All Posts from January 7, 2013

Corps says it can keep the Mississippi open

The U.S. Army Corps of Engineers on Jan. 2 said it believes the authorized 9-foot deep commercial navigation channel on the Mississippi River will remain open between St. Louis, Mo., and Cairo, Ill., due to a combination of dredging, rock removal, upriver reservoir releases, and an improving weather forecast.

The Corps said the latest weather forecast shows an increased chance of rain for the Middle Mississippi during the second week of January, while the Corps’ ongoing effort to remove some 890 cubic yards of limestone from the river bottom at Thebes, Ill., will result in approximately 2 feet of additional depth in that stretch of the river by Jan. 11. The Corps also said recent rainfall and water releases from Carlyle Lake in southeastern Illinois have improved the forecast for the drought-depleted river between St. Louis and Cairo.

“The Corps’ rock removal contractors are making excellent progress in removing the rock obstructions from the primary area of concern,” said Maj. Gen. John Peabody, the Corps’ Mississippi Valley Division Commander. “We believe we will deepen the channel ahead of the worst-case river stage scenario, and I remain confident that navigation will continue.”

Based on the latest National Weather Service worst-case, “no rain” forecasts, the Corps said river levels won’t reach minus 5 feet on the St. Louis gage until mid-January. At that point, the rock formations at Thebes will be removed enough to prevent a negative impact to the 9-foot-deep navigation channel, the Corps said.

The American Waterways Operators (AWO) and Waterways Council Inc. (WCI), however, continue to stress that commerce on the Middle Mississippi River could come to an effective halt between Jan. 5 and Jan. 15, because dropping water levels will likely limit towboats to an 8-foot draft between St. Louis and Cairo.

The two trade groups, which represent the barge and inland waterways industries, have been pressing the Obama Administration to direct the Corps to release more water from Missouri River reservoirs to help bolster the Mississippi between Cairo and St. Louis, where the Missouri joins the Mississippi. AWO and WCO said the majority of towboats require a 9-foot draft to operate, and only a very small number of towing vessels can operate at 8- or 7-foot drafts.

“The uncertainty of this deteriorating situation for the nation’s shippers is having as much of an impact as the lack of water itself,” said Michael J. Toohey, WCI president and CEO. “The Administration must direct the Corps to release enough water to sustain navigation on the Mississippi River now or time will have run out and an effective shutdown could remain in place for weeks.”

AWO and WCI last week released revised data on the economic impact of a shutdown of barge traffic in January. They said the potential supply-chain disruption in Mississippi River states from Jan. 7-31 alone could affect more than 8,000 jobs and more than $54 million in wages and benefits, as well as 7.2 million tons of commodities valued at $2.8 billion.

Stakeholders have urged the Administration to authorize the release of an additional 4,000 cfs, or 1 percent of current storage, from the Missouri River reservoir system to avert a shutdown of Mississippi River barge transportation.

As part of its Missouri River management plan, the Corps in early December began its seasonal decreases in water releases from upriver reservoirs. The Corps announced on Nov. 23 that it would gradually reduce water discharges from Gavins Point Dam from 38,000 cfs to a winter discharge rate of 12,000 cfs (GM Nov. 26, 2012). On Dec. 18, however, the Corps temporarily increased releases to 18,000 cfs to prevent ice jams in the lower Missouri during a period of cold weather.

On Jan. 3, the Corps said it would again begin gradually

Growmark continues to grow, Bunge to exit fertilizer

Growmark Inc. continues to grow within the fertilizer industry, while Bunge North America and parent Bunge Ltd. continue their exits from the business. Growmark said Dec. 31, 2012, that it has agreed to purchase Bunge North America’s share in B-G Fertilizer LLC.

B-G, which was owned by Growmark and Bunge, operates the former CF Industries Holdings Inc. terminal located in Cincinnati, Ohio, to serve the needs of retail customers that provide fertilizer to farmers. Terms of the transaction were not disclosed.

Growmark and Bunge bought the terminal in early 2011 (GM Jan. 24, 2011, p. 1). It has approximately 91,000 st of dry and liquid storage capacity. At the time, the parties said it would allow both to tap existing expertise within their organizations while also leveraging Bunge’s grain and oilseed network in Indiana, Ohio, and Kentucky. B-G was part of a 2011 buying spree by Growmark, which also bought storage capacity at Albany and Mapleton, Ill., St. Louis, Mo., (GM Jan. 10, 2011, p. 1), Seneca, Ill. (GM Jan. 10, 2011, p. 10), and East Liverpool, Ohio (GM Feb. 7, 2011, p. 1), for almost 300,000 st of combined storage capacity.

In early 2012, Growmark completed 34,000 st/y of storage capacity at Casey, Ill. (GM Feb. 27, 2012, p. 1).

“We have had a great working relationship with Bunge during the past two years,” said Jim Spradlin, Growmark Agronomy vice president. “The Cincinnati terminal has brought value to the dealers in the areas it serves, and we look forward to continuing to provide the outstanding customer experience for which the team at Cincinnati is known.”

Growmark and Bunge also announced that Growmark will lease Bunge fertilizer assets located in Council Bluffs, Iowa, and Fulton, Ill. These facilities will be incorporated into the current Growmark portfolio to expand the cooperative’s scope and reach.

“We are pleased to announce the additions of Council Bluffs and Fulton to our existing terminal portfolio,” said Rod Wells, Growmark Plant Food division manager. “There are exciting opportunities at each facility to capitalize on truck transportation to their associated grain terminals in the form of back hauls. This should provide efficient sourcing opportunities for area retailers. The Council Bluffs facility, in particular, is new construction and state-of-the-art. We look forward to serving the dealer network from these two locations.”

Bunge broke ground on a 30,000 dry fertilizer warehouse in Council Bluffs in 2010 (GM Aug. 2, 2010, p. 1). At the time, the company told Green Markets it planned to market the major NPK dry fertilizers from the location, which is adjacent to an existing Bunge soybean crushing plant. The facility is on the BNSF rail line and can receive fertilizer by rail and ship by truck. It is located south of Council Bluffs, near highway I-29. This was Bunge’s first major fertilizer warehouse in the U.S., as at that time the company had leased a smaller one in Fulton, Ill.

Overall, the B-G acquisition and lease agreements represent approximately 130,000 st of dry and liquid plant food storage for Growmark.

“Bunge realized benefits from our North American fertilizer business, including our investment in B-G Fertilizer, but we have decided to focus our investments in our other lines of business,” said Bailey Ragan, vice president, Grain, Biofuels and Fertilizer for Bunge North America. “We look forward to continuing our strong relationship with Growmark through the lease of our terminals in Council Bluffs and Fulton.”

Bunge announced in 2008 that it was entering the North American fertilizer market (GM July 21, 2008, p. 12). The plan was to distribute and market fertilizer products, sourcing commodities domestically and internationall

Mosaic 2Q operating earnings off 30 percent; lower P&K volumes, phosphate prices cited

The Mosaic Co. reported that operating earnings during the second quarter ending Nov. 30, 2012, were $560 million, down from the year-ago $797 million. Mosaic said the decline was primarily driven by lower phosphate volumes and margins. Mosaic’s net sales in the second quarter were $2.5 billion, down from $3.0 billion last year, driven by lower phosphate and potash volumes and lower phosphate prices.

Second-quarter net income was actually up, at $629 million ($1.47 per diluted share) versus the year-ago $624 million ($1.40 per share). The current year quarter included a $179 million ($0.42 per share) benefit from a decrease in the amount of unrecognized tax benefits reported on the balance sheet. Gross margins were down at $676 million from the year-ago $881 million.

Six-month operating income was $1.17 billion on sales of $5.04 billion, down from the year-ago $1.53 billion and $6.1 billion, respectively. Six-month net income was $1.06 billion ($2.48 per share), versus the year-ago $1.15 billion ($2.58 per share).

Second-quarter Phosphate net sales were $1.8 billion, down 19 percent from the year-ago quarter, driven by lower sales volumes and prices of finished product. Sales volumes were impacted by lower shipments to the export market, offset by near record domestic shipments. Gross margin was $318 million, or 18 percent of net sales, compared to $476 million, or 22 percent, for the same period a year ago. The year-over-year decline in gross margin rate was primarily driven by lower finished phosphate prices and sales volumes, marginally offset by lower raw material costs. Sequentially, the flat gross margin rate reflects the impact of higher fixed cost absorption and higher selling prices, offset by higher ammonia costs. Operating earnings were $245 million, down 43 percent from the year-ago $432 million. Last year’s quarter included a $20 million benefit from insurance proceeds related to Mosaic’s Faustina plant.

The second-quarter average DAP selling price, FOB plant, was $544/mt, compared to the year-ago $611/mt. Phosphate total sales volumes were 3.0 million mt versus the year-ago 3.2 million mt, primarily driven by lower export sales, partially offset by an increase in domestic sales.

Phosphate rock production in Florida was 3.9 million mt compared to 2.7 million mt, reflecting the increased production at the South Fort Meade mine. Mosaic has built up rock inventory and has begun shipping Florida rock to use in the Louisiana production facilities, which is expected to result in lower consumed rock costs beginning in the fourth quarter of fiscal 2013. Mosaic’s North American finished phosphate production was 2.1 million mt, or 86 percent of operational capacity, flat with last year.

"The global phosphate market appears to be in balance, with steady demand and reported U.S. producer inventories at historic averages," said Jim Prokopanko, Mosaic president and CEO. "Domestically, we’ve seen very strong shipments for fall application. Additionally, low Mississippi River levels are presenting logistical difficulties and consequently creating a sense of urgency to ensure product availability for the spring. Internationally, customers continue to delay purchases to avoid price risk.”

Second-quarter Potash net sales totaled $780 million, down 7 percent from the year-ago $839 million, driven by lower export volumes and lower domestic and international MOP prices, partially offset by higher domestic volumes. Gross margin was $355.4 million, or 46 percent of net sales, compared to $394 million, or 47 percent of net sales, a year ago. Operating earnings were $316 million, down 12 percent from the year-ago $358 million.

The second-quarter average MOP selling price, FOB plant, was $443/mt, up slightly from a year ago, as generally lower crop nutrient prices were offset by a higher proportion of granular domestic shipments and higher pricin