All Posts from July 5, 2024

Canadian Rail Union Votes Again to Authorize Strike at CN, CPKC

Canada, Featured

The Teamsters Canada Rail Conference (TCRC), which represents nearly 10,000 workers at Canadian National (CN) and Canadian Pacific Kansas City (CPKC) railroads, announced on June 29 that union members voted overwhelmingly to reauthorize strikes at both companies if negotiated settlements cannot be reached.

“CN and CPKC are trying to force changes to our collective agreements that would move the clock back on working conditions and rail safety. The Teamsters are trying to stop them,” said TCRC President Paul Boucher. “With this renewed strike mandate, we intend to go back to the bargaining table, work with federal mediators, and do everything in our power to reach a fair deal for our members and protect all Canadians.”

The second vote was held after the first strike vote in late April expired. For federally regulated industries in Canada, strike authorization votes are only good for 60 days. The earlier vote was also overwhelmingly supported by union workers (GM May 3, p. 1), but the planned strike on May 22 was averted when the Canadian Industrial Relations Board (CIRB) intervened and requested information from both parties on whether a strike would have potential safety implications (GM May 24, p. 1).

The TCRC said the second vote had an 89.5% turnout, with 98.6% voting to reauthorize a strike. The union said CN and CPKC are “demanding a wide range of concessions on issues pertaining to crew scheduling, hours of work, and fatigue management,” including efforts to “gut the collective agreement of all safety-critical fatigue provisions” and to push through “a forced relocation scheme” that would force workers “to move around the country for months at a time.”

“Compromising on safety, or threatening to tear families apart for months, are not solutions to staffing problems,” the TCRC said. “CN and CPKC should instead be looking to improve working conditions and adopt a more humane approach to railroading.”

For federally regulated industries in Canada, strike authorization votes are only good for 60 days, and unions are required to give a 72-hour strike notice before any labor action commences. Railroad officials earlier stated that the earliest a strike could happen is mid-July, but both sides remain in negotiations to avert a “labor disruption” that CN in June said would hurt “CN, our employees, our customers, and the Canadian economy.”

Supreme Court Overturns Chevron Rule, Limiting Agency Regulatory Power

Featured, U.S.

The US Supreme Court on June 28 voted 6-3 to overturn a 40-year legal precedent known as the “Chevron deference,” which gave federal agencies wide powers to interpret laws that they considered unclear and required courts to uphold those interpretations as long as they were considered reasonable.

The ruling, which came in a fight over a fishing-industry regulation, overturned Chevron v. Natural Resources Defense Council, a 1984 decision that Democratic administrations had used as a legal building block for new regulations. In practice, the Chevron doctrine gave federal agencies the freedom to implement rules if Congress passed a law that was ambiguous, and said judges should defer to agency experts in how they interpreted the statutes.

“Chevron was a judicial invention that required judges to disregard their statutory duties,” Chief Justice John Roberts wrote in a 35-page ruling for the majority. He said judges “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

The court divided along ideological lines, with liberal Justices Elena Kagan, Sonia Sotomayor, and Ketanji Brown Jackson in dissent. “A longstanding precedent at the crux of administrative governance thus falls victim to a bald assertion of judicial authority,” Kagan wrote for the dissenters. “The majority disdains restraint, and grasps for power.”

Roberts’ opinion took direct aim at the decision penned by Justice John Paul Stevens in 1984, when Stevens argued that “judges are not experts in the field and are not part of either political branch of government,” and should therefore play a limited role.

“That depends, of course, on what the ‘field’ is,” Roberts wrote in his decision. “If it is legal interpretation, that has been, ‘emphatically,’ ‘the province and duty of the judicial department’ for at least 221 years,” Roberts wrote, quoting from the Marbury v. Madison decision that established the Supreme Court as the last word in interpreting laws and the Constitution.

Critics of the Supreme Court’s decision argued that it will constrain environmental, consumer, and financial-watchdog agencies, while supporters said it puts more of the onus on Congress to directly tackle policy issues with new laws and gives judges a broader mandate to rein in regulators when they exceed their authority.

Several industry trade groups issued statements supporting the court’s rejection of the Chevron doctrine, including the Agricultural Retailers Association (ARA). Numerous regulatory decisions by federal agencies in recent years have drawn the ire of industry groups, including efforts by the US EPA under the Obama and Biden administrations to broaden the definition of Waters of the United States under the Clean Water Act.

“For the past 40 years, the Chevron doctrine has provided an opportunity for federal regulatory agencies to expand their regulations beyond the intent of Congress. If Congress was not specific in limiting an agency’s authority in statute, Chevron provided deference to the agency in interpreting its own authorizing statute,” said ARA President and CEO Daren Coppock.

“This decision from the Supreme Court is important because it will require an agency to have specific statutory authority in order to submit private citizens or businesses to a regulatory requirement,” Coppock continued. “We are proud to have been part of the amicus brief filed last year requesting the Supreme Court to consider this case. For our member companies who operate under these regulations, the clarity and certainty that result from this change are very valuable.”
 

Nutrien CEO Says Fertilizer Demand Stabilizing After Seismic Shocks

Argentina, Brazil, Eastern Europe, Featured, Russia, South America, Ukraine

Nutrien Ltd. CEO Ken Seitz told Bloomberg on June 26 that fertilizer demand is just now starting to stabilize from seismic shocks of the past few years that left the company with wild profit swings.

“We’re getting back at least to a market that we would call stable,” Seitz said in an interview with Bloomberg, referring to previous Black Swan-like events – unanticipated calamities that pull markets into a tailspin – that upended the typical cycles of the market.

Russia’s 2022 invasion of Ukraine disrupted global fertilizer shipments and pushed prices and company earnings to record heights, but also triggered a slump in demand as farmers and retailers balked at the sticker shock. Nutrien earnings plunged 71% in the first quarter (GM May 10, p. 1) and company shares have tumbled more than 50% from a record in April 2022, shortly after Russia’s invasion of Ukraine.

“We are looking at demand that is after a very volatile period, with some demand destruction, that is only today returning to sort of trend levels,” Seitz said, noting that fertilizer prices today are below the 10-year average.

Nutrien has responded by scrapping big investment plans and putting some assets up for sale in South America as it focuses on restoring growth.

Brazil in particular has been a sore spot for Nutrien. Fears of supply shortages because of disruptions in Eastern Europe first led to an overbuilding of fertilizer inventories in the country. But surging interest rates in Brazil have made the glut even more challenging to manage. Farmers are now opting for just-in-time purchases, Seitz said, adding that a pesticide glut will take the remainder of this year and possibly into 2025 to be resolved.

Nutrien reported in May that it was halting three blending facilities in Brazil indefinitely, according to Bloomberg, citing a statement from the company (GM May 31, p. 1). Two of the plants are in Goias state, and the other is a new blender in Minas Gerais. The Minas Gerais plant was expected to start operations in June, a Nutrien spokesperson said.

In Argentina, Nutrien is working to sell its agriculture retail operations (GM April 9, p. 1) and is considering options for its 50% interest in Profertil SA, a urea and ammonia manufacturing venture it has with Argentina state-run oil company YPF SA.  If Nutrien ends up selling the stake along with the retail businesses, it will join a slew of other major companies exiting the South American country.

The challenge of repatriating dollars is a key problem because of Argentina’s currency controls, Seitz told Bloomberg. Nutrien lost money when it transferred currency out of the country because it had to use a more expensive exchange rate.

“I wouldn’t say that we are clamoring to get out of Argentina, we’re just being very thoughtful about our strategic options there,” Seitz said. However, he added that “we don’t see any indication that anything is going to change” under the new administration of President Javier Milei.

Seitz estimated that US farmers planted about 90 million acres of corn and 86.5 million acres of soybeans this spring. While the prospect of fewer corn plantings could impact applications of nitrogen, Seitz noted that there could be ample use of nitrogen in the mid- and post-growing season, and he sees no reason to change the company’s nitrogen sales guidance of 10.6-11.2 million tons.

While crop prices have fallen, so have farm input costs, at a time when grower incomes remain healthy, according to Seitz. “All indications are that farmers are looking as usual to maximize yields,” he told Bloomberg.

Trinidad Fertilizer Operations Dodged by Hurricane Beryl

Caribbean, Featured, Mexico, Nitrogen, Trinidad and Tobago

Nutrien Ltd. on July 2 confirmed that it had no impact or production issues at its nitrogen production facility in Trinidad from Hurricane Beryl, which was a Category 4 storm with top winds of 150 mph in the Caribbean late on Tuesday. Yara International ASA also reported no damage or production interruptions at is nitrogen operation in Trinidad.

Heavy rain and high storm surges were predicted for Jamaica and the Cayman Islands on Wednesday, the Yucatan Peninsula on Thursday, and Belize on late Thursday and early Friday, prompting hurricane and tropical storm watches across the Caribbean.

Beryl had weakened slightly from Monday, when it became the Atlantic’s earliest Category 5 storm on record as it made landfall on Carriacou, the second largest of Grenada’s islands. “Beryl is expected to continue to gradually weaken for the next day or two but is still forecast to be at or near a major hurricane when it passes near Jamaica on Wednesday and near the Cayman Islands on Wednesday night,” the National Hurricane Center said in an advisory. 

While the humanitarian losses are still being assessed, there are signs Beryl is having an impact on markets. European insurers’ stocks fell as the storm raised worries that an unusually active storm season will drive up claims. Munich Re and Swiss Re, the two biggest reinsurers, continued their slide on July 3 after dropping 3.3% and 4%, respectively, in trading on July 2.

There is a risk that a significantly weaker Beryl will spiral into the northern Gulf of Mexico next week. The storm has a 30-40% chance of reaching the upper Gulf as a tropical storm or weak hurricane, but it probably wouldn’t cause any damage, said Matt Rogers, President of the Commodity Weather Group LLC.

“I think it may stay farther south into Mexico like Alberto and Chris did, particularly if it starts to weaken in coming days as projected, but the odds of an upper Gulf entry have increased,” Rogers said. In the last two weeks, Tropical Storms Alberto and Chris developed off Mexico’s east coast and quickly made landfall without causing extensive damage.

Typically, the first hurricane arrives in the Atlantic by Aug. 11 and the first major storm — Category 3 or stronger on the Saffir-Simpson scale — comes by Sept. 1, according to the National Hurricane Center. The other Category 5 system to occur in the Atlantic basin during July was Emily in 2005.

“Unfortunately, Beryl is breaking records that were set in 1933 and 2005, two of the busiest Atlantic hurricane seasons on record,” said Phil Klotzbach, a Senior Research Scientist at Colorado State University. It likely points to a hyperactive season, he added.

Ag Tech Startups Struggling Against Traditional Suppliers

Featured, U.S.

Bold ag tech startups that once threatened to shake up the $1.5 trillion agriculture sector and disrupt crop trading giants such as Archer-Daniels-Midland Co. and Cargill Inc. are stumbling, Bloomberg reported.

Indigo Ag Inc., once a marketplace for trading and shipping grain, has cut jobs and shrunk its business. Farmers Edge Inc. was taken private at a tiny fraction of its initial public offering. Gro Intelligence, named in 2021 by Time magazine as one of the 100 Most Influential Companies, is shutting down, according to a person familiar with the matter.

The struggle for many of these newcomers, according to Bloomberg, was thinking they could easily apply the Silicon Valley playbook to the world of farming, especially during a downturn in the farm economy. The task is even more challenging as the traditional powerhouse operators are also aggressively pushing high-tech services and e-commerce convenience to farmers.

The startups initially raked in billions of dollars from investors, benefiting from ultra-low interest rates that helped feed speculative ventures. Their vision, inspired by the likes of eBay and Uber, was to take traditional crop trading and farm management onto digital platforms, offering data, inputs, and technologies to change practices throughout the farm supply chain.

E-commerce sales platforms for crop inputs experienced a surge in business and interest during the early days of the Covid pandemic (GM April 17, 2020). But once-plentiful funding has rapidly dried up. The global “agrifoodtech” sector raised $15.6 billion globally in 2023, down nearly 50% from a year earlier and the lowest level since 2017, according to an investment report from venture capital firm AgFunder.

The industry giants have proved to be formidable adversaries. There was a “very, very strong industry resistance to FBN being in the market,” said Charles Baron, co-founder of Farmers Business Network, which has faced pushback from larger rivals on its efforts to use collective data from growers to provide price transparency.

The venture-capital community is learning that the return on agriculture technology is different from other areas, according to Marc Kermisch, Chief Digital and Information Officer at tractor maker CNH Industrial NV, which has its own strategy to connect farmers to hi-tech equipment.

“Farmers are small business people at the end of the day, and they usually get one chance to plant their crop every single season,” he said. “So their bar for adding technology is really high because if they mess up their crop,” they’re impacting their profits.

“How many farmers do you see?” Matt Carstens, CEO of Landus, Iowa’s biggest farm cooperative, asked during a presentation at World Agri-Tech Innovation Summit in San Francisco in March. “We’re all talking to ourselves. That’s cool. But somebody’s got to execute it on a farm.”

Carstens said both FBN and Indigo have done good work, but they “met the force of our traditional ag” and couldn’t break in. For its part, Landus, with the backing of FBN co-founder and former CEO Amol Deshpande, is launching its own digital platform initially focused on fintech, leveraging the advantages of the cooperative model to provide services to its member farmers and beyond.

Dean Banks, CEO of Indigo Ag, said it’s easier to talk about disrupting than it is to actually disrupt. The company ditched businesses including one that sought to use idled trucks for shipping crops, and now is primarily focused on seed coatings and helping farmers sequester carbon.

Indigo Ag’s valuation dropped from almost $4 billion in July 2022 to about $200 million a year later, according to estimates from researcher PitchBook. A more recent valuation isn’t available due to lack of data, and the company declined to comment on the matter.

Banks said Indigo has made “substantial progress,” and is seeking to reach break-even EBITDA by the end of the year. “We’ve sold off or gotten out of the businesses where there were other people who were just as good or better doing it,” he said.

Canadian-based Farmers Edge, which seeks to provide technology solutions across the supply chain, reached a market value of about C$835 million ($607 million) after its initial public offering three years ago. It was bought out earlier this year by Fairfax Financial Holdings Ltd. at a price 98% below that of its IPO.

“The majority of the tech world experienced inflated valuations, particularly startups, and then as things started normalizing after Covid those valuations kind of evaporated,” said Vibhore Arora, CEO of Farmers Edge. Arora said his mandate has been to reset the company’s direction, double down on execution and stop trying to do everything in the crowded ag tech market.

Gro Intelligence, which used satellite data and artificial intelligence to make crop predictions, last month let go of most of its remaining staff as it faced a worsening funding crunch, and is shutting down after failing to find a buyer, according to the person familiar with the matter.

The company in February parted with founder Sara Menker. Just five years ago, Gro boasted of being an alternative to the US Department of Agriculture when the agency had to cancel reports due to a government shutdown.

FBN, meanwhile, is trying to regain its footing after a recent spate of leadership departures and worker layoffs. “The down cycle in the ag industry over the past two years has affected many companies, and FBN has not been immune,” said CEO Diego Casanello. He said FBN is on the path for profitability this year on an EBITDA basis after making “many tough, prudent decisions” to focus on its most profitable and core services.

FBN had an estimated valuation of roughly $3.8 billion a few years ago, though a current figure wasn’t available. The company recently took out a short-term loan in the form of a convertible note that hasn’t yet been priced, according to a person familiar with the matter.

The ag tech startup space in general should be prepared for the tough financing climate to continue, said Rob Leclerc, a founding partner of AgFunder. “Companies need a really compelling story about why they are fundamentally different.” he said. “We will see a tremendous amount of failure” in the sector.

Germany Plans Floating Green Ammonia Terminal

Clean Ammonia, Germany, Green Ammonia, Hydrogen, Low-Carbon

German-based Deutsche ReGas and Norwegian Höegh LNG have signed an agreement to develop a floating import terminal in Lubmin, Germany, that will convert imported green ammonia to green hydrogen.

According to the companies, the terminal will be the “world’s first” floating green ammonia cracker. Operations are expected to commence in early 2026 with production equaling 30,000 tonnes of hydrogen per year.  

The hydrogen is expected to be fed into Germany’s Hydrogen Core Network (HCN), a planned 9,700-kilometer hydrogen pipeline for which Germany is approved to receive €3 billion from the European Commission. The hydrogen will enter through a feed-in point at Deutsche ReGas’s terminal in Lubmin.

Höegh LNG has developed the green ammonia cracker technology for the floating terminal project, while Deutsche ReGas will provide the onshore terminal infrastructure and project coordination involving permitting. 

Sungrow Hydrogen Wins Bid for China Project

China, Clean Ammonia, Green Ammonia, Hydrogen, Low-Carbon, Methanol

Sungrow Hydrogen has won the bidding for the electrolyzer system that will be used at the China Energy Engineering Corporation’s (CEEC) Songyuan Hydrogen Energy Industrial Park in Jilin, China. The project is billed as the world’s largest green hydrogen, ammonia, and methanol integrated project.

Sungrow Hydrogen’s 1000 Nm3/h ALK hydrogen production system will be utilized for the project, which is expected to produce 110,000 mt/y of green hydrogen, 600,000 mt/y of green ammonia, and 60,000 mt/y of green methanol. The project, which is being built by the state-owned CEEC, began construction at the end of 2023.

It is expected that the project will “load follow,” meaning that hydrogen and ammonia will be produced flexibly, depending on how much wind and solar power are available at any given moment.

This is the third project Sungrow Hydrogen, a green hydrogen production system solutions provider based out of China, has won within Jilin province.

Egypt Signs Deals for Green Ammonia Projects

Clean Ammonia, Egypt, Europe, Green Ammonia, Low-Carbon

Four European companies have signed agreements with the Sovereign Fund of Egypt (TSFE) for green ammonia projects in Egypt that require a combined investment of $33 billion. The deals were signed during the EU-Egypt Investment Conference in Cairo at the end of June.

Egypt detailed that an $11 billion investment is associated with a green ammonia project at the East Port Said port, while $14 billion will be invested by BP, Masdar, Hassan Allam Utilitie, and Infinity Power as part of a green ammonia project in Sokhna. The Sokhna Port will host the two other green ammonia projects from Ocior Energy worth $4.25 billion and Taqa Arabia and Voltalia SA worth $3.46 billion.

TSFE is a private investment fund for investment in Egypt’s state-owned assets. The agreements are part of a plan to boost Egypt’s economy, which has been impacted negatively by geopolitical events in Gaza and the Sudan region.

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