All Posts from May 20, 2013

Mosaic cites costs, soft market for K delay; downplays chance of takeover attempt

Featured, News

The Mosaic Co. President and CEO James Prokopanko last week cited “red hot” capital expenditure costs in Western Canada and a “soft potash market” as reasons for the company’s decision to delay a $2 billion, 2 million mt/y potash brownfield project by 12-36 months. The 2 million mt/y expansions were split between the Colonsay and Belle Plaine mines.

Current Mosaic potash capacity is put at just over 10 million mt/y, with an additional 3 million mt/y gradually coming online up through 2018. Earlier plans had called for the company to have 16.5 million mt/y by 2021.

Prokopanko noted the intense demand for labor right now in Western Canada and neighboring North Dakota for fertilizer, oil sands, natural gas, and uranium projects. The remote area of the potash projects – away from major population centers – is another consideration.

Prokopanko said that brownfields remain about half the cost of greenfields, and referenced the recent closure of Vale S.A.’s greenfield project in Argentina. He said Mosaic’s Vice President of Market and Strategic Analysis Dr. Michael Rahm likened that news to a common phrase from the sitcom Gomer Pyle – “surprise, surprise, surprise.” Prokopanko said that project was going to cost $11 billion once you added on infrastructure to the remote location.

Another competitor, Germany’s K+S Group, recently announced both a delay and increased costs for its Legacy potash project in Saskatchewan (GM April 29, p. 10).

Prokopanko also noted the soft potash market right now, but said that demand is growing. He rejected concerns that the industry might now focus on volumes rather than price, saying lower price does not greatly impact demand. He said he had no sense that the industry was going to “rush to the bottom” on prices just to gain market share. Others last week noted that while North American prices have been under pressure, recent offshore spot prices have begun to move up.

As for the current season, Prokopanko remains optimistic that U.S. corn would still be 95-96 million acres in 2013, as farmers can quickly plant all their corn within 10 days after they are able to get into the fields. In relation to corn prices and other farmer inputs, Prokopanko said fertilizer prices are at a 10-year low, and that they are “cheap, cheap, cheap.”

For now, Mosaic will focus on its recently announced plans to partner in new phosphate development with Ma’aden in Saudi Arabia (GM March 25, p. 1), as well as to grow its distribution business in Brazil. Mosaic said there is need there for more port facilities and warehouses to get product to new growth areas in the northern part of the country.

Mosaic continues to assess whether to build $1 billion worth of ammonia capacity at Faustina, La., and now expects that decision in the second half of the year. The company said it is weighing whether to build or simply ink offtake agreements with other players that do proceed with additional ammonia capacity.

In other news last week, Mosaic officials downplayed speculation that the company is in danger of a pending takeover attempt. Mosaic said there was not a strong likelihood of a takeover.

The reason for the speculation is the looming availability of some 129 million outstanding Class A restricted shares of the MAC Trust and Cargill family that will be available to sell starting May 26. Those shares have been “locked up” for the past few years (GM Jan. 24, 2011, p. 1), and Mosaic will not be able to talk to the sellers about buying the stock until after May 26. All told, the trust/family holds 30 percent of Mosaic’s 425.7 million outstanding shares.

The plan contemplated an orderly distribution of the shares to be sold through three annual secondary offerings, the first to

Indiana governor pulls plug on Fatima

News, News Briefs

Indianapolis — Indiana Governor Mike Pence said May 17 that Indiana has withdrawn the incentives the state offered to Midwest Fertilizer Co. to build a fertilizer plant in Posey County. Midwest is backed by Pakistan’s Fatima Group, which has come under fire for its “less than cooperative” efforts to reduce the improvised explosive device (IED) threat in Central and South Asia. Once in office in January, Pence directed state authorities to place the incentives on hold pending review. While Fatima has recently taken steps to overcome Pence’s concerns, they were not enough. "While we have been encouraged by promises made by Fatima Group to replace production of their current fertilizer with a more inert and less explosive formula in Pakistan, at this point in time, U.S. officials have not been able to independently confirm this fact and, as such, Indiana will not be moving forward with this project,” said Pence. "Without assurances from our Defense Department that the materials which have been misused by the enemy in Afghanistan will be permanently removed from production by Fatima Group in Pakistan, I cannot in good conscience tell our soldiers and their families that this deal should move forward."

The Week in Fertilizer Stocks

Fertilizer Stocks

The Week in Fertilizer Stocks

Producer Symbol Price Week Ago Year Ago
Agrium AGU 90.04 94.86 79.09
CF Industries CF 190.75 194.99 160.53
CVR Partners UAN 26.41 26.50 22.37
Intrepid Potash IPI 17.53 18.16 19.41
Mosaic MOS 61.11 63.84 46.82
PotashCorp* POT 43.78 43.56 39.46
Rentech Nitrogen RNF 33.04 33.55 23.66
Terra Nitrogen TNH 220.85 222.52 187.18
Distribution/Retail
Andersons Inc. ANDE 53.70 54.25 46.41
Deere & Co. DE 89.39 92.19 74.18
Scotts SMG 48.65 47.54 45.41
* represents three-for-one stock split

Ammonia

Ammonia, Black Sea, Eastern Canada, Eastern Cornbelt, Market Watch, Middle East, Northern Plains, Western Cornbelt

Eastern Cornbelt: Spring planting surged ahead in Indiana and Ohio at mid-month thanks to dry conditions and warmer weather.

Activity remained spotty in Illinois due to wet field conditions in some areas, but the cool weather pattern there was breaking. Temperatures reached 91 degrees in Chicago on May 14, up dramatically from a low of 36 degrees just one day earlier.

Corn planting had progressed to 46 percent complete in Ohio by May 12, compared with 30 percent in Indiana and 17 percent in Illinois. Progress in Ohio jumped nearly 40 percentage points in one week and was near the five-year average of 49 percent. Illinois growers, however, were still trailing the five-year average by some 57 points at mid-month.

One Illinois source commented that May 10 is often cited as a planting deadline for corn, after which crops will often see yield reductions. He said corn growers in some areas of the state were planting in high gear last week, and would likely have all the corn seeded by May 17.

Spot ammonia pricing was pegged in the $740-$750/st range FOB Illinois terminals and $760/st FOB in Indiana, which was down from last report. “Shipments have picked up somewhat, but not gangbusters,” said one Illinois contact.

Western Cornbelt: Planting and spring fieldwork moved into high gear in the region at mid-month, thanks to dry weather and record-high temperatures. The heat wave came just two weeks after an early May storm blanketed much of the region with record snowfall.

The region saw a number of temperature records broken during the May 12-14 period. Tuesday’s highs reached 108 degrees in Tekamah, Neb., and 103 degrees in Norfolk, Neb., just two days after a daily record low of 29 degrees was recorded in Norfolk. Similar temperature swings were recorded in Omaha, Neb., where highs on Tuesday climbed to 101 degrees after a low of 32 degree on May 12, and in Sioux City, Iowa, where a low of 29 degrees on May 12 was followed by a high of 106 degrees on May 14.

The warm weather fueled a frantic planting pace last week. “We’re going,” said one Iowa contact at midweek. “This is the week we’ve all been waiting for.” A Missouri source said growers in his trade area were still “picking spots” due to wet fields in some locations.

Sources said a few growers were shifting corn acres to soybeans at mid-month, and others reported a move away from preplant anhydrous in favor of later sidedress applications of urea or liquid nitrogen. One Iowa source said preplant ammonia volumes were down 6-8 percent from last year in his trade area, but ammonia was still moving to the field in the region. “Ammonia is just about wound down, and UAN is ramping up,” he said.

Ammonia pricing remained at $680-$685/st FOB Nebraska terminals, $710-$720/st FOB in Iowa, and up to $725/st FOB Palmyra, Mo. Missouri sources also quoted delivered ammonia in the $715-$725/st range from southern production points.

Northern Plains: Summer-like temperatures hit the region last week. In Minnesota, Rochester posted a record-high 97 degrees and Minneapolis reached 98 degrees on May 14, while highs in Albert Lea and St. James climbed to 102 degrees on that date. Those readings were all the more remarkable because all four locations notched lows in the 20s and 30s just one day earlier.

The hot, dry weather produced a flurry of spring fieldwork. “We’re in the heat of applications and spring planting right now,” said one Minnesota source at midweek. Added a North Dakota contact, “We’ve been swamped.”

North Dakota sources reported long truck lines at ammonia terminals last week, with some locations reportedly on allocation. Delivered ammonia continued to be reported at the $787/st level for availa

Urea

Black Sea, China, Eastern Canada, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Northeast, Northern Plains, Pakistan, U.S. Gulf, Urea, Western Cornbelt

U.S. Gulf: The bad news last week for sellers was that granular barges remained under pressure. The good news is they appeared to have settled in the $320s/st FOB. Sources last week put trades between $320-$328/st FOB.

Prills remained a puzzle as to whether they still justified a premium or had fallen in line with granular. For now, the last word on prills was $350/st FOB.

Eastern Cornbelt: The granular urea market was quoted at $395-$415/st FOB in the Eastern Cornbelt region last week, down some $20/st from last report, with the low out of spot river locations.

Western Cornbelt: Granular urea pricing continued to slip in the Western Cornbelt, with regional sources quoting the river terminal market in the $380-$390/st FOB range on the low end. Inland terminals in the region remained at the $410/st FOB level or higher.

Sources quoted the Tulsa, Okla., urea market at $365-$375/st FOB last week, with the low end reported late in the week and the higher numbers earlier.

Northern Plains: Granular urea pricing covered a very wide range in the Northern Plains region. The Twin Cities market was quoted at $380/st FOB on the low end, while North Dakota sources reported spot pricing as high as $485-$510/st on an FOB or DEL basis. North Dakota sources also talked of long truck lines at urea terminals at mid-month.

Northeast: The fieldwork pace was still stop-and-go in many locations in the Northeast due to wet conditions at mid-month, but other areas were seeing brisk activity. “Great weather,” said one New York contact on May 16. “Lots of work has been done in a short period of time.”

Much of the region began the week with chilly temperatures and even frost in parts of New England and the Mid-Atlantic region. By midweek, however, the spring chill was replaced with much warmer weather and a threat of thunderstorm activity in some locations.

USDA reported that fully 48 percent of the Pennsylvania corn crop had been seeded by May 12, up 20 percentage points from the previous week and even ahead of the five-year average of 45 percent.

Regional sources reported slipping nitrogen prices last week. Granular urea pricing was quoted at $445/st FOB in the Philadelphia market last week, down another $10/st from last report. Urea pricing out of port terminals in the Southeast region had reportedly fallen to the $420s/st FOB.

Eastern Canada: The granular urea market was quoted at $565-$580/mt FOB in Eastern Canada for prompt tons, down only slightly from last report.

India: Sources say the next Indian tender will most likely come after the IFA delegates return home from Chicago. Supplies in India are sufficient, say observers.

The last tender pulled in sufficient supplies to ensure that the supply pipeline is full enough to allow for a delay in receiving new tons until late June or early July.

By delaying the tender until late May or early June, offers from China could be included more easily in the mix. The buyers seem to hope that Iran and China will fight each other for the business and push prices down further.

Sources speculate that the Indian delegates to the IFA meeting will spend time talking about everything but urea. The Indian buyers know they are in the driver’s seat when it comes to large-scale urea purchases.

Efforts to strengthen the tendering process have also led to fewer opportunities for Indian buyers to use the IFA meeting to work out “acceptable” prices for future purchases. One trader noted that the Indians might listen to what producers and traders have to say, but will most likely be reluctant to discuss a “bottom line” price.

Traders speculate that the Indian

Nitrogen Solutions

Eastern Canada, Eastern Cornbelt, Market Watch, Northeast, Northern Plains, U.S. Gulf, UAN, Western Cornbelt

U.S. Gulf: Arguments were made last week that UAN barges were finally falling in line with granular urea prices. Some have been calling the market down for weeks, but with little or no business to justify their estimates of $300-$310/st ($9.38-$9.69/unit) FOB.

Last week they got a little more weight as CF was reported to have sold between 25,000-30,000 st into the export market, destined for Eastern Canada and Mexico. Sources said the exports are more evidence of a backlog of product at NOLA and on the river system. Based on the Canadian business, reportedly at $330/mt DEL, sources said the ocean-going barge would have easily had a $290-$295/st ($9.06-$9.22/unit) FOB NOLA price tag – if not lower.Others, citing smaller parcels of business, still called the market $300-$310/st ($9.38-$9.69/unit) FOB.

Some argue that NOLA UAN is in the midst of a traditional end-of-season dive and that prices will remain under pressure in the next round of trading.

Eastern Cornbelt: UAN-28 remained at $330-$350/st ($11.79-$12.50/unit) FOB in Ohio and Indiana, with the UAN-32 market quoted in the $380-$395/st ($11.88-$12.34/unit) FOB range in Illinois.

Western Cornbelt: UAN pricing in the Western Cornbelt was down from last report, but sources quoted a broad range in the region last week.

Some continued to indicate firm dealer pricing for UAN-32 in the $390-$400/st ($12.19-$12.50/unit) FOB range, but others reported significantly lower numbers. Sources quoted the Sioux City, Iowa, market at $360/st ($11.25/unit) FOB for May tons, with June pricing reportedly dropping to as low as $340-$350/st ($10.63-$10.94/unit) FOB.

Northern Plains: The UAN-28 market was reported at $340-$360/st ($12.14-$12.86/unit) FOB regional terminals, with the low FOB the Twin Cities and the upper end in North Dakota.

Delivered UAN-28 was quoted at $365-$375/st ($13.04-$13.39/unit) level in the Dakotas.

Northeast: The UAN-32 market had reportedly fallen to $339-$341/st ($10.59-$10.66/unit) FOB Baltimore, Md., on the low end, although reference prices from some suppliers remained at the $350/st (10.94/unit) level.

Out of terminals in upstate New York, UAN-32 was referenced at the $395/st ($12.34/unit) FOB level last week.

Eastern Canada: UAN supplies were described as very tight in Eastern Canada in mid-May. The UAN-28 market was pegged at $365-$375/mt ($13.04-$13.39/unit) FOB in Ontario, with UAN-32 quoted in the $417-$429/mt ($13.03-$13.41/unit) FOB range for spot tons in the region.

Ammonium Nitrate

Ammonium Nitrate, Market Watch

U.S. Gulf: The barge market remained thin and quiet, with the last done business still called $345/st FOB.

Western Cornbelt: Ammonium nitrate was steady at $400-$405/st FOB in the Western Cornbelt region.

Eastern Canada: The ammonium nitrate market remained at $478-$500/mt FOB in Eastern Canada, although sources reported minimal new business to test the market.

Ammonium Sulfate

Ammonium Sulfate, Eastern Canada, Eastern Cornbelt, Market Watch, Northeast, Northern Plains, Western Cornbelt

Eastern Cornbelt: Granular ammonium sulfate was steady at $385-$405/st FOB in the region, with the low in Illinois and the upper end in Indiana and Ohio on a spot basis.

The ammonium thiosulfate market remained at $350-$365/st FOB regional terminals.

Western Cornbelt: The granular ammonium sulfate market was slipping in the Western Cornbelt. Sources quoted the regional market in the $365-$390/st FOB range, down $10/st from last report, with the low reported at Omaha and the upper end in the Missouri market on a spot basis. Iowa sources tagged the common dealer market in the $375-$385/st FOB range last week.

The ammonium thiosulfate market remained at $325-$365/st FOB, depending on location.

Northern Plains: The granular ammonium sulfate market remained at $370-$380/st FOB in Minnesota, with delivered tons quoted at $402-$405/st in North Dakota.

No current pricing quotes were reported for ammonium thiosulfate in the region.

Northeast: Granular ammonium sulfate was quoted at $385-$390/st FOB and $400-$405/st DEL in the Northeast.

Eastern Canada: The granular ammonium sulfate market remained in a broad range at $475-$500/mt FOB in Eastern Canada, depending on location, with dealer reference prices quoted as high as $510/mt FOB.

Phosphates

Central Florida, Eastern Canada, Eastern Cornbelt, India, Market Watch, Northeast, Northern Plains, Phosphate Rock, U.S. Exports, U.S. Gulf, Western Cornbelt

Central Florida: After several weeks of good weather, planting in the Northeast was closer to finishing than in the Midwest, which only recently saw Mother Nature begin to cooperate.

The eastern U.S. and other areas served by Central Florida were up and running at mid-month. Most of the phosphate was coming from warehouses, and trucks were the primary vehicle for moving product to dealer locations. As a result, getting trucks was extremely difficult last week. Unit trains from Florida were not an option this late in the season.

The Central Florida DAP price range was unchanged last week at $465-$520/st FOB, based on posted and asking prices. However, those prices were probably open to negotiation, especially this late in the season.

Mosaic’s list prices were $465/st FOB for rail and $480/st FOB for trucks, while CF Industries was posted at $520/st FOB. PCS Sales was selling at market prices out of Aurora and White Springs.

MAP continued to bring a $20/st premium over DAP.

U.S. Gulf: Planting was underway in much of the Cornbelt last week, and mostly nitrogen fertilizers were being applied. Phosphate has been the ugly stepsister this spring.

Farmers were busy trying to get their crops in the ground while they can, just in case wet or unusually cold weather hits again. Moisture has been plentiful this spring, although the U.S. Drought Monitor continued to show portions of Kansas, Oklahoma, Colorado, and New Mexico with areas of extreme drought.

No problems were reported with flooding or with high water levels on the Mississippi River last week. One of the biggest problems last week was trucks – or a lack of them. With most of the activity reported at inland facilities, trucks were in high demand. Prices were up as a result, and availability was tight. One source said in some cases the sellers had to pay the additional cost of using trucks.

Crop prices for grain products were mixed last week compared to the previous week, with corn and wheat headed down and soybeans going higher. Corn for July was down at $6.415/bushel last week, compared with $6.5025/bushel the previous week. Corn for December 2013 was $5.24/bushel, down from $5.415/bushel a week earlier, while corn for December 2014 was posted at $5.3925/bushel last week, down from $5.50/bushel the previous week.

Soybeans for July were at $14.275/bushel last week, up from $14.0225/bushel a week earlier. Bean prices for November 2013 were up as well, to $12.175/bushel last week from $12.085/bushel the previous week. Soybeans for November 2014 were posted at $12.2225/bushel, also up from $12.185/bushel a week earlier.

Wheat for July 2013 decreased to $6.8775/bushel last week, compared with $7.2375/bushel a week earlier. Wheat for July 2014 was listed at $7.3875/bushel last week, down from $7.70/bushel at last report, while wheat for July 2015 was listed at $7.485/bushel, down from $7.70/bushel a week earlier.

Phosphate continued to be slow again this past week, and transactions were few. PhosChem reached an agreement last week with two buyers in India to deliver 400,000 mt of DAP at current market prices before the end of September. That will help ease production burdens for members Mosaic and PCS during the slow summer months.

Considering the price of export DAP at $470-$475/mt FOB, the deal made NOLA DAP far more attractive because it was cheaper than the product for export.

The NOLA DAP barge price range was quoted at $415-$420/st FOB based on actual transactions, down from the previous week’s $418-$424/st FOB range. The difference in price between domestic and Moroccan product appeared to have disappeared.

MAP barges were in the $430-$450/st FOB NOLA range, with little activity.

Eastern Cornbelt: DAP was steady in the $490-$510/st range FOB region

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