All Posts from November 9, 2015

Crops/Weather

Eastern Cornbelt, South Central, Southeast, Southern Plains, Western Cornbelt

Grain Futures: As of 4:00 p.m. on Nov. 5, corn, soybean, and wheat futures were all lower compared to the week before.

December 2015 corn was posted at $3.745/bushel, down from $3.80/bushel, and corn for March 2016 slipped to $3.8275/bushel from the prior week’s $3.8975/bushel. Contracts for December 2016 corn were $4.0225/bushel, also down from $4.065/bushel the week before.

Soybean prices for January 2016 were $8.64/bushel, down from $8.8025/bushel at last report. March 2016 soybeans were $8.6625/bushel, and November 2016 soybeans were $8.74/bushel, down from $8.845/bushel the week before.

December 2015 wheat punched in at $4.86/bushel, down from $4.8825/bushel one week earlier, while July 2016 wheat contracts slipped to $5.2175/bushel from the previous week’s $5.2475/bushel. Wheat for July 2017 was $5.73/bushel, down from $5.74/bushel the week before.

Eastern Cornbelt: Most of the Eastern Cornbelt enjoyed favorable harvest weather in early November, with highs in the 70s reported across the northern tier of Illinois, Indiana, and Ohio.

The corn harvest had progressed to 88 percent complete in Ohio by Nov. 1, up nearly 30 percentage points from the week before. Corn growers in Illinois and Indiana had 92-96 percent of the crop in the bin by Nov. 1, while the regional soybean harvest stood at 96 percent complete by that date.

Regional growers also had 89-95 percent of the winter wheat crop seeded by Nov. 1.

Western Cornbelt: Forecasts called for the possibility of severe weather in Iowa and Missouri as the week progressed, with high winds, rain, and hail likely in parts of both states. A half-inch of rain was expected in Iowa east of Interstate 35, with temperatures down in the 50s.

Although some fieldwork delays were likely as a result of the precipitation, most of the region’s harvest activity was nearly complete by last week. USDA reported that 97 percent of Missouri’s corn was in the bin by Nov. 1, along with 85 percent of Iowa’s crop and 75 percent in Nebraska. The soybean harvest was fully 96-97 percent complete in Iowa and Nebraska by that date, compared with 80 percent in Missouri.

Missouri growers also had 72 percent of the cotton crop in the bin, up 12 percent from the week before. The regional sorghum harvest was 81 percent complete in Missouri and 70 percent complete in Nebraska by Nov. 1.

Southern Plains: Strong storms were expected late in the week in parts of Texas, Oklahoma, and southeastern Kansas. Tornado and flash flood watches were in effect on Nov. 5 for central and northern Texas, and also for central and eastern Oklahoma.

Harvest activities continued in the Southern Plains last week. Kansas growers had 94 percent of the corn and 84 percent of the soybeans in the bin by Nov. 1, with the corn harvest rated at 84 percent complete in Texas and 45 percent in Colorado by that date.

The grain sorghum harvest was tracking ahead of normal in the region last week, with progress rated at 35 percent complete in New Mexico, 55 percent in Colorado, 77 percent in Kansas, and 81-83 percent in Oklahoma and Texas. “Grain sorghum is still coming in, but it is easily 75 percent harvested and what is in the field may need a frost to kill the plant and bring down the grain moisture,” said one Kansas source.

The regional cotton harvest was 40 percent complete in Texas, 39 percent in Oklahoma, and 20 percent in Kansas, with good or excellent ratings assigned to 61 percent of the acreage in Kansas and Oklahoma, compared with just 38 percent in Texas.

South Central: Parts of the South Central region were bracing for strong storms as the week progressed. Winds of up to 60-70 mph were in the

Uralkali ponders sales cut – Alert

Breaking Industry News

Uralkali is thinking about cutting fourth-quarter potash sales. "We are carefully monitoring the development of the situation on the market and we are now considering the possibility of reducing the sales target for the fourth quarter by about 300,000 mt," Vladislav Lyan, Uralkali marketing director, said Nov. 5, in response to a question from Bloomberg. He declined to give the current sales target.

Committee approves resource tax increase – Alert

Breaking Industry News

Israel’s Knesset Finance Committee has approved the recommendations of a government-appointed committee on raising taxes on natural resources. The recommendations will primarily impact Israel Chemicals Ltd. ICL had mounted a campaign against the recommendations and has threated to halt investments in Israel. Israeli Prime Minister Benjamin Netanyahu had hoped to modify the recommendations and reduce their impact on ICL. However, Finance Minister Moshe Kahlon was opposed and the committee backed him.

The committee voted unanimously in favor of the recommendations of the committee headed by Professor Eitan Sheshinski. The law will impose a 25 percent windfall profits tax over and above a 14 percent return on investments.  The rate will rise to as much as 42 percent on returns of 20 percent or higher. The law also sets a 5 percent uniform royalty payment on all natural resources. ICL has said the new law will cost the company $110 million starting in 2017.  However, that figure is based on much higher potash prices. Industry experts say that the tax is likely to be substantially lower at current potash price levels. The committee approved a proposal that all funds from the surtax and royalties go to finance the creation of new jobs in Israel’s southern Negev region.

ICL Board Chairman Nir Gilad called it a bad day for the Negev. ICL has also warned that it will take legal action against the law and take the matter to Israel’s Supreme Court.

Meanwhile, Israel’s Finance Ministry is continuing to bicker with ICL over payment of past royalties on potash and downstream fertilizer production. The Finance Ministry said ICL owes an additional $60 to $120 million in back taxes specifically the linkage on royalties due on profits the company has earned dating back to 2000. The ongoing dispute follows the ruling by an arbitration panel that last year ruled ICL owed royalties not just on profits, but also on mining and extraction operations and on downstream production. ICL estimated its back royalties at $152 million and paid the sum along with an additional $7.5 million owed for the past two years.  

Nitrogen Solutions

Eastern Cornbelt, South Central, Southeast, Southern Plains, U.S. Gulf, UAN, Western Cornbelt

U.S. Gulf: UAN remained quiet last week, with the NOLA market quoted at $185/st ($5.78/unit) FOB. East Coast vessel product continued to be called $202-$205/mt CFR.

September UAN imports surged 106 percent, to 233,748 st from the year-ago 113,591 st. July-September imports were up only 1 percent, however, to 788,704 st from the year-ago 782,950 st.

Eastern Cornbelt: UAN-28 was steady at $214-$217/st ($7.64-$7.75/unit) FOB Cincinnati, Ohio, with the upper end of the regional range pegged at $220-$225/st ($7.86-$8.04/unit) FOB inland terminals in Ohio and Indiana.

UAN-32 remained at $248-$260/st ($7.75-$8.13/unit) FOB in the Illinois market last week.

Western Cornbelt: UAN-32 was quoted at $245-$255/st ($7.66-$7.97/unit) FOB in the Western Cornbelt.

Southern Plains: The UAN-32 market remained at $230-$250/st ($7.19-$7.81/unit) FOB in the Southern Plains, with the low at regional production points and the upper end reported out of inland terminals in Kansas.

South Central: UAN-32 was unchanged at $245-$250/st ($7.66-$7.81/unit) FOB in the South Central region, with the low at Memphis and the upper end quoted out of Arkansas terminals.

Southeast: UAN-32 pricing in the Southeast was pegged at $210-$220/st ($6.56-$6.88/unit) FOB regional terminals, with the lower numbers out of Norfolk, Va., and Wilmington, N.C., and the upper end FOB Savannah, Ga.

House approves transportation funding bill

News Briefs

Washington — The U.S. House of Representatives on Nov. 5 approved the “Surface Transportation Reauthorization and Reform (STRR) Act of 2015,” a six-year funding bill designed to address needed infrastructure investments and give states and local governments more flexibility in allocating resources. The Agricultural Retailers Association (ARA) said it supports the measure, but had pressed for two amendments, neither of which made it into the final bill – the Crawford-Ashford Short Haul Graduated Driver Pilot Program amendment and the Ribble SAFE Trucking amendment. ARA told Green Markets that the House Rules Committee blocked consideration of the Crawford-Ashford amendment, which would have allowed commercial driver’s license (CDL) holders who are 18 years old to operate a commercial motor vehicle (CMV) from one state to an adjacent state. Current regulations allow CDL drivers between the ages of 18 and 20 to only operate a CMV within their state, while interstate CDL drivers must be 21 years old. ARA had earlier distributed a coalition letter seeking signatures of national and state agricultural groups who supported the amendment. Also defeated on the House floor was the Ribble amendment, which would have given states the option to raise the truck weight maximums on their interstate highways from 80,000 to 91,000 pounds. More than 100 amendments were reportedly considered for the bill, which was approved by a vote of 363 to 64 after three days of debate.

LSB reports cost run up, Koch deal, income drop

News Briefs

Oklahoma City — LSB Industries Inc. said Nov. 6 that it is revising its cost estimate for its El Dorado, Ark., expansion to $831-$855 million from the latest update in August of $660-$680 million. “The primary reason for the further cost escalation relates to mechanical and piping labor costs increases versus earlier estimates,” said Daniel Greenwell, LSB interim CEO. LSB announced a strategic investment of $260 million to complete the expansion. This investment, from Security Benefit Corp., will be in the form of debt and equity. The ammonia plant is expected to be mechanically complete in February 2016. As for the new nitric acid plant and concentrator, LSB said the concentrator went into production in June 2015, and the nitric acid plant is expected to be in production the week of Nov. 9. LSB also announced that it has inked a three-year offtake agreement with Koch Fertilizer for all of the excess ammonia from the El Dorado ammonia plant. In the meantime, an unplanned outage at the Pryor, Okla., plant impacted third-quarter earnings. The Chemical segment had an operating loss of $55 million on net sales of $80.6 million, compared to the year-ago loss of $5.6 million and $94.8 million, respectively. The unit had a nine-month loss of $31.5 million on sales of $320 million compared to year-ago income of $46.8 million and $345 million, respectively. Company-wide, LSB reported a third-quarter net loss of $33.8 million ($1.48 per diluted share) on net sales of $157.7 million, compared to a year-ago loss of $3.8 million $(0.17 per share) and $171 million, respectively. LSB had a nine-month net loss of $26.7 million ($1.19 per share) on sales of $534.2 million, compared to year-ago income of $19 million ($0.80 per share) on sales of $551.2 million.

Agrium 3Q income up; higher volumes, lower costs offset weaker fertilizer prices

Featured

Agrium Inc. reported third-quarter net earnings from continuing operations of $99 million ($0.72 per diluted share) on sales of $2.5 billion, compared to the year-ago $91 million ($0.63 per share) and $2.92 billion, respectively. The company exceeded most analysts’ expectations.

Agrium said the increase was due to higher sales volumes in its Wholesale unit, combined with lower production costs in the unit. In the meantime, Retail earnings were similar to the prior year period, despite weaker market conditions.

"Agrium’s performance this quarter is another demonstration of the resilience of our business model,” said Chuck Magro, president and CEO. “We focused on what we can control, improving our on-stream Wholesale performance and optimizing our distribution network and effectively managing costs in Retail, all of which helped drive a 9 percent increase in earnings over the same period last year despite prevailing market headwinds. We see strong crop input demand during the fall application season, which is now in full swing, and we are confident that our strategy and business structure can continue to deliver value to all our shareholders."

Agrium noted that it achieved a 94 percent ammonia capacity utilization rate during the quarter, exceeding its goal of 90 percent. Year-ago rates were problematic for the company. “The performance of our Nitrogen segment was particularly impressive with margins reaching $171/mt," added Magro, “reflecting both our regional price and natural gas cost advantages. Our Retail business unit also achieved solid results this quarter even against a backdrop of challenging market conditions in the U.S.”

Asked about acquisitions, Magro told analysts that Agrium needed to take this year to get its own house in order, such as improving reliability and shedding some assets. However, on that front he said the company has achieved 21 “tuck-ins” so far this year representing $14 million in EBITDA, with a solid pipeline of opportunities, including in Brazil. He said with the difficult situation there now a lot of facilities are for sale, though he said there is still quite a disconnect between buyer and seller valuations.

As for the fall season, Agrium said it is seeing good application across all three nutrients. It reports a very strong ammonia application season in Western Canada. In the U.S., it is predicting a slightly above-average season in the Cornbelt, and an average season outside the Cornbelt.

Going forward, the company is upbeat, saying that despite historically high crop production, the outlook for grains is more positive than it was a year ago, and as of October 2015 cash corn prices were more than 10 percent above 2014 levels. It said excluding China, the global grain stocks-to-use ratio is projected to decline to the lowest level since 2012-13, and the U.S. corn supply/demand balance is projected to tighten. As a result, U.S. 2016 corn acreage is expected to increase.

And while noting that farm income is down, Magro said that is primarily due to livestock returns. He also believes Chinese urea exports, which were up in the first half, are on the decline, saying they were off 30 percent in the third quarter as operating rates were pressured.

Agrium expects to achieve annual diluted EPS of $7.10-$7.40 compared to previous guidance of $7.00-$7.50. It has adjusted its potash production projections to 1.95-2.05 million mt from 1.9-2.2 million mt. Nitrogen remained between 3.5-3.7 million mt.

Third-quarter Wholesale gross profit was $218 million on sales of $673 million, up from the year-ago $127 million and $803 million, respectively. Total volumes were 1.67 million mt, down from 1.86 million mt, with this decrease reflecting mainly purchased tons for resale.

Nitrogen gross profit was $130 million, up from

Ammonia

Ammonia, Eastern Cornbelt, South Central, Southern Plains, Tampa, U.S. Gulf, Western Cornbelt

U.S. Gulf/Tampa: A new NOLA trade was reported at $420/st FOB. While some remain skeptical of anything above the $400/st FOB mark, sub-$400/st FOB trades have not been confirmed in recent weeks.

Ammonia imports were up 4 percent in September, according to the U.S. Department of Commerce, to 512,913 st from the year-ago 492,460 st. July-September imports were off 3 percent, to 1.48 million st from the year-ago 1.53 million st.

The December NYMEX natural gas price closed Nov. 5 at $2.364/mmBtu, up from the Oct. 29 close of $2.257/mmBtu.

Eastern Cornbelt: Several sources reported an uptick in ammonia movement in the Eastern Cornbelt last week, with demand picking up “at a brisk pace” for both fall prepay and new spot sales. The ammonia market was steady at $545-$555/st FOB in the region, with the low in Illinois and the upper end FOB Indiana terminals.

Western Cornbelt: Fall ammonia movement was slowly picking up steam in some parts of the Western Cornbelt, but the movement of dry tons remained very light, sources said. “It is slow and very quiet,” said one Missouri contact at midweek.

The anhydrous ammonia market was steady at $510-$540/st FOB in the Western Cornbelt, depending on location, with the low reported in Nebraska and western Iowa. Delivered tons remained at $540-$550/st from southern production points.

Southern Plains: Anhydrous ammonia was unchanged at $460-$490/st FOB in the Southern Plains, with the low out of regional production points and the upper end FOB Kansas pipeline terminals. Sources reported some application of ammonia – along with an N stabilizer – taking place in parts of the region last week.

South Central: The anhydrous ammonia market was steady at $530-$550/st FOB in the South Central region, with the low at Memphis, Tenn., and the upper end FOB Henderson, Ky.

Urea

Black Sea, China, Eastern Cornbelt, India, Middle East, South Central, Southeast, Southeast Asia, Southern Plains, U.S. Gulf, Urea, Western Cornbelt

U.S. Gulf: Granular prompt barges continued to edge down last week, with the most recent business now called in the $242-$249/st FOB range. February was reported at $254-$256/st FOB. Prills remained at $255-$263/st FOB.

September urea imports were up 1 percent, to 866,972 st from the year-ago 853,972 st. July-September imports were up 2 percent, to 1.97 million st from 1.94 million st.

Eastern Cornbelt: Granular urea pricing in the Eastern Cornbelt was tagged at $290-$300/st FOB most regional terminals last week.

Western Cornbelt: Sources quoted the granular urea market at $300-$310/st FOB most terminals in the Western Cornbelt.

Southern Plains: The granular urea market was quoted at $280-$290/st FOB in the Southern Plains, down another $5-$10/st from last report, with the low reported out of Catoosa, Okla., and described as “easy to find this week.”

Timely rains in recent weeks have produced favorable field conditions for fall fieldwork, but sources continued to report minimal activity. “Farmers are shopping everything to save a nickel,” said one contact. “Margins continue to narrow.”

South Central: The granular urea market was quoted in a broad range at $290-$310/st FOB in the South Central region, with the low reported out of spot Louisiana river locations. The dealer market FOB Memphis and Arkansas River terminals was generally pegged in the $300-$310/st FOB range last week.

Southeast: The granular urea market remained at $320-$325/st FOB most port terminals in the Southeast, with rail-DEL tons pegged at the $335/st level in the Carolinas.

India: The STC tender that closed Oct, 30 provided a much-needed positive push in the urea market. Even though prices were $5-$6/mt higher than the MMTC tender, STC is slated to take about 150,000 tons more.

All told, just under 3 million tons were offered by 26 companies at prices that reflected the higher netback expectations of Chinese producers and a slightly stronger global market.

Ammonium Nitrate

Ammonium Nitrate, South Central, Southeast, Southern Plains, U.S. Gulf, Western Cornbelt

U.S. Gulf: Ammonium nitrate barges remained inactive, and were still called $238/st FOB for the last trade.

September AN imports were 37,763 st, up 9 percent from the year-ago 34,709 st. July-September imports were up 13 percent, to 125,343 st from the year-ago 111,386 st.

Western Cornbelt: Ammonium nitrate was unchanged at $305-$310/st FOB in the Western Cornbelt.

Southern Plains: Ammonium nitrate was steady at $295-$300/st FOB Catoosa.

South Central: The ammonium nitrate market was pegged at $295-$300/st FOB in the South Central region, down $5/st from last report.

Southeast: Ammonium nitrate remained at $310-$315/st FOB Tampa for truck tons.

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