© 2016 CHS Inc. - MVTLmvtl.com/_static/web/assets/media/pdf/mn2015/fertilizer.pdfAMMONIA IMPORTS...

© 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


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


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


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


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


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


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!


NOLA UREA


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


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


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


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


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


• 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


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


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


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


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


WRAP UP

Lower demand vs History

Domestic Production

Logistics

Questions?

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