Post on 29-Jul-2020
transcript
© 2016 CHS Inc.
Fertilizer Industry Update
Adam Anderson
2/18/16
DISCLAIMER
The information and opinions contained herein are
provided for informational purposes only. Any decision to
purchase or sell products or commodities must be made
based upon your own investigation and that of your
advisors. The information contained herein is derived
from sources that are believed to be reliable, but such
information is not guaranteed as to accuracy or
completeness. All opinions made herein may be changed
at any time without notice.
© 2016 CHS INC. CONFIDENTIAL
AGENDA
• Market Trends
• North American Production
• Logistics
© 2016 CHS INC. CONFIDENTIAL
FERTILIZER SOURCING
THE MARKET TODAY IS DRIVEN BY THE
“C” FACTORS
• Currencies
• Brazil and Russia remain weak
• Commodities
• All commodities are taking a lead from the price movement of oil
• China
• Potential for a weaker currency, weak demand, and an appetite to export crop nutrients
© 2016 CHS INC. CONFIDENTIAL
MARKET TRENDS
• Manufacturers struggling to move physical tons
• Brazil not taking tons
• U.S. trading at discount to world
• U.S. pays it’s bills
• U.S. River issues
BROKE 6-YR AVE 23.4 BU/ACRE NOW 20.7
BU CORN TO PAY FOR CROP NUTRIENTS
© 2016 CHS INC. CONFIDENTIAL
CRUDE LEADS EVERYTHING DOWN
AMMONIA IMPORTS DOWN
• Import demand into Tampa
and New Orleans will be
greatly reduced soon
• LSB at Eldorado, AR will
soon start up a 375K ton
plant that will make them self-
sufficient
• Cornerstone, on the TX gulf
coast, will start up soon and
supply the industrial demand
as well as throw about
300,000 tons/year on the river
© 2016 CHS INC. CONFIDENTIAL
ANHYDROUS AMMONIA
• 2016 was ushered in with by some additional spring pre pay ammonia buying
• Some growers did step up although overall demand was reported as light compared to other years
• The big demand push for ammonia could now be delayed until spring application begins
• This means it will be a true logistical play
© 2016 CHS INC. CONFIDENTIAL
UREA UPDATE
• Demand was relatively light until TFI meeting
• Prepay demand was much less compared to expectations
•Unit Train demand was normal to previous years
• Buying began in earnest in early February, moving market
up sharply
• Supply indications continue to be strong
•Net backs will continue to be a key factor for imports
•US plants expected to come online for 2016
•Donaldsonville, LA; Wever, IA; Port Neal, IA = up to 2.5
million tons of added urea capacity
© 2016 CHS INC. CONFIDENTIAL
NEW N PRODUCTION
Donaldsonville, LA
-Running
-1.2M tons/year
Wever, IA
-Not Running
Port Neal, IA
-Not Running
UREA – OUTLOOK
• Nearby supply and demand
• Volatility is alive and not going anywhere
• Nola market recently recovered approx. $50/st
• Depending upon demand, adequate supply capacity exists to temper price highs
• Regional volatility is also expected
• Current market level could potentially make high-cost producers idle and/or reduce spot imports/sales tenders
• Imports of 4 million tons for July – December, off 316,000 from prior period
• Lower urea values may have a significant impact on other N products
• Spring demand is still expected to be strong!
© 2016 CHS INC. CONFIDENTIAL
NOLA UREA
© 2016 CHS INC. CONFIDENTIAL
150
175
200
225
250
275
300
325
350
375
400
1/2/2015 4/2/2015 7/2/2015 10/2/2015 1/2/2016
Nola Urea 1-yr MA
Even with recent recovery, prices down ~$75 vs year ago
GLOBAL UAN (NITROGEN SOLUTION)
• UAN prices edging upwards as farmers in US/EU think
spring
• Egypt's Abu Qir closed a tender Feb 8 at $145/mt, spot
sale followed $148/mt
•China is quiet during the New Year holiday, though prices
are assed at $145-150/mt
• FSU plants report limited output which should provide
support
• CF Industries exported a 35K MT vessel of UAN in late
December destined for France
© 2016 CHS INC. CONFIDENTIAL
UAN (NITROGEN SOLUTION)
• Imports continue to arrive although the pace has slowed
• The increased production at Donaldsonville, LA is still not running (was expected to be online in Q4 2015)
• Delays at Wever, IA take it out of the supply picture until next summer at the earliest
• Indications are that US plants are running less than 80% capacity today
• Rail logistics are the biggest challenge facing UAN as we move into spring
• Lack of demand has had many rail fleets sitting idle and this capacity has been lost
• If we see an early spring, look for many rail shipments to be late this year
© 2016 CHS INC. CONFIDENTIAL
INTERNATIONAL PHOSPHATE DEMAND
• World markets have begun to stabilize
• World demand is very slow
• US and EU are the only viable, with consistency, destinations for exporters
• Brazil
• $2.5 USD billion in credit will be available to farmers, matching last years, well-below market rates, starting in February
• Currency devaluations remain a concern
• Government stability in question
• Poor farm economics in much of the world
• Chinese production costs along with lack of domestic demand are pointing to inevitable production curtailments
© 2016 CHS INC. CONFIDENTIAL
DOMESTIC PHOSPHATE UPDATE
• As spring season approaches, domestic producers will concentrate on local markets
• Imports are continuing to affect pricing as off-shore producers attempt to sell into the market
• Logistics will soon come into play the longer buyers remain on the sidelines
• US production rates are reported to be running somewhere around 60%
• It will be important to watch domestic producer production rates if sales continue to disappoint
• Heavy volumes need to occur between now and planting to come close to historical levels
• Labor and production cut backs are a clear sign of soft domestic and world markets
© 2016 CHS INC. CONFIDENTIAL
INTERNATIONAL POTASH UPDATE
Most of the world markets remain slow with pressure on prices
Some of the same factors influencing the phosphate market are affecting the potash market
• Currency devaluation across the globe
• Poor farm economic in most world markets
• Lackluster demand in all markets
Brazil bids and offers remain far apart, hampering new business
• Economic uncertainty overshadows all Brazilian trade
© 2016 CHS INC. CONFIDENTIAL
• PCS mothballing their New Brunswick Mine (total capacity of 1.8 million tons) and this mine could be down for several years
• India has temporarily restricted product movement from the ports
• US imports are not expected to dramatically drop off as importers prefer the relative stability provided by the US
INTERNATIONAL POTASH UPDATE
© 2016 CHS INC. CONFIDENTIAL
DOMESTIC POTASH UPDATE
• Inventories are building at Canadian production plants
• A large amount of tons are being shipped to the US unpriced so it is
difficult to discern inventory for Spring
• Watch for additional world wide curtailments in the near future
• Imports continue to pressure the river markets
• Rumors of BPC imports are beginning to surface, but quantities are
unknown
• Cheap Ocean Freight < Ferrari
• Barge freight vs Vessel
• Many buyers remain on the sidelines, but need to move soon to
ensure adequate supply
© 2016 CHS INC. CONFIDENTIAL
AMMONIUM SULFATE
Ample supply of AMS available in the US due to:
• Domestic production running at normal levels since
Sept. 2015
• Increase of US imports (mainly Chinese product)
•US off-shore imports are up 100,000 st for crop year 2016
over 2015
• Decrease of US exports due to general global economic
situation
• Exports continue to run behind prior years, down 90,000st
compared to 2015
© 2016 CHS INC. CONFIDENTIAL
AMMONIUM SULFATE
Chinese economic situation starting to cause Chinese
producers to cut-back production
• This may help to put a floor on international pricing soon
US market is expected to remain flat until spring demand
kicks in
An early start to spring along with strong in-season
demand will put pressure on logistics
• The long supply we have today could tighten quickly
• Price increases most likely will occur in season
© 2016 CHS INC. CONFIDENTIAL
LIQUID STARTERS
• Pricing is expected to be firm through spring season due to stable acid input costs
• Flat to modest growth is expected
• An early Spring would create ideal conditions to drive starter demand
• Plan now to include starters in your Spring 2016 product offering
•Consider including micronutrients to add value for grower customers
© 2016 CHS INC. CONFIDENTIAL
WRAP UP
Lower demand vs History
Domestic Production
Logistics
Questions?