with companies in countries like Australia, Russia, Germany, U.S.A. and Kazakhstan so as to make our country self-reliant in the production of fertilizers.”
Pakistan: A delegation of Thyssen-Krupp Technologies AG, Germany, led by its Chairman, Dr. Olaf Berlien, called on Pakistan Prime Minister Syed Yusuf Raza Gilani and discussed the possibility of cooperation for investment in fertilizer, cement, shipyards, and windmill energy sectors. They also showed keen interest to help Pakistan in the fertilizer sector, according to local sources.
Russia: UralChem OJSC, one of the largest producers of nitrogen and phosphate fertilizers in Russia and the CIS, recently reported production results for 2008. For the full 12 months of 2008, UralChem enterprises produced 4,438,797 mt of commercial products, a 1 percent decrease compared to the same period in 2007 (including Azot, OJSC, and Voskresensk Mineral Fertilizers, OJSC). By product, the company said 2008 ammonia production was down 10 percent from 2007; ammonium nitrate and its derivatives were up 4 percent; urea production was up 13 percent; DAP was down 14 percent; MAP was down 17 percent; phosphoric acid was down 39 percent; and sulfuric acid production was up 18 percent in 2008 from 2007. “The first nine months of 2008 were very favorable for the company; we managed to achieve great results regarding the output of a number of products,” said CEO Dmitry Osipov. “However, in the 4th quarter of 2008, due to decreased overall demand on the global markets, the company shifted its production to those products still in demand by consumers. As a result, the output of some products was adjusted to lower levels.” UralChem also announced its unaudited IFRS financial results for the nine months ended Sept. 30, 2008. Nine-month revenue increased to US$1,621 million, compared with $305 million for the same period in 2007. The company’s operating profit totaled $588 million, or 36 percent of the revenue, compared with $35 million, or 11 percent of the revenue, for the first nine months of 2007. Net profit for the first nine months of 2008 totaled $363 million, compared with $18 million for the same period in 2007, while EBITDA increased to $643 million compared with $63 million in the same period in 2007. Export sales totaled $1,146 million for the 2008 nine-month period, compared with $209 million in 2007. More than 70 percent of the company’s sales for the first nine months of 2008 were export sales, and sales volume of commercial products increased by 7 percent to 3,509,317 mt for the first nine months of 2008. As of Sept. 30, 2008, the company’s total debt amounted to $1,183 million. “At the beginning of 2009, world fertilizer demand became more brisk,” Osipov noted. “The most significant growth in sales was seen by ammonium nitrate and urea, so, correspondingly, the company’s production assets were loaded at full capacity for these products.” Osipov said the Russian domestic market “has seen increased sales of ammonium nitrate, followed by increased demand for complex fertilizers, which is caused by both seasonal changes and the fact that farmers are willing to compensate for the low volume of fertilizers applied in autumn.”
Georgia-Pacific (G-P) Plant Nutrition, Atlanta, has announced the addition of Jon Mixson as national sales and marketing manager, and Blake Covert as sales agronomist for the western U.S. Mixson will oversee and drive nationwide sales for the Nitamin® plant nutrition business, which includes Nitamin 30L and Nitamin Nfusion® Steady Delivery® nitrogen. On the west coast, Covert will support Nitamin sales efforts, as well as agronomic research and trials.
Tom Snipes, commercial manager, says the timing could not be better for the new staffers. “It’s an exciting period for the Georgia-Pacific Plant Nutrition Group as we continue to expand our presence in key row crop and specialty agricultural markets, as well as in the turf industry,” Snipes says. “Jon and Blake bring a wealth of agricultural experience, and they will be instrumental in serving these markets.”
A graduate of Florida State University, Mixson has worked in the agricultural business for more than 15 years, and most recently was in product marketing with Bayer Crop Sciences. Covert has more than 10 years of experience in the agricultural and turf business in California. In addition to managing his family’s almond and walnut farm, Covert was also with Wilbur-Ellis. He holds a B.S. in Crop Science from California Polytechnic State University.
Sylvite Southeast has announced the addition of Johnny Wayne Lambeth to its family as the Southeast regional sales manager. He has been in the fertilizer industry for 35 years, during which time he managed four bulk blend plants. Most recently, he spent 12 years in wholesale fertilizer sales. Lambeth, who was born and raised on a dairy farm in south Alabama, has done extensive work in sulfur micros for sugar cane, melons, cotton, corn, soybeans, and peanuts.
He will represent the whole array of Sylvite’s products and services, with his primary focus being in the southeastern U.S. He will replace Donell Davies, who worked part-time for Sylvite while at the same time working for Omni-Agri’s expansion project.
Boston-Converted Organics Inc. said Feb. 24 that on Feb. 20 it completed an initial shipment of 22 tons of its all-natural, organic lawn and turf fertilizer to a major retail distribution chain for the Spring 2009 selling season. Converted Organics expected to ship a second 22-ton order to the same major retail distribution chain Feb. 25. It also announced that full-time, around-the-clock manufacturing operations commenced at the Converted Organics Woodbridge, New Jersey, facility Feb. 21. “Although Converted Organics expected to be fully operational in January, our production schedule was delayed. However, we are very pleased to have begun shipping our organic fertilizer to a major retail distribution chain for the upcoming growing season,” said Edward Gildea, company president. “The difficulties and challenges we encountered as we commenced our manufacturing system have been or are being addressed. To date in 2009, we have processed 1,131 tons of food waste at our Woodbridge facility and anticipate that figure to increase significantly in the near future as we operate on a 24-hour cycle.” The company said as a result of the delay in manufacturing, it is seeking additional cash resources. It has retained the services of Chardan Capital Markets LLC to pursue strategic offerings, including a potential financing or restructuring. Chardan is a full-service financial firm specializing in small and microcap companies in the international arena, encompassing both public and private sectors. Converted Organics has also been in the news lately as it owns a plant in Gonzales, Calif., which, under a former owner, allegedly spiked organic fertilizer with ammonium sulfate (GM Jan. 5, p. 10).
Annapolis, Md.-The legislative outlook is in doubt for a $2 per ton surcharge on specialty fertilizer distributed in the state to be allocated to the Chesapeake and Atlantic Coastal Bays 2010 trust fund (GM Feb. 23, p. 12). If passed, the bill would make Maryland the third state to adopt measures to reduce the impact of fertilizers on water quality. But the bill, according to Bill Angstadt with the Delaware/Maryland Agribusiness Association, is stalled in committee, with no action in nearly a month. “There was a hearing on HB 136 on Feb. 4; and since then there has been no further action in committee. The chair has not asked for a third reading, which would mean a vote, and the Senate will not consider until it is passed in full House,” Angstadt reported. “Whether it has died in committee at this point is still up in the air. There have been no additional sponsors and the committee chair hasn’t joined as sponsor. That’s one good indication that it will fail this session, but you can never tell in politics.” Meanwhile, in Arkansas, a bill to double the state’s fertilizer tonnage fee to pay for soil tests and support the sampling and testing program is moving through the legislature without opposition, according to the state plant board. The bill, which raises the fee from $1.20 to $2.40, sailed through the Senate committee on agriculture, forestry and economic development, and on Feb. 23 passed the Senate 35 to 0. It was scheduled into the House agriculture committee before the end of the month. Under the higher rate, the University of Arkansas soil testing and research laboratory would get $1.78 per ton to help pay for soil tests, while 62 cents would go to the plant board to pay for sampling and testing. Since 1993 the number of soil samples processed each year has increased from about 55,000 to 115,000, causing the lab to run a deficit for the past three years.
Topeka, Kan.-The owner of MagnaGro International Inc., which produces plant stimulants in Lawrence, Kan., has pleaded guilty to unlawfully discharging fertilizer waste into the city sewer system and faces a maximum sentence of a year in federal prison and a fine up to $25,000 per day of violation along with his company, which faces a possible fine of $50,000 or more per day of violation, according to the U.S. attorney’s office here. Sentencing is set for June 1. Raymond Sawyer and the company were charged with criminal violations of the Federal Water Pollution Control Act, which also is known as the Clean Water Act. In their pleas, Sawyer and the company admitted discharging a large quantity of industrial waste from fertilizer production into the city of Lawrence’s sewer system, interfering with the operation of the sewer system. The Kansas Dept. of Health and Environment and the city of Lawrence ordered Sawyer to discharge no more material into the sewer system. In September 2007, EPA agents found Sawyer and MagnaGro discharging waste from the fertilizer operation into the city’s sewer system via a hose inserted into a toilet stool. For 10 years, investigators determined, Sawyer and the company had been discharging waste through the hose. The hose was used to pump material into the toilet from a waste pit surrounding a mixing vat. MagnaGro produces plant stimulants designed around root growth and plant metaphysical functions and blending soluble plant foods like MiracleGro to support the main product. Sawyer told Green Markets that he pleaded guilty to a misdemeanor for himself and a felony for his company “as the cheapest way out.” He said he doubted MagnaGro would be in business after March. His case has been dragging on for a year and a half, during which time, he said, the city shut off the water and dug up the sewer line. But he said that didn’t stop him. He hauled in thousands of gallons of water and hauled out the production wash to continue his plant operations.
Sacramento, Calif.-Highway patrol investigators aren’t putting any blame on the driver of a TruGreen Lawncare fertilizer truck for a Feb. 17 early-morning freeway crash that resulted in the spill of as much as 200 gallons of liquid nitrogen, requiring a large pumper truck to be brought in order to keep the liquid out of the drain system. Patrol spokesman Michael Bradley said a southbound vehicle started the chain reaction during a rainstorm by cutting off another car whose driver lost control, hit a sound wall, bounced back into traffic, and hit the TruGreen truck. The first car got away and was listed as “non-contact hit and run.” He said the truck driver was taken to the hospital for minor injuries and released. Bradley estimated that the fertilizer truck was carrying about 250 gallons of fertilizer and “more than less” was spilled, plus the contents of an undetermined number of granular fertilizer bags, which added to the mess. He said the southbound portion of the freeway was closed for three hours. TruGreen parent ServiceMaster of Memphis, Tenn., said TruGreen is working closely with authorities to establish more information about the accident and is continuing to monitor the situation.
Agrium Inc. said Feb. 25 that it submitted a proposal to the board of directors of CF Industries Holdings Inc. to acquire all of the capital stock of CF for cash and Agrium shares at $72.00 per CF share, or a total of approximately $3.6-billion, based on Feb. 24’s closing price of Agrium shares. Agrium says the proposal represents a premium of 30 percent over CF’s closing price on Feb. 24, and a premium of 42 percent over the 30-day volume-weighted average share price of CF. Under the terms of the proposed transaction, stockholders of CF would be entitled to receive one Agrium common share and $31.70 in cash for each CF share. Of the total consideration, approximately 56 percent would be in Agrium common shares and 44 percent would be in cash. CF shareholders would wind up owning 24 percent of Agrium shares.
The Agrium bid for CF is contingent on CF terminating its own bid for Terra Industries Inc. (see below).
CF on Feb. 25 acknowledged that it received the unsolicited Agrium proposal. It said the CF board would evaluate it carefully and make a determination in due course.
“The proposed transaction is strategically compelling and a superb opportunity to create value for both Agrium and CF shareholders,” said Agrium President and CEO Mike Wilson. “Adding CF’s strong North American nitrogen, phosphate and extensive crop nutrient distribution assets to Agrium’s broader global wholesale and retail capabilities would greatly enhance our existing portfolio and enable us to create a premier global franchise across the entire agricultural value chain. We will have combined revenues of nearly $14-billion and become a global leader in nutrient production and distribution. The acquisition would also triple our phosphate and UAN capacity and further strengthen all aspects of our business. We expect to achieve significant operating synergies – well in excess of those contemplated in CF’s proposal to acquire Terra Industries Inc. – and expect the combination to provide many benefits to the customers, suppliers, and employees of both Agrium and CF, as well as the communities in which both companies operate. Furthermore, our offer presents CF stockholders a compelling opportunity for significant long-term value through their ownership in the combined company. Importantly, this proposed transaction will not diminish our ability to continue to build on our position as the leading North American agricultural retailer, further expand our potash capacity and advanced technologies business or pursue other strategic opportunities. We look forward to engaging with CF’s board of directors to quickly reach a negotiated agreement and deliver on the exciting opportunities this combination offers to both companies.”
Agrium expects to realize substantial annual operating synergies of approximately $150-million from the combination within three years of closing. It expects the transaction to be accretive to both earnings and cash flow in 2010 and significantly accretive on both measures in subsequent years.
Agrium says the proposal is not subject to a financing condition as it has sufficient cash resources and committed financing underwritten by Royal Bank of Canada and The Bank of Nova Scotia to fund the cash portion of the proposal. RBC Capital Markets and Scotia Capital are acting as financial advisors to Agrium, and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Blake, Cassels & Graydon LLP are providing legal advice.
Agrium noted that it had serious discussions regarding a combination with CF prior to CF’s initial public offering in 2005. Agrium said the deal was compelling then, and even stronger now. Agrium noted that it has a track record of successful acquisitions and integrations, spanning the entire agricultural value chain. It says an Agrium-CF deal would create a company with a substantially larger global footprint. The combined crop nutrient production capacity of about 17 million mt would
touch over 20 million mt crop nutrients through wholesale, retail, and advanced technologies businesses. Agrium said this balanced portfolio would be a more stable company, better able to navigate the volatility of commodity cycles.
Wilson told analysts that CF’s extensive storage and distribution network throughout the Eastern Cornbelt, coupled with Agrium’s distribution network primarily concentrated in the Western Cornbelt, would provide significant efficiencies. It noted that CF owns more than 41 storage and distribution facilities across the U.S. with total storage of 1.8 million tons, as well as CF’s access to the main gateway of North American fertilizer imports and exports in New Orleans. It said CF’s 50 percent stake in Keytrade will complement Agrium’s growing global distribution business, including its recent acquisition of a 70 percent stake in European distribution via Common Market Fertilizers.
Agrium is not anticipating any regulatory hurdles and does not expect to have to divest any assets as a result of the combination, saying the assets are more complimentary than overlapping. Wilson said the retail segment makes its own decisions in purchasing product. Today about one-fourth of their purchases come from Agrium’s wholesale business. “I still expect the retail to purchase from a wide variety of suppliers, I’d be surprised if it went up more than half. I think it would stay well below half, and likely perhaps well below a third.”
Bruce Waterman, CFO, explained that CF shareholders may have some flexibility in getting to their $72 per share, conceivably taking all shares or all cash, or the combination of the two.
Wilson said his expectation is to enter into a discussion with the CF board in a fairly rapid fashion, and subject to regulatory approval, to close it as quickly as possible. “I’d love to see it close within 90 days.”
Most fertilizer industry sources were surprised by the news. One termed it a shock out of left field. Several said they thought it was a fair offer and it stood a good chance of going through, especially with Agrium’s resources. CF has a 52-week high and low of $172.99 and $37.71, respectively. The company began its IPO in 2005 at $16.
Another source added that in light of all the money made by large producers in 2008, it is surprising that more have not been out trying to buy up assets, at least to shield themselves from being targets.
“CF has a lot of dry warehouses, a lot of storage that they weren’t using,” said one source, “so this is a perfect fit for Agrium, more storage for wholesale and retail operations, and it gives them a strong N position.” He said the downside is for CF contract holders. “CF still has plenty of supply contracts in place with old members, and those contract holders always get first crack. They are the ones who will potentially suffer.” These concerns were expressed by several.
Unlike the CF-Terra deal, the Agrium-CF deal brought out more dealer worries about the loss of CF as a supplier. “We don’t compete with our customers,” is a line often used by some fertilizer producers. Dealers and cooperatives can currently rest easier with Terra and CF on this basis. However, Agrium is now the largest retailer in the country. While Agrium says its retail division sources product independently, one source said last week that it all comes back and hits a consolidated balance sheet.
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