Saskatoon-Potash Corp. of Saskatchewan Inc. President and CEO Bill Doyle told analysts at the Morgan Stanley Basic Materials Conference that he was not particularly crazy about the $5/mt increase negotiated by Belarusian Potash Co. with the Chinese over potash. He said money was left on the table. Not all is lost though, as Doyle believes potash prices to Brazil could go up $100/mt. He said a $60/mt increase has already been identified. Meanwhile, in North America, Doyle says his company has increased its market share as Agrium Inc. and The Mosaic Co. have had to allot tons to Canpotex that they might have sent to North America. He said the two have to meet their Canpotex quotas or risk seeing them decline. Doyle was skeptical that U.S. corn acreage can get as high as 90 million acres in 2007, as some have speculated. He said he had a hard time finding those extra acres. However, he does go along with many, who eye a more conservative corn acreage of 86-87 million. He sees soybeans at 66 million. He said the added corn acres will come from soybeans.
U.S. Gulf/Tampa: New NOLA barge business was reported last week at the $340/st FOB mark, popping up several dollars from the last done business. Sellers were reportedly quoting $345/st FOB for the next deal.
PotashCorp was reported to have sold a cargo to CF at Donaldsonville for mid-March at the $373/mt DEL mark. This deal had sellers salivating about higher prices at Tampa, with goals of $370-$375/st DEL for March. Buyers, however, were reported to be trying their best to hold the line below $370/mt DEL.
July-December ammonia imports are off 11 percent, according to recent DOC data, at 4.4 million mt from the year-ago 3.9 million mt. They were off 18 percent in December alone, at 579,701 mt from the year-ago 711,190 mt.
Eastern Cornbelt: Ammonia pricing had reportedly firmed to $440-$450/st FOB in the region, but higher postings were in effect. One supplier was referenced at $460-$470/st FOB in Illinois at midweek. Agrium’s ammonia postings firmed on Feb. 21 to $470/st FOB Illinois terminals at E. Dubuque/East, Niota, Meredosia, and Marseilles, and $480/st FOB Cincinnati/Finney, Ohio. Those postings represent a $35/st increase from the company’s Feb. 6 postings.
Forward contract ammonia was available from one regional supplier at $445-$455/st FOB regional terminals for March.
Western Cornbelt: Ammonia was quoted at $420-$440/st FOB regional terminals, but postings were on the rise in the region. Sources said Koch’s reference prices firmed $20/st last week to $440-$450/st FOB in Iowa and $435/st FOB Aurora and Beatrice, Neb. One Missouri source pegged the new market at $450/st truck-DEL and $435-$440/st FOB Palmyra, Mo.
Agrium’s ammonia postings firmed on Feb. 21 to $465/st FOB E. Dubuque/West, Iowa, and $460/st FOB Early, Iowa, Garner, Iowa, Whiting, Iowa, Mankato, Minn., Greenwood, Neb., and Hoag, Neb. Those postings represent a $35/st increase from the company’s Feb. 6 postings. Postings in the Leal, Velva, Grand Forks, and Beulah sales area in North Dakota firmed on Feb. 21 to $490/st DEL and $472/st FOB.
Southern Plains: Anhydrous ammonia was pegged at $415-$430/st FOB regional terminals in the wake of another round of new postings that went into effect last week. Sources said Koch moved its reference price up $20/st to $415/st FOB Enid, Okla. Agrium’s Feb. 21 ammonia postings included $455/st FOB Clay Center, Kan., $450/st FOB Conway, Kan., $445/st FOB Mocane, Okla., $435/st FOB Borger, Texas, $460/st DEL in Texas north of Interstate 40, and $465/st DEL in Texas and Oklahoma south of Interstate 40. Those levels represent a $35/st increase from Agrium’s Feb. 6 ammonia postings.
South Central: Anhydrous ammonia was quoted at roughly $380-$385/st FOB Memphis, $390-$395/st FOB Blytheville, Ark., and $400-$405/st FOB Henderson. The market was a tough one to call, however. As one source described it, terminal postings have gone up $50/st since the last time any tonnage was purchased, leaving the new prices largely untested.
Pacific Northwest: On Feb. 21, Agrium’s reference price for anhydrous ammonia increased again to $495/st truck-DEL in Montana and northern Wyoming, and $510-$530/st DEL in Idaho, Oregon, and Washington, with the upper end in northern Idaho and in Washington and Oregon east of the Cascades. Those levels represent a $35/st increase from Agrium’s Feb. 2 list prices in the region. Agrium also reposted aqua ammonia on Feb. 21 at $133/st FOB Central Ferry and Finley, Wash., a $9/st increase from the company’s Feb. 2 postings.
California: Agrium’s truck-DEL anhydrous ammonia postings firmed on Feb. 23 to $475/st in central California and $480/st in northern California, a $45/st increase from the company’s previous postings in those locations. Granular urea postings from the company firmed on Feb. 23 to $360/st FOB West Sacramento, Calif., $380/st truck-DEL in central California, and $385/st truck-DEL in northern California. Those listings represent a $35/st increase from the company’s Dec 1 reference prices for urea in California.
Black Sea: Producers and traders operating in this area continue to watch what happens in the United States. Even as demand stays strong elsewhere, the focus remains on what the American buyers need – and how soon they need it.
Prices took a breather from the steady increases last week and remained within the $280-$290/mt FOB range. This did not stop producers from calling the market $295/mt FOB.
Production is moving smoothly, say Asian sources, so all the real pressure is coming from the demand side. Besides the American buyers, sources say China and India remain large buyers. While these two buyers would prefer tons from the Middle East, sources say their needs are so great they will take what they can from wherever they can.
Middle East: Even with most of the production facilities up and running, sources say supplies are tight. All the Sabic plants are running at full capacity, but sources say it may now be well into April before the company pays off the swapped tons to Mitsui. The best estimates at this time put ammonia production off 25 percent from anticipated levels.
The last contracted price that became public was done some time ago, to India at an estimated netback of $320-$325/mt FOB. Sources say this is about the lowest public price out there. One trader commented there might be tons shipped that cost less, but those are cargoes that are part of long-term contracts.
Whatever spot tons that exist are clearly being done in the mid-$330s/mt FOB, say observers.
How much longer Indian buyers will dominate the situation will depend on how talks between the Indian DAP producers and their phosphoric acid suppliers go. These talks are expected to start sometime in April. Asian sources still remember how stalled talks with the phos acid suppliers cratered the ammonia market, only to watch it take off once the parties reached an agreement. One observer said even if an early phos acid deal means a continued strong Middle East market, he still prefers a stable and steady market to the roller coaster ride everyone took a couple of years ago.
The strength in the current price comes from strong demand and limited supply. India and East Asia remain steady as fertilizer and industrial manufacturers look to the Middle East for the ammonia component of their downstream products. At the same time, the delay in the starting of the Iran plant adds pressure on both sides.
Asia: Chinese demand remains strong as the BASF facility in Shanghai takes as many tons as suppliers can send. Likewise, the southern tier is taking tons for DAP production. The main problem with the southern deals is the long land journey the ammonia must take. Sources say the issue is not getting dedicated railcars to transport the ammonia, but rather making sure congestion along the rail routes is eliminated.
Gresik in Indonesia remains a problem. With limited or no natural gas supplies, its ammonia needs have to be made up from other state-owned suppliers.
The two joint-venture operations, KPI and KPA, are running fine, say sources. KPI came back up about the 15th following some minor repairs. Sources said once the few parts were exchanged for new ones the plant started up fine and is now back to full production.
UREA
U.S. Gulf: The bullish urea market continued to surge again last week. Prices rose throughout the week, with sellers stair stepping up each transaction. Some players claimed that business was done early in the week at the previous week’s high, $345/st FOB – then prices moved into the high $340s and into the $350s/st FOB. By Thursday, several players were calling the market $360-$365/st FOB. While some said these were forward tons, others said no, these were prompt.
In the meantime, prills were reported to be catching up with granular. Product was called $335-$340/st FOB, if you could find it.
According to the DOC, U.S. urea imports for urea for July-December 2006 were off 35 percent, or 2.3 million st, down from the year-ago 3.5 million st. December imports were also off by 35 percent, to 560,630 st, down from the year-ago 856,248 st.
Eastern Cornbelt: Urea pricing was also on the rise. Sources tagged the market in a broad range at $375-$390/st FOB in the region, with the low out of spot river locations. Agrium’s granular urea postings firmed on Feb. 21 to $390/st FOB Garrett, Ind., $395/st rail-DEL in Ohio, Indiana, and Illinois, $400/st FOB Saginaw, Mich., and $400/st rail-DEL in Michigan. Those postings represent a $20-$25/st increase from the company’s Jan 29 list prices.
Western Cornbelt: Granular urea pricing had firmed to $370-$380/st FOB to the dealer, with the low reported in Missouri and the upper end in Iowa. The dealer market FOB Kansas City, Mo., was pegged at the $375/st level last week.
Agrium’s granular urea postings firmed on Feb. 21 to $385/st FOB Shakopee, Minn., and North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton. The company’s railDEL postings firmed on that date to $390/st in the Dakotas, Minnesota, and Wisconsin. Those postings represent a $20-$25/st increase from the company’s Jan 29 list prices.
Southern Plains: Granular urea pricing had firmed to $365-$370/st FOB Catoosa and Inola, Okla. Some sources claimed $360/st FOB was still doable early in the week, but others were doubtful and quoted the market firmly at the higher numbers to dealers.
South Central: The urea market continued to firm, with terminal pricing to the dealer quoted last week at $360-$370/st FOB most locations. At least one supplier had firmed its dealer price on Thursday to $375/st FOB, up $10/st from the prior level. Reference pricing from other suppliers was reportedly as high as $380/st FOB in the region.
Southeast: Granular urea pricing was up significantly from last report, with the market quoted firmly at $380-$390/st FOB port terminals. The lower end was quoted FOB Wilmington at midweek, while the upper end of the range was reported FOB Norfolk, Brunswick, and Savannah, Ga. Tons were very tight or tapped out at some locations, sources said.
One Carolina source said rail-DEL urea had firmed last week to the $405/st mark, up from the prior week’s $385/st level.
Pacific Northwest: Effective Feb. 21, Agrium’s granular urea postings increased to $395/st FOB Glade, Wash., Kennewick, Wash., Warden, Wash., and Wilson, Wash.; $382-$387/st DEL in Montana and Wyoming, depending on location; $400/st DEL in southern Idaho and Oregon’s Malheur County, and from the company’s warehouse and plant locations in Alberta and Oregon to points in Washington, northern Nevada, northern Idaho, and Oregon excluding Malheur County; $405/st DEL in northern and central Utah; and $410/st DEL in southern Utah. Those postings represent a $20/st increase from Agrium’s Jan. 29 list prices in the region.
Black Sea: Sources say the driving influence out of Yuzhnyy is more what traders are doing than any actual deals with end users.
One Asian trader noted that a major trading house is taking a series of long positions in anticipation of strong demand from India and Pakistan. Sources report $310-$315/mt FOB done, but in trader-to-trader business. Still, said one observer, if that is what is needed to make a purchase, that is the price in that market.
Exactly how many tons from the Black Sea will actually make it to India or Pakistan is up in the air. Saudi Arabia offered a major aid package to Pakistan for fertilizer purchases that would require large-scale purchases from the Middle East, if the terms follow the usual procedures. Indian buyers are currently in the Middle East looking to secure a series of long-term deals as well. The combination of potentially strong sales to India and Pakistan from the Middle East could leave holders of Yuzhnyy material left with unsold cargoes.
Add to the mix the track record of the Black Sea price following an Indian tender. In each of the three previous Indian tenders, the Yuzhnyy price didn’t so much fall as it plummeted.
Until the Indian and Pakistani buying plans are known, however, sources expect to see prices remain strong, with traders holding long positions continue to push up the price.
For now, sources peg the market at $305-315/mt FOB.
Middle East: The first whiff of a good selling season came into the region last week. Reportedly, Indian buyers have been going door to door trying quietly to nail down long-term deals, with cargoes spread out through the rest of the year.
At the same time, Pakistan received a large aid package from Saudi Arabia, reportedly for fertilizer purchases.
No new deals out of the region could be nailed down. Sources say prills and granular are still effectively at parity near the $320/mt FOB mark. Some cargoes are moving out from previous deals at the lower $310/mt FOB level, but those are going fast.
Sources say supplies are so tight that spot tons are rare. One trader noted that most of the spot ton deals people are hearing about are more likely top-off deals.
Besides the potential of filling up order books with cargoes bound for India and Pakistan, sources say South Korea will need an additional 100,000 mt this year to cover the fertilizer aid package for North Korea. While some of that need might be covered by Chinese tons, industry watchers are looking to the Middle East to supply many of the tons.
And depending on how high the price goes, buyers from the Philippines and Thailand might start sniffing around as well for their needs.
Overall, said one trader with close ties to the Middle East producers, the next few months look very healthy for the producers.
India: Buyers spent last week talking to producers up and down the Arab Gulf. Sources say the agents were looking to secure large quantities at reasonable prices for deliveries that will also be reasonable in size but stretch out until the end of the year.
The Indian government – and IPL and MMTC – were burned following last year’s tenders when too many urea-laden ships arrived at already overstretched ports. Some ships had to sit at anchor for more than a week. Demurrage costs soon eclipsed freight and package rates.
Because of the port congestion, urea was not unloaded in a timely manner. The opposition parties in India took advantage of spot shortages of urea to hammer the government.
Industry observers have been saying the smart move would be for the buyers to stretch out their purchases through the year. The steady flow of urea from producers will cushion the industry from price shocks up and down, as well as give port operators a predictable timetable of vessels.
Sources say even if the Indian buyers secure large quantities in the private talks, IPL and MMTC will still have to call tenders to round off the estimated demand. The difference between last year and this year, said one trader, is that the tenders will be for fewer tons this time around.
Unfortunately for the buyers, sources say the market did not react as the Indian buyers would have liked. Observers note the Indian plan seemed to be to sit low for a couple of months and then start quiet talks with the Middle East producers. The idea was to give the market time to cool off.
The problem is that the market fired up instead.
Now IPL and MMTC will have to pay more than they expected. Even with backing by the government for the urea subsidies, the companies will have to be careful about how much they pay.
The Indian government will begin its fiscal year March 1. During the 2006-2007 fiscal year, the government fell into arrears in its subsidy payments to urea producers and importers. It was only in the past couple of weeks that the multi-million dollars payments were made.
Late last week, the Department of Fertilizers asked the Finance Ministry for an additional Rs120 billion, about US$2.7 billion, to the Rs340 billion – about US$7.7 billion – urea subsidy budget. The total budget includes about US$1 billion to cover subsidies owed from the 2006-2007 budget.
A DOF official is quoted in local media as saying the increased cost of inputs to produce urea is the reason for the arrears in last year’s payments, as well as the need for additional funds in the 2007-2008 fiscal year.
The 2006-2007 budget for subsidies was Rs170 billion (US$3.8 billion).
The Indian urea industry has been complaining of increased costs because input costs have increased or are limited. Part of the problem, according to the media reports, has been reduced availability of natural gas under a subsidized plan. The producers have had to resort to other sources, such as the more-expensive naphtha, to continue operations.
Pakistan: Saudi Arabia gave Pakistan a large aid package for fertilizer and other agriculture inputs. Sources in Asia were unsure as to exactly how much was given and what strings are attached. One trader familiar with the outline of the program said at a minimum Pakistan will buy a certain quantity of urea from Sabic. Other tons purchased with the money will most likely have to come from other Middle East suppliers in the Gulf Cooperative Council.
For both parties this is a win-win situation. Pakistan gets its much-needed urea at little cost to its own treasury, and Sabic gets a full order book courtesy of the House of Saud.
The deal will not be enough to satisfy the whole year, say sources, but it should be enough to take Pakistan out of the market at the same time India is arranging for its large-scale purchases.
Sources figure Pakistan will need 100-150,000 mt of urea for the current season.
South Korea: Namhae closed a tender Feb. 22. At press time the results of the tender were not public, but Asian sources expect to see Chinese material figure prominently in the offers.
With freight rates less than $16/mt to South Korea, shipping urea from China makes more economic sense than buying high-priced Middle East material that will come with higher freight rates.
The tender is the first of what many in the industry expect to see regularly coming. The material is expected to be used primarily for NPK production so the South Korean government can make good on its pledge to send at least 100,000 mt to North Korea in the next few months.
The tendered material may not arrive in time for the North Korean material, so sources say the companies will use their domestic reserves to make the assistance material and then use the imported goods for the South Korean farmers.
Bangladesh: A tender for 50,000 mt each of prills and granular closes March 5. A second tender for the same quantities closes March 12. Sources are still scratching their heads at the timing of these two tenders. Even though Bangladesh is short of material, and even if BCIC moves quickly to award winners in each tender, the cargoes will not arrive until mid-to-late April. By then the season will be all but over.
There is no doubt Bangladesh needs urea. During the 2005-2006 tenders more than 500,000 mt were awarded in tenders, yet only about 100,000 mt was ever delivered. Sources point the accusatory finger at the BCIC bureaucracy for delaying making awards. In many cases, said one source, the awards were issued long after the validity period of the offer lapsed.
In cases where the offering company accepted the awards, the difficulties in getting the rest of the paperwork led to delay after delay. With the market moving up at a steady rate a number of companies just walked away from the deals, because they could no longer get tons at a price that would ensure a small profit. One source said even breaking even would have been nice, but impossible.
The interim government has instituted steps to block smugglers seeking to move urea into Myanmar at exorbitant prices. Likewise, urea hoarders and price gougers are being arrested under military decrees. The government is also testing random samples of urea to make sure adulterated material is not being passed off as “the good stuff.”
One source noted the army arrested a gang last week that had mixed brick dust with potash. He figured similar attempts to “cut” urea were taking place.
Vietnam: Apparently, more rice farmers are converting their fields to catfish farms. The shift from rice production to fish farming, combined with moves by Phu My, is reducing demand for urea. The Phu My plant keeps pricing its material at levels just below the imported price, and so makes it impossible for any importer to send tons to local farmers.
NITROGEN SOLUTIONS
U.S. Gulf: Most were putting new sales in the $220s/st FOB, with sellers quoting $230/st FOB by the end of the week.
U.S. UAN imports are off 43 percent for July-December, down to 857,775 st from the year-ago 1.5 million st. For December, they were off 51 percent, at 184,970 st, from 375,353 st.
Eastern Cornbelt: UAN pricing had reportedly firmed to $7.81-$8.15/unit FOB regional terminals. Forward contract UAN-32 was being offered for March from one regional supplier for $8.20-$8.34/unit FOB in the region, depending on location.
Western Cornbelt: UAN-32 pricing moved up significantly, with sources pegging the dealer market last week at $250-$260.80/st ($7.81-$8.15/unit) FOB regional terminals. The low end was reported by Missouri sources, where one dealer also quoted a $255/st ($7.97/unit) price FOB Bigelow, Mo. The upper end of the regional range was tagged at $8.05-$8.15/unit FOB in Iowa.
Southern Plains: UAN-32 was reported in a broad range at $225-$240/st ($7.03-$7.50/unit) FOB in the region, with the lower numbers reported in Oklahoma. Reference prices ranged from $240-$250/st ($7.50-$7.81/unit) FOB, with the low in Oklahoma and the upper numbers in Kansas.
South Central: UAN-32 pricing was up considerably from last report. Terminal pricing out of most southern locations in the region was quoted in at $230-$240/st ($7.19-$7.50/unit) FOB to the dealer, with the upper end of the regional range pegged at $245/st ($7.66/unit) FOB in Kentucky.
Southeast: UAN-30 was quoted at $210-$220/st ($7.00-$7.33/unit) Wilmington, N.C., and Norfolk, Va. Reference pricing had reportedly firmed last week to the $230/st ($7.67/unit) mark FOB Baltimore, Md. The UAN vessel market was quoted at $245/mt C&F, with reports of tons offered at higher numbers, but no confirmed sales.
Pacific Northwest: Agrium’s UAN-32 postings moved up on Feb. 21 to $265/st ($8.28/unit) DEL in Washington, northern Idaho, and Oregon excluding Malheur County.
California: Agrium’s UAN-32 postings will move on Feb. 26 to $263/st ($8.22/unit) FOB Sacramento, $280/st ($8.75/unit) truck-DEL in central California, and $285/st ($8.91/unit) truck-DEL in northern California.
AMMONIUM NITRATE
U.S. Gulf: Of the major nitrogen barges, AN was the dog last week. Sources said it was mainly due to full inventories, that many buyers have already filled, leaving the last done business still in the $245-$248/st FOB range.
U.S. AN imports are off 29 percent for the July-December period to 417,919 st, down from the year-ago 588,666 st. December imports were off 33 percent, to 96,577 st from the year-ago 144,768 st.
Western Cornbelt: Ammonium nitrate was up slightly to $285-$295/st FOB in the region, with the upper end in Iowa for confirmed spot sales.
Southern Plains: Ammonium nitrate was steady at $265-$275/st FOB Catoosa.
South Central: Ammonium nitrate was pegged at $270-$280/st FOB in the region, up slightly from last report. The dealer market FOB Memphis was tagged at the $275/st level. Terra’s Feb. 3 ammonium nitrate postings included $275/st FOB Yazoo City, Miss., and $285/st FOB McComb, Miss.
Southeast: Ammonium nitrate was quoted at $280-$285/st FOB and $290/st rail-DEL in the Carolinas, up slightly from last report.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was pegged at $195-$205/st FOB in the region, also up from last report.
Western Cornbelt: Granular ammonium sulfate was in tight supply, and the dealer market had reportedly firmed to $195-$205/st FOB in the region. The upper end was reported by Iowa sources for confirmed spot sales last week. One Missouri dealer pegged the market firmly at the $200/st FOB mark last week.
Southern Plains: Granular ammonium sulfate was unchanged at $170-$200/st FOB in Texas, depending on location and supplier. Course sulfate ranged from $160-$195/st FOB, with standard referenced at $150-$180/st FOB in Texas, depending on location.
South Central: Granular ammonium sulfate remained at $185-$195/st FOB, with the upper end representing dealer reference pricing FOB Vicksburg, Miss. Reference pricing from some regional suppliers firmed to the $200/st FOB level last week, and sulfate supplies were described as tight in the region.
Southeast: Granular ammonium sulfate remained at $162-$172/st FOB, with the low at Hopewell, Va., and the upper end FOB Augusta, Ga. DSM Chemicals North America Inc. has a $10/st increase scheduled for March 5 on both granular and standard grade sulfate. New postings from the company will include granular sulfate at $182/st FOB Augusta and $195/st DEL in Florida.
U.S.: AS imports are the only major nitrogen seeing an uptick this fertilizer year. July-December imports are up 23 percent at 140,817 st, up from the year-ago 114,086 st.
PHOSPHATE
Central Florida: Unless you have a contract with a producer or someone in high-up places really and truly loves you, it’s going to be nearly impossible to get new orders of phosphates out of Central Florida in the next couple of months. Or so say many sources. Some buyers were already looking to buy fill for June, but have been told that is too far in the future. Inventories were at the bottom last week, and whatever production was in the process already had a home. By the end of the season, producers will have sold every gram of phosphate they can sweep off the floor. Someone even suggested that sales be made in grams, rather than tons, which might make the price seem a little more appealing – before you do the math.
Let’s face it, the industry is in a dither about the price of phosphates, and the biggest threat they face is surgery to remove the gigantic smiles from their mugs. Finally, phosphate producers and everyone in between have moved from barely keeping their heads above water to riding the big waves to paradise. Nice to be on top for a change. No one was still asking how high can it go?, and now say there is nothing to stop it from continuing to run up. A month ago, a price of $300/st FOB was only a glint in the producers’ eyes. Now, $400/st FOB could be very real possibility.
Farmers have just begun to return to the fields in some areas, and so far, no reports of grumbling about the price. Not yet, at least. With the price of crops at prices the growers can thrive on, the cost of fertilizer will likely be far down their line of complaints. There’s always the weather to talk about.
CF was said to have taken its Plant City phosphate processing plant off line for a turnaround that should take about three weeks. That will not help the supply situation.
Sources said both Mosaic and CF were unable to take new orders for February or March, and April was not all that promising. However, Mosaic was said to have sold a truckload of MAP early last week at $320/st FOB, and CF was said to have made a rail deal at $330/st FOB. PotashCorp’s Central Florida reference price was $320/st FOB, but that will probably go up early this week, or even late last week. One buyer said he was offering $335/st FOB for April, but wasn’t sure the producer would bite. Published prices for Central Florida were pretty much off the table last week, and producers will likely be increasing their prices to closer mirror the Gulf’s barge market, which was still gaining altitude. Because of the price differential – about $35/st FOB – producers will probably favor the river for available tonnage.
The Central Florida DAP price index last week was $320-$330/st FOB, up from $295-$310/st FOB the previous week.
U.S. Gulf: After the TFI meeting at Dallas two weeks ago everyone was back at work last week, buying and selling phosphate barges, and pushing up the price on a daily basis. With inventories low, supplies tight, and demand raging, there were no brakes in the market to slow down rising prices. As a sign of how optimistic the industry was last week, a trader sold a barge at $365/st FOB, and then bought a barge of DAP at $365/st FOB. That makes sense, oddly enough. The sale represented a profit of about $40/st FOB, and the new barge would go up in price by the time it was ready for trading or the warehouse. Last week was basically a “can’t lose” kind of market.
“Everybody (in the phosphate industry) had smiles on their faces at the (TFI) meeting,” one attendee noted.
“The market is explosively firm,” a source said. “It will go a lot higher before it comes down.”
Meanwhile, the weather improved in much of the area last week, and farmers in the more southern regions of the Midwest were getting into the fields. In the Texas-Oklahoma area, the snow, ice, and rain of the past few weeks saturated the ground and was a blessing to farmers, to whom water shortages are their biggest challenge. Temperatures there also improved, but a little later than normal – about 10 days – and the combination of plenty of moisture and warmth was promising.
The biggest complaint last week was the lack of MAP. NOLA MAP barges were nearly impossible to find. At one terminal on the Arkansas River, the price of MAP was $15/st FOB higher than DAP, $370/st FOB compared to $385/st FOB.
In general, warehouse prices were seriously trailing the barge market. In some cases, warehouse prices matched NOLA DAP barge prices. That situation will not continue for long. In order for traders and dealers to make new buys without losing money, they will have to sell their old stock for enough to provide replacement of the inventory. Warehouse prices will rise sharply in the next few weeks.
Most of the confirmed sales found last week were at the top of the range, while the lowest was early in the week. No big surprise. The NOLA DAP barge price range last week was $355-$365/st FOB based on confirmed sales, compared to $324-$335/st FOB the previous report. However, there were rumors that a sale had been done at $370/st FOB. Prices will rise again this week.
Eastern Cornbelt: DAP was up significantly at $370-$380/st FOB regional warehouses, with the low reported in Illinois. MAP was in very tight supply, with the warehouses market quoted at the $380/st mark or higher, where available. One supplier was offering forward contract DAP for March at $383-$386/st FOB in the region.
No current prices were reported for TSP in the region. The 10-34-0 market, however, had reportedly firmed to $295-$305/st FOB last week, and was in tight supply.
Western Cornbelt: Phosphate pricing took another dramatic increase last week. The pricing volatility was illustrated by the comments of one source, who said the levels he discussed at midweek were “good only till we hang up the phone.” DAP was quoted in a range of $370-$380/st FOB regional warehouses throughout the week, with most dealer quotes at the $375-$380/st FOB level as the week advanced. Iowa sources confirmed spot sales at the $380/st FOB level at midweek, with postings at some locations firming to $390/st FOB later in the week.
MAP was in very tight supply, with the warehouse market quoted firmly at $380-$390/st FOB in the region. TSP was pegged at roughly $25-$30/st less than DAP, but sources qualified that as a guess, saying tons were very limited. The same was true of 10-34-0; although pricing quotes ranged from $290/st up to $305/st FOB, sources said tons were scarce and most said they were unsure of the current market.
Southern Plains: Phosphate pricing was up dramatically from last report. Most sources tagged the dealer market for DAP firmly in the $360-$370/st range FOB Catoosa, with some quoting reference pricing at the $380/st level at the port as the week advanced. Most dealer quotes at midweek fell in the $365-$370/st FOB range. One northern Texas source said DAP pricing there had firmed from $315/st FOB the prior week to $375/st FOB last week.
MAP was in very tight supply, with the dealer market pegged at a firm $380-$385/st FOB Catoosa. 10-34-0 remained at $275-$285/st FOB, with the upper end FOB Wichita, Kan. Reference pricing for 10-34-0 was reportedly as high as $305/st FOB at some Kansas shipping points last week.
Agrium’s phosphoric acid prices were scheduled to increase $5/st on March 1 to $560/st for merchant grade and $570/st for superphosphoric acid in Colorado, Kansas, Oklahoma, New Mexico, and Texas.
South Central: Phosphate pricing in the region had firmed $100/st at the warehouse level from just three weeks ago. DAP was pegged at $365-$380/st FOB regional warehouses last week, with the upper end reflecting new dealer postings as the week advanced. The dealer price FOB Vicksburg was tagged firmly at the $375/st level at midweek.
MAP was reported at $370-$380/st FOB, where available. TSP pricing covered a wide range at $295-$315/st FOB regional warehouses, with the low end reported early in the week and the upper numbers more common as the week advanced.
Sources continued to express amazement at the firming fertilizer prices. “This corn thing is just out-of-sight, and the fertilizer deal is all a result of the corn,” said one source. The surge in pricing prompted some to wonder if current levels were a “false market,” and subject to another downward swing if ethanol demand for corn ebbs or ethanol plant startups are delayed.
Some also wondered if growers would respond to the much higher phosphate prices by cutting back on rates this spring, especially since parts of the region saw heavy phosphate and potash movement last fall. “We’re at a point where we could see some phosphate fall-off,” said one source, adding that he wouldn’t be surprised if rates in some parts of the region were cut by half.
Pacific Northwest: Agrium released back-to-back ammonium phosphate pricing hikes in the region at mid-month. Postings effective Feb. 23 included MAP at $405/st DEL in Montana and Wyoming, and $410/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County. MAP postings in Washington, northern Idaho, and Oregon excluding Malheur County moved on Feb. 23 to $410/st FOB and $415/st DEL Those levels were up $25/st from the company’s Feb. 15 postings, $45/st from the Feb. 12 reference levels, and $65/st higher than Agrium’s Feb. 2 MAP postings in the region.
Agrium’s 16-20-0 postings have followed a similar course, moving on Feb. 23 to $325/st DEL in Montana, Wyoming, Idaho, Oregon, Washington, Nevada, Utah, and Oregon’s Malheur County; and $325/st FOB and $330/st DEL in Washington, northern Idaho, and Oregon excluding Malheur County. Like MAP, Agrium’s 16-30-0 prices were also up roughly $25/st from Feb. 15 postings, $45/st from Feb. 12 levels and $65/st from Feb. 2 reference prices.
California: Agrium’s ammonium phosphate postings in California and Arizona, effective Feb. 23, included MAP at $420/st FOB warehouse or rail-DEL, and 16-20-0 at $325/st FOB warehouse or rail-DEL. Those levels were up $20-$25/st from the company’s Feb. 15 postings, $40-$45/st from Feb. 12 postings and $60-$65/st from Feb. 2 reference prices.
U.S. Export: Last week PhosChem made a sale of 10,000 mt of DAP into Central America at a new high price of $360/mt FOB, which was $10/mt FOB higher than the previous one. Although it could not be confirmed, a third party was said to have made a sale of phosphate into Argentina at $375/mt FOB, which could be an indication of what comes next. Meanwhile, the North Africans were said to have moved their price to $350/mt FOB. Also, Lithuania was said to be losing 70,000 mt of production as a result of a rock shortage, which in today’s market has a much bigger impact than it normally would. Supplies in Europe were so tight last week that their buyers were reaching across the Atlantic but, alas, the closet was bare and none was to be found.
The export market was having trouble competing against the NOLA barge market, where the price for an st is higher than the cost of an mt for offshore.
One of the reasons more export sales have not been done has been the heavy traffic of phosphate vessels in ports, which were becoming congested. PhosChem has been informally talking with the Chinese cooperative, but no actual negotiations have begun. Still, the Chinese have expressed an interest in acquiring additional tons. India will continue to be a major customer of North American phosphate producers this year, and will need several hundred thousand tons. Inventories are in short supply, and producers in every country will be in the driver’s seat for the foreseeable future.
TFI issued its export report for January last week. It showed China was the biggest recipient of DAP from this country at 176,418 mt, or about three panamax vessels. Brazil was the second biggest buyer at 48,455 mt, and Thailand was third with 43,258 mt. The total amount of DAP exported in January was 395,858 mt, an increase of 14.1 percent compared to the same period a year ago. MAP sales declined 30.2 percent to 154,267 mt for the period.
With only one confirmed export sale last week, the export DAP price range was not a range, simply $360/mt FOB, compared to $330-$350/mt FOB the previous week. Most expect the price this week will be higher.
Pakistan: High international prices and demand are being felt in Pakistan. Local sources say Fauji Fertilizer has received poor response for its recent inquiry to import 50,000 mt of DAP. Pakarab Fertilizers inquiries for DAP (80,000 mt) and TSP (40,000 mt) met with same treatment.
POTASH
Eastern Cornbelt: Potash remained at $210-$222/st FOB regional warehouses, depending on grade and location.
Western Cornbelt: Potash pricing was steady at $208-$222/st FOB in the region, with most dealer quotes for red granular potash in the $212-$215/st FOB range, give or take. Although some continued to talk of a $7-$10/st pricing increase in March, nothing firm was reported last week.
Southern Plains: Potash FOB Carlsbad, N.M., remained at $192-$198/st, depending on grade, with red granular quoted at $195/st FOB the mine. The Catoosa potash market was unchanged at $205-$210/st FOB last week, with some discussion of higher potash prices coming in March.
South Central: Potash out of the warehouse was pegged at $198-$210/st FOB in the region, with the low in Vicksburg and the upper end out of Kentucky warehouses. The market for red granular potash was tagged at the $203/st mark FOB Blytheville, Ark. Barge-DEL import potash was reported in the $185-$190/st range.
Southeast: Potash remained at $220-$230/st DEL in the region, depending on grade and location, with talk of another increase in March.
SULFUR
Vancouver: As the strike by CN railroad workers continued last week, inventories at Vancouver were drying up, and a scramble was on to find replacement supplies. As a result, prices on the spot market, especially on the West Coast, were up between $5/lt and $10/lt. Even on the Gulf Coast, priller operations were searching for supplies to take advantage of the void. Because all prices are on a delivered basis, customers the farthest away pay in the higher end of the range.
Tampa: Mosaic and PotashCorp were both said to be running full out in order to meet the high demand for phosphates, which were bringing incredible and record-breaking prices. However, CF was said to have taken its Plant City phosphate processing plant off-line for a turnaround, which was said to take about three weeks. To offset that, many oil refineries were in the process of doing turnarounds, but the market was said to be slightly short – not enough to slow any of the phosphate producers’ production. That situation should improve during the next 30 days, as refineries come back online.
One of the major sulfur producers was said to still be unhappy with the recent contracts that settled the price at $4.50/lt down from the previous month. A sulfur source prediction for the next quarter was that contract prices would either rollover or go up by no more than $2-$3/lt, and remain constant for the balance of the year.
Valero’s refinery at McKee, Texas, suffered an explosion that injured three people – two Valero employees who were treated and released, and a contract employee, who was in critical but stable condition. However, the facility produced only about 50 lt/day of sulfur, which will not have an impact. Unfortunately, it was a big supplier of gasoline into the West, where prices at the pump will go up.
MARKET NOTES
India: FACT is actively pursuing the proposed Rs 22.50bn joint venture ammonia-urea complex in Egypt with Adi Group of Syria. A FACT team recently went to Egypt for a second round of discussions with Abdul Kareem, the head of Adi Group. Adi has already signed a memorandum of intent with FACT on the project. The project is proposed at Sokhna in Egypt, in the Suez Industrial Development Co. Park. Though Adi is a Syria-based company, the availability of cheaper natural gas prompted the company to consider establishing the unit in Egypt, according to company sources.
The capacity of the project will be in the range of 0.7 to 1.0 million mt/y. While Adi Group will bring in the investment, FACT will provide the necessary infrastructure and will run the plant. The current plan is for FACT is to buy back urea and sell it in India. The joint venture is expecting an annual revenue of Rs 4bn, which may be shared equally. FACT, which has reportedly been plagued by a working capital shortage, recently got a fresh lease of life with a bank consortium enhancing the credit limit.
Belarusian Potash Co. (BPC) announced Feb. 21 that Michelle Weathers will join the company as director of its new U.S. office and director of sales, North America, effective March 1. Weathers is currently employed with Agrium Inc. as director, purchasing. BPC said she has solid experience in both the sale and purchasing of fertilizers, especially potash. Her previous positions were managing director, materials purchasing of Royster Clark Inc. (until it was acquired by Agrium in 2006), and sales manager of IMC Agribusiness. BPC’s North American office will be located in Chicago.
J.R. Simplot, 98, returned home from the Idaho Elks Rehabilitation Hospital in Boise on Feb. 6. He suffered a head injury in a fall from a motorized scooter Jan. 1 outside the University of Phoenix stadium, where he went to cheer the Boise State University Broncos in the Fiesta Bowl. A hospital spokesman said Simplot successfully finished his rehabilitation and is expected to continue to do well.
Pakistan’s TCP has announced that TCP Director General Abdul Malik has also assumed the title of chairman.
Bunge Ltd. Chief Financial Officer William Wells will be leaving, effective April 1, to become CFO of Loblaw Companies Ltd., Canada’s largest food distributor. Drew Burke, co-CEO, Bunge Global Agribusiness, will serve as interim CFO until a permanent replacement is named.
Don’t be left out. Three excellent speakers ?Çô Rich Pottorf, chief economist and Washington editor of Doane’s Agricultural Services; Don Lauriente, senior fertilizer industry consultant and president of DH Lauriente Consultants Ltd.; and Dave Coppess, vice president of sales and marketing for Heartland Co-op in West Des Moines, Iowa, gave an excellent assessment of what to expect in 2007.
An audio recording of the conference is available on CD-ROM for $199, and can be ordered by visiting http://www.pf.com/eventDetail.asp?id=43&type=2. Audio recordings of past Green Markets audio conferences can also be ordered at http://www.pf.com/events.asp.
Washington-How do you keep track of 80,000 different local jurisdictions, including even school boards with power to pass rules and regulations that can impact the specialty fertilizer business? It isn’t an easy task, but RISE (Responsible Industry for a Sound Environment) is working on it for more than a half dozen industry members, including Scotts, Lesco, Spectrum Brands, Harrell’s, and others. RISE President Allen James explains, “We’ve created a grassroots department within RISE, and we are organizing our industry all around the country to go down to their local boards and talk about the benefits of our products and help bring some degree of scientific understanding to the debate.” RISE point man Jim Skillen, director of science and regulatory affairs, has found that a big part of the problem is that those who want to restrict fertilizer use don’t have the time to wade through all the scientific research. Recently he tried, without success, to convince a Sarasota, Fla., county commissioner that requiring slow-release instead of regular fertilizer wouldn’t cut down on the total amount of nitrogen applied. At last word the commission was having the order drafted for approval next month. “If we don’t hear about them they get the regulations passed before we can move in,” he adds. “And there’s no software to track the business of local municipalities.” So Skillen relies on newspaper accounts and help from local agriculture organizations. One benefit, he notes, is that since 2004 legislation has been passed in eight states removing local authority over fertilizer. The total is now 10 since two states already had laws on their books. Bills were introduced this year in Kentucky, Tennessee, and Virginia, and Skillen is working with others. Skillen usually provides written statements to local entities considering fertilizer regulation, adding that “it’s not very helpful to show up in person when you’re from Washington.”
Lansing, Mich.-The fate of legislation to remove local control over fertilizer use is unresolved in Michigan after the question was dropped in the closing days of the state legislature in December, according to agriculture interests. “The local preemption language was stripped from the bill on the Senate floor,” Michigan Agri-Business Association Policy Director Bob Tadsen told Green Markets. “There was talk about reinserting similar preemption language in the House, but negotiations failed.” Tadsen added that at this point the association is not planning to do anything more with the issue in the upcoming session. Michigan Farm Bureau officials were also disappointed to see the preemption taken out of the bill, but FB Legislative Counsel Tonia Ritter said it’s her “gut instinct that we’ll see it introduced again.” Ritter said the state’s right-to-farm law provides some protection for agriculture, but believes that it should be shored up with preemption legislation. Some sentiment emerged during last session’s deliberations over the fertilizer legislation for a statewide reduction in phosphorus use, including non-agricultural products such as dishwasher detergent. April Hunt of the state agriculture department indicated that a committee is dealing with the phosphorus question at the state level. Hunt, fertilizer and bulk storage manager, said that the bill that finally passed the legislature represented the first substantial revision in fertilizer regulations since 1975. No major changes were made, she noted, but rules were adopted banning application on frozen turf and requiring setbacks from waterways. She said new bulk storage rules are being implemented with dealers, and that similar requirements will be phased in with farmers through 2008.
Richmond, Va.-Agriculture interests, along with others, have strong hopes for a bill in this session of the Virginia general assembly to limit local authority to regulate fertilizers. The measure (SB1061) was introduced at the request of the agribusiness industry, and is supported by the Virginia Turfgrass Council and others. “The bill restricts localities from regulating the registration, packaging, labeling, sale or distribution of fertilizers, leaving this authority with the state,” said Virginia Agribusiness Council’s Donna Pugh Johnson. The Turfgrass Council said the bill will benefit all who make, sell and use fertilizer by preventing any and every town from making different rules restricting and banning the sale and use of fertilizer products. Both groups also applauded tabling of another bill (HB 2663) prohibiting excessive application of pesticides and fertilizers. “While we do not condone excess application of fertilizers, this proposal did not provide a reasonable solution,” Johnson said.
The walkout of 2,800 conductors and rail yard workers that has affected rail shipments of fertilizer and other commodities on the Canadian National Railway continued last week, even as the Canadian government considered back-to-work legislation and a federally appointed labor mediator worked to end the strike.
The strike by the United Transportation Union-Canada, which began on Feb. 10, entered its second week after the Canada Industrial Relations Board ruled on Feb. 19 that the strike was legal. The three-member board on Monday rejected CN’s argument that the UTU had given improper notice of the walkout and that union officials had acted without a proper mandate from the UTU-International, based in Cleveland, Ohio. The strike does not involve CN’s train crews in the U.S.
UTU-Canada is asking for a 4.5 percent wage increase in the first two years of a three-year contract with CN, with a 4 percent increase in the final year. Also at issue are concerns related to working conditions, including lunch breaks and disciplinary actions. The last contract between CN and UTU-Canada expired in December.
Labor Minister Jean-Pierre Blackburn told the House of Commons on Tuesday that he had back-to-work legislation ready, and news reports said the legislation could be offered for a vote on Friday. Montreal-based CN, one of only two major railways in Canada, has been using management crews to replace striking workers, and has demanded that the picket lines come down and workers agree to a 63-day strike-free “cooling off” period before formal negotiations resume. UTU-Canada rejected CN’s call for a voluntary return to work, however.
Impacted businesses continued to call for government intervention to end the strike, with a litany of statements coming last week from the chemical, forestry, automobile, grain, mining, and fertilizer industries. Some chemical companies have announced production cutbacks because the strike has delayed incoming shipments of raw materials and outgoing shipments of finished products to customers.
A Feb. 21 statement from The Canadian Fertilizer Institute said the CN strike “is making it difficult to get fertilizer delivered throughout rural Canada so that farmers will have adequate supplies for spring planting.” CFI said it supports government intervention to end the strike, saying service disruptions “could cause significant losses and layoffs throughout industry.”
“North America’s farmers depend on fertilizer to grow food,” said Roger Larson, CFI president. “Grain prices are strong. Farmers can’t afford to miss this opportunity. In addition, fertilizer exports to 70 countries around the world are threatened by this situation.” CFI said Canadian farmers spend $2.7 billion each year for fertilizer, and “getting that product to farm retail outlets each spring is a major challenge, even without a strike.”
The rail congestion caused by the strike has also hurt competing carriers, including Canadian Pacific Railway Ltd. Claiming the strike has delayed shipments through the port of Vancouver, CPN declared a force majeure on Feb. 16 at its Vancouver operations, where it relies on CN employees and tracks to service terminals in North Vancouver as part of a co-production agreement.
As of midweek, the backlog of anchored grain vessels at Vancouver and Prince Rupert, B.C., had grown to 15, and several other ships were reportedly waiting for delayed shipments of bulk commodities. Local reports said grain shipments had dropped to half their normal volumes at both West Coast ports, citing the strike and inclement February weather as the cause. Local reports also quoted coal, potash, and canola oil terminal representatives as saying their rail traffic had dropped by 60 percent since the strike began.
“Farmers have had some tough times and now, when they see some light at the end of the tunnel, the transportation system breaks down,” said Richard Phillips, executive director of the Grain Growers of Canada. “It is critical to get rail service back up as soon as possible.”
Disclaimer of Warranty
All information has been obtained by Green Markets from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Green Markets or others, Green Markets does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.
