Agriculture and Chemical Menu. by JPM

7/24/2019 Agriculture and Chemical Menu. by JPM

1/15www.jpmorganmarkets.c

North America Equity Research27 July 2015

Agriculture and Chemical MenuThe Week in Chemicals - 7/27/15

Chemicals: Specialty, Commoditand Agricultural

Jeffrey J. ZekauskasAC

(1-212) 622-6644

[email protected]

Bloomberg JPMA ZEKAUSKAS

Silke Kueck

(1-212) 622-6503

[email protected]

Ben Richardson

(1-212) 622-6455

[email protected]

Youyou Yan

(1-212) 622-4951

[email protected]

J.P. Morgan Securities LLC

See page 13 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that tfirm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor

making their investment decision.

The S&P Averages retreated (2.2%) this week, and the Chemical and

Agricultural companies were broadly routed; the more cyclical the equity, thelarger the price decrease. The stalwarts for the week, if they can be termed so,were Sherwin-Williams up 0.4%, Scotts Miracle-Gro, which edged lower by (0.6%),Valspar off (1.2%) and IFF, which gave back (1.4%). Oil prices moved lower andtook the petrochemicals down with them. Dow Chemical fell (10.2%) despitereporting far stronger than expected 2Q:15 EPS; LyondellBasell was (7.3%) lower;Westlake fell (6.3%); and Eastman receded (5.9%). Lower oil prices did little forPPG, off (7.6%) and for Axalta, which declined (3.2%). Agriculture was hit hard bystable-to-improving crop conditions: CF fell (11.7%); Potash Corp by (5.4%);Mosaic by (5.2%); Agrium by (4.7%); and Monsanto by (3.9%). Smallercapitalization specialties that had shown recent strength gave up ground: Ferro wasoff (5.7%) and Albemarle by (6.0%) and is now back below $50/sh. Titanium

dioxide companies, needless to say, struggled: Huntsman was (8.4%) lower andChemours was this weeks weakest performer, down (13.3%).

We expect lower and better entry points from the Chemical companies thisearnings season. The share prices of chemical companies, for the past two years,tended to rise whether news was good or bad, and now the share prices tend to godown whether news is good or bad, which is probably a reflection on the generalrelative trading multiples of the chemical companies. There is no longer an elementof prospective new activist activity that would make a difference. There is no senseof rising trading multiples and some sense of falling trading multiples. The chemicalcompanies thought to be non-cyclical are decidedly outperforming companies

perceived as cyclical. Investors have observed CE, PPG, DOW, and SHW reportdecent-to-excellent 2Q:15 EPS and then fall in value, and now simply want to stayclear of anything chemical, and certainly wish to reduce exposures going into any

new print. There is no confidence that holding a chemical company into a positiveprint will make a positive difference. Lower oil prices near-term are weighing on thecommodity chemical companies and weak demand numbers on the specialties. Thespecialties have run in price so far over the past two years that they do not fall intothe value category when they give up ground. Investors have wanted a larger rawmaterial benefit from the coatings companies that they have yet to receive, and soare to a degree dissatisfied with the group. That said, the earnings of the reportingchemical companies, generally speaking, are for the most part stronger than onewould have expected from a profit standpoint and weaker than one might havethought from a demand standpoint. Chemical earnings estimates are mostly risingon the margin.

Economics: Existing U.S. home sales lifted 3.2% m/m to 5.49m units annualized inJune. New U.S. home sales fell (6.8%) m/m to 0.482m units annualized in June. The

U.S. Architecture Billings Index (ABI), a leading indicator of construction activity,increased to 55.7 in June versus 51.9 in May and 48.8 in April. The Markit U.S.Manufacturing PMI inched higher from 53.6 in May to 53.8 in June.

The Brent price (COA Commodity) decreased from $57.10/bbl to $54.62/bbl.Henry Hub gas moved slightly lower from $2.84/mmBtu to $2.82/mmBtu.

Chemical Railcar shipments increased 1.1% for the week. July shipments are 0.7%higher y/y, and year-to-date shipments are 0.4% better.

Table of Contents

I. Commodity Chemicals Table 1: Ethane-based Ethylene Margin Table 2: Commodity Chemical Pricing Table 3: Chemicals & Feedstock Pricing

II. Railcars Table 4: Chemical Railcar Shipments

III. Crude Oil Crack Spreads Table 5: Global Crude Oil Pricing & Sprea

IV. Agricultural Chemicals & Crop Pricing Table 6: Fertilizer, Feedstock & Crop Pric Table 7: U.S. Crop Prices Table 8: U.S. Crop Conditions Table 9: U.S. Crop Budgets Figure 1: N. American Fertilizer Inventorie Table 10: Chinese Fertilizer Tariff Schedu Chart 1: Chinese Glyphosate Price

V. Currencies Table 11: Global Currencies

VI. Chemicals Stock Performance Table 12: Weekly Pricing Table


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Jeffrey J. Zekauskas(1-212) [email protected]

The bulk of 2Q earnings are to be reported this week: On Monday, RPM has itsearnings call at 10:00 a.m. (dial: 888-771-4371); JPM est. $0.85; Street est. $0.83. OnTuesday, EMNhas an earnings call at 8:00 a.m. (dial: 913-312-0934, ID 1077297); JPMest. $1.78; Street est. $1.83. The DD call is at 9:00 a.m. (dial: 847-413-3538, ID7613839); JPM est. $1.23; Street est. $1.22. The CMPcall is also at 9:00 a.m. (dial: 877-614-0009, ID 1706826); JPM est. $0.33; Street est. $0.30. LYB will host its call at 11:00a.m. (dial: 888-677-1826, ID 4843334); JPM est. $2.37; Street est. $2.72. ECL has anearnings call at 1:00 p.m. (contact ECL at 651-293-2233); JPM est. $1.10; Street est.$1.08. On Wednesday, AVYhas its earnings call at 10:00 a.m. (dial: 800-891-3472); JPMest. $0.92; Street est. $0.88. The HUN call is also at 10:00 a.m. (dial: 888-713-4211, ID43780722); Street est. $0.55. PXwill host its call at 11:00 a.m. (dial: 631-485-4849, ID72624899); JPM est. $1.53; Street est. $1.46. On Thursday, ASH has its earnings call at9:00 a.m. (dial: 877-303-6152, ID 75975407); JPM est. $1.76; Street est. $1.75. APD hasan earnings call at 10:00 a.m. (dial: 888-500-6974, ID 1083893); JPM est. $1.55; Streetest. $1.58. The FOE call is also at 10:00 a.m. (dial: 800-940-2599); Street est. $0.25.POTwill host its call at 1:00 p.m. (dial: 855-327-6838); JPM est. $0.55; Street est. $0.52.

Switching seats: Matthew Trerotola (prev. EVP at DuPont overseeing its Safety &Protection division, Electronics & Communications business, and Asia Pacific region) isleaving DuPont to become CEO of Colfax. Marc Doyle was named SVP of the Safety &Protection division at DuPont; James Collins, of Industrial Biosciences and PerformanceMaterials, will assume oversight of the Electronics & Communications business; andDouglas Muzyka, SVP and Chief Science & Technology Officer, assumes responsibilityfor the Asia Pacific region. Chris Jensen was named CFO at Celanese, a role he has beenfilling on an interim basis since May 2014. Minerals Technologies appointed W. RandMendez (prev. Corporate Marketing Director at DuPont) as SVP and Managing Directorof its Paper PCC business. Axalta named David Grimes (prev. Performance MaterialsBusiness Director at BASF) to the newly created role of Global VP of its AutomotivePlastic Components (APC) business. RPM International appointed Kenneth Armstrong toVP of Environmental, Health & Safety; Tracy Crandall to VP, Associate General Counseland Assistant Secretary; and Melissa Schoger to VP of Planning & Financial analysis.

Investimus Foris plans to invest $265m to convert an idle biofuels refinery to anammonia manufacturing facility in Grant Parish, Louisiana. The Lithuania-basedcompany plans to purchase the assets from the former Vanguard Synfuels refinery as thesite for its new facility. The plant is designed to produce 500,000 st/year ammonia for thenorthern U.S. market and potentially for exports. The project is expected to be completedin late 2018.

The weather in key corn growing regions continues to improve, and corn cropconditions are unchanged for a third week in succession. As of the week ending July19, 69% of U.S. corn was in good or excellent condition (compared to 76% last year), and31% was in fair or poor condition (compared to 24% a year ago).

Potash: Domestic potash barge prices slipped (~$5/st) this week to a range of $305-310/s

fob NOLA. Corn Belt prices are trending lower at about $340/st, and below the producersummer fill price of $355/st. Brazil potash prices are under pressure with August ton

being offered at $320-325/mt cfr and buyers indicating interest at $310-$320/mt cfr. InIndia, potash imports are (32%) lower y/y for the April-June period at 669 kt, which could

be a timing issue. About 700 kt of potash are to arrive in India in July. In China, potasimports are (2%) lower YTD through June at 3.87m tons. Canadian and Belarusian potashshipments to China grew 67% and 50% to 1.19m tons and 0.99m tons, respectively. Bycontrast, Russian and Israeli potash shipments to China slipped (8%) and (81%) to 0.95mtons and 0.18m tons, respectively.


3/15


Jeffrey J. Zekauskas(1-212) [email protected]

Phosphate: The general pattern over the past month has been a slowly eroding price inSouth America stemming from weak demand and general price stability elsewherePhosphate prices still continue to edge lower in Brazil. Brazilian MAP is close to $470/cfr. There is talk that higher prices in Brazil are needed for OCP to ship to Brazil in sizeThere is some firming domestically with some barges at $430-$440/st up from $420/stIndia is taking material at $465/t fob and landed prices are near to $480/t in the US GulfIndian demand is reasonably strong. Indian DAP imports in June were 1.1m tons and DAPimports from April to June 2015 are 2.55m tons, which is more than double the shipmentof the year-ago period. China has been a key beneficiary of the Indian phosphate demanstrength. DAP exports YTD from China through June are 2.8m tons, more than double lasyears total. DAP raw materials are generally stable with little movement in ammonia andsulfur prices.

Nitrogen: Prices for granular urea in Nola edged higher by a couple of dollars to jusunder $290/st fob. China prills are quoted at $280/t fob but little business is beingtransacted at such levels: ideas are closer to $265/t for August and September with the

price direction lower. January through June global exports from China were 6.7m tons up62% from the same period in 2014. China urea exports over the 12 months ending Jun2015 were 16.2m tons. Black Sea ammonia is unchanged at just under $390/t as it has

been for most of July. There are more bullish feelings about ammonia for September duto prospective gas curtailments in Trinidad that could amount to more than 25% oTrinidad production for later in September and into October. Year to date ammoniaimports from Trinidad to the US have been about 5% higher. UAN pricing is decidedlysoft. Some sources maintain Nola prices are just above $210/st; others claim that som

barges are indicated closer to $200/st. Black Sea and Egyptian UAN prices each lookabout $10/t lower from last week between $180-$190/t fob.


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North America Equity Research

27 July 2015Jeffrey J. Zekauskas(1-212) [email protected]

Commodity ChemicalsTable 1: Ethane-based Ethylene Margin

Ethane Price(cents/gal)

Ethylene contract Price(cents/lb)

Ethane-based EthyleneMargin (cents/lb)

Monthly Average Ethane-based Ethylene Margin (cents/lb)

2015 YTD 18.44 34.43 26.43Week 3 Jul 19.00 33.00 24.75Week 2 Jul 18.63 33.00 24.92Week 1 Jul 18.25 33.00 25.082Q:15 18.27 34.58 26.66Jun-15 18.68 33.75 25.64May-15 18.97 35.50 27.271Q:15 18.62 34.75 26.67Mar-15 18.33 34.25 26.29Feb-15 18.33 34.75 26.80Jan-15 19.19 35.25 26.922014 26.81 48.02 36.384Q:14 20.82 44.77 35.73Dec-14 17.53 38.30 30.69Nov-14 22.37 45.50 35.79

Oct-14 22.56 50.50 40.713Q:14 23.65 51.77 41.50Sep-14 23.36 54.50 44.36Aug-14 22.83 51.30 41.39Jul-14 24.75 49.50 38.762Q:14 29.03 47.18 34.58Jun-14 29.00 47.75 35.16May-14 28.66 47.00 34.56Apr-14 29.44 46.80 34.021Q:14 33.74 48.35 33.71Mar-14 30.08 45.30 32.24Feb-14 38.69 49.50 32.71Jan-14 32.44 50.25 36.172013 25.83 46.63 35.42

Source: IHS Chemical, Bloomberg, and J.P. Morgan estimates. Note: Ethane-based ethylene margin is calculated as: ethylene contract price-0.434*ethane spot price. Wkly prices as of end of the week.

Table 2: U.S. Commodity Chemical Contract PricingEthylene, Contract Propylene* Butadiene High-Density PE (HDPE) Polypropylene (PP)

2014 2015 2014 2015 2014 2015 2014 2015 2014 2015Jan $0.503 $0.353 $0.730 $0.480 $0.553 $0.373 $0.815 $0.775 $0.960 $0.730Feb $0.495 $0.348 $0.720 $0.490 $0.607 $0.291 $0.855 $0.725 $0.950 $0.740Mar $0.453 $0.343 $0.705 $0.475 $0.695 $0.291 $0.855 $0.725 $0.935 $0.725Apr $0.468 $0.343 $0.695 $0.415 $0.695 $0.293 $0.855 $0.725 $0.925 $0.685May $0.470 $0.345 $0.690 $0.405 $0.695 $0.300 $0.855 $0.775 $0.920 $0.675Jun $0.475 $0.338 $0.660 $0.385 $0.666 $0.350 $0.855 $0.775 $0.890 $0.685Jul $0.495 $0.330e $0.660 $0.365 $0.633 $0.413e $0.855 $0.775e $0.890 $0.670eAug $0.515 $0.710 $0.609 $0.855 $0.940Sep $0.545 $0.710 $0.569 $0.885 $0.940Oct $0.505 $0.750 $0.549 $0.885 $0.980Nov $0.455 $0.700 $0.463 $0.855 $0.930Dec $0.383 $0.600 $0.433 $0.815 $0.835

Titanium Dioxide (TiO2)** PET Resin Polyvinyl Chloride (PVC) Caustic Soda*** Chlorine***2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

Jan $3,567 $2,963 $0.803 $0.675 $0.73 $0.74 $390 $360 $150 $150Feb $3,470 $2,871 $0.775 $0.660 $0.76 $0.74 $380 $350 $140 $150Mar $3,472 $2,748 $0.765 $0.680 $0.79 $0.77 $410 $330 $140 $150Apr $3,469 $2,678 $0.800 $0.713 $0.79 $0.77 $420 $330 $140 $150May $3,408 $2,686 $0.800 $0.750 $0.79 $0.77 $420 $330 $140 $160Jun $3,396 $2,693 $0.820 $0.770 $0.79 $0.77 $420 $320 $150 $160Jul $3,388 $2,677e $0.850 $0.780e $0.79 $0.77e $410 $150Aug $3,368 $0.865 $0.79 $370 $150Sep $3,202 $0.848 $0.81 $360 $150Oct $3,065 $0.823 $0.81 $350 $150Nov $3,041 $0.755 $0.79 $370 $150Dec $3,032 $0.725 $0.76 $370 $150

Source: Industry Sources, Chemical Data Inc, IHS Chemical, Industrial Minerals and J.P. Morgan estimates. Note: *The propylene price is quoted as the chemical grade propylene price.

**TiO2 prices are quoted as dollar per metric ton. The global blended price is composed of 24% of North America, 34% of EMEA, 5% of Latin America and 37% of Asia.

*** Caustic soda and chlorine prices are quoted as dollars per short ton.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00


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Table 3: U.S. Commodity Chemicals & Feedstock Spot Pricing

WeekEnding

Week Month Quarterly Average Annual Average Since 20

24-Jul Ago Ago QTD 2Q:15 3Q:14 2Q:14 YTD 2014 2013 Low H

Olefins

Ethylene (cents/lb.) FINSETFD 35.00 35.00 36.00 35.00 35.50 66.94 55.12 35.80 5 7.78 57.05 --

Est. Ethane-based ethylene margin (cents/lb), spot 26.92 27.08 27.92 27.02 27.57 56.67 42.52 27.79 46.19 45.76 --

Propylene (cents/lb.) FINSPPFD 23.00 24.00 30.00 24.06 29.68 59.77 57.91 32.95 58.38 58.73 --

Feedstocks

Benzene ($/gal) MATSBNFB 2.89 2.77 2.78 2.85 2.69 4.80 4.66 2.50 4.45 4.41 --

WeekEnding


24-Jul Ago Ago QTD 2Q:15 3Q:14 2Q:14 YTD 2014 2013 Low H

Feedstocks

Natural Gas, H. Hub ($/mmBTU) NGUSHHUB 2.82 2.84 2.77 2.82 2.72 3.93 4.58 2.79 4.32 3.72 1.82 1

Light Naphtha ($/gal) LPGSMBNG 1.04 1.09 1.21 1.10 1.26 2.11 2.22 1.17 1.98 2 .14 0.65 3

Ethane (cents /gal) LPGSMBPE 19.00 18.63 19.00 18.38 18.27 23.65 29.03 18.44 26.72 26.02 15.00 15Propane ($/gal) LPGSMBPP 0.42 0.43 0.41 0.42 0.47 1.04 1.06 0.49 1.04 1.00 0.32 1

Ethanol ($/gal) DLA Comdty 1.50 1.54 1.56 1.59 1.51 1.68 1.81 1.50 1.70 1.86 1.38 2

Source: Bloomberg. Note: Spot propylene price represents refinery grade propylene.

Railcars

Table 4: U.S. Chemical Railcar Shipments

Freight Carloads Y-O-Y % Change Monthly U.S. Railcar Shipments

As of 7/18/15 30,057 1.1%

Year Ago Week 29,734Week Prior 7/11/15 31,213

YTD Total 853,152 0.4%

Year-Ago YTD Total 849,643

Weekly Average 2014 2015 Y-O-Y % Change

January 29,456 30,670 4.1%

February 30,291 30,871 1.9%

March 30,524 30,410 (0.4%)

April 31,208 31,094 (0.4%)

May 30,517 29,976 (1.8%)

June 29,958 29,827 (0.4%)

July 30,013 30,225 0.7%

August 30,416

September 29,752

October 29,929November 28,938

December 29,883

Source: Bloomberg, Association of American Railroads, and J.P. Morgan estimates.

24,000

25,000

26,000

27,000

28,000

29,000

30,000

31,000

32,000

33,000


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Crude Oil Crack Spreads

Table 5: Global Crude Oil Pricing & Spreads

$ per barrel, X-Y-Z crack spreads represent (Y * $/barrel of gasoline) + (Z * $/barrel of heating oil) - (X * $/barrel of crude oil)

Global Crude Oil Prices and SpreadsWeek

EndingWeek Month Quarterly Average Annual Average Since 2005

(Spot Prices) 24-Jul Ago Ago QTD 2Q:15 3Q:14 2Q:14 YTD 2014 2013 Low HighCrack Spreads - Bloomberg TickerHeavy - Light (WTI - Maya)Spread ($/barrel)

1.36 1.49 2.89 1.65 2.49 6.65 7.36 3.27 7.36 0.63 (15.15) 24.14

WTI 2-1-1 Crack Spread - Cushing ($)- CRKS211C

19.01 20.17 15.43 19.92 16.55 14.29 15.48 16.51 13.60 18.91 (1.64) 51.61

WTI 3-2-1 Crack Spread - Cushing ($)- CRKS321C

20.75 22.98 17.39 22.58 17.81 14.10 15.23 17.32 12.83 17.70 (2.02) 56.05

European Dated Brent 3-2-1 Crack Spread ($)- CRKS321Y

16.60 17.72 17.73 18.43 16.24 12.81 11.50 15.11 12.01 10.82 1.10 51.50

Crude Oil Prices - Bloomberg Ticker

WTI Crude Oil, Cushing, OK ($/barrel)- USCRWTIC 47.99 50.89 59.63 52.42 57.68 97.69 103.15 53.14 93.07 98.01 31.41 145.29

Crude Oil, Brent Active Contract ($/barrel)- COA Comdty

54.62 57.10 63.84 58.21 65.08 103.58 103.04 62.24 96.99 97.45 54.31 109.64

European Dated Brent Crude Oil ($/barrel)- EUCRBRDT

53.85 56.34 61.35 57.20 62.08 102.14 109.84 58.00 98.91 108.84 34.04 145.66

Latin American (Maya) Crude Oil ($/barrel)- LACRMAUS

46.63 49.40 56.74 50.77 55.19 91.04 95.78 49.87 85.71 97.38 26.56 130.74

Note: Crude Oil Brent price historical low/high is quoted starting at 2/24/2006

Source: Bloomberg and J.P. Morgan estimates.


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Agricultural Chemicals & Crop PricingTable 6: Benchmark Selling Prices for Fertilizer Products, Major Crops, and Key Feedstocks

WeekEnding


24-Jul Ago Ago QTD 2Q:15 3Q:14 2Q:14 YTD 2014 2013 Low High

Products

Ammonia

US Gulf cfr ($/mt) 465 465 455 465 468 552 564 483 550 611 125 955

Benchmark Margin ($/mt) 329 332 320 330 337 375 363 349 381 483

Caribbean fob ($/mt) 418 418 408 418 421 504 517 436 504 564 85 891

Urea

US Gulf fob ($/mt) 330 332 351 335 331 379 389 338 379 520 211 907

Benchmark Margin ($/mt) 224 228 246 230 228 244 236 233 249 416 Yuzhnyy/Black Sea fob ($/mt) 270 288 297 274 284 333 316 291 343 408 173 813

Trinidad/Venez fob ($/mt) 269 276 300 280 276 315 304 286 340 450 193 825

Nitrogen Solutions (UAN 32% N)

NOLA ($/mt) 231 231 231 231 254 265 298 266 303 338 135 573

Benchmark Margin ($/mt) 156 157 156 156 181 175 198 192 215 248

DAP

Central Florida fob ($/mt) 474 475 475 475 485 481 498 484 477 538 219 1193

US Gulf export fob ($/mt) 465 470 472 469 469 499 461 474 443 535 223 1228

Potash

Vancouver fob spot ($/mt) 295 295 308 295 308 295 293 306 391 474 148 875

Brazil cfr spot ($/mt) 313 318 320 317 319 320 312 319 420 526 181 1008

Feedstocks

Natural Gas

Henry Hub ($mmBTU)-NGUSHHUB 2.82 2.84 2.77 2.82 2.72 3.93 4.58 2.79 4.32 3.72 1.82 15.39

Ammonia

Tampa cfr ($/mt) 460 460 450 460 463 547 559 478 545 607 125 931

Phosphate

Phosphate Rock 68-70% BPL (cfr India, $/mt) 129 129 129 129 130 125 124 132 148 195 N/A N/A

Phosphoric Acid (cfr India, $/mt) 810 810 805 810 805 738 702 789 723 917 N/A N/A

Sulfur

Tampa/Florida cfr contract ($/lt) 137 132 132 135 135 135 131 138 123 175 0 606

Basic Freight Indices 23-Jul 17-Jul

Baltic Dry Freight Index BDIY 1102 1048 790 933 629 1093 953 659 1101 1220 509 11793

Panamax (50-60,000 mt)-BPIY 1161 1162 834 1053 646 1026 738 677 964 1195 418 11713

Source: ARGUS FMB, FWA, Green Markets, Bloomberg, and J.P. Morgan estimates. Note: mt=metric ton (2,205 pounds); mmBtu=million British Thermal Units; bu=bushel.

Table 7: U.S. Crop Prices (Near-Month Futures)In $ per bushel, except cotton in $ per pound

U.S. Crop Prices Price Week Month Quarterly Average % Change Annual Average % Change Since 2005

24-Jul Ago Ago QTD 2Q:15 3Q:14 QTD YTD 2014 YTD Low High

Corn 3.93 4.20 3.68 4.18 3.66 3.61 16.0% 3.81 4.16 (8.4%) 1.86 8.31

Soybeans 9.91 10.15 9.88 10.27 9.64 11.52 (10.8%) 9.83 12.45 (21.1%) 5.00 17.71

Wheat 5.12 5.54 5.22 5.65 5.05 5.29 6.8% 5.20 5.88 (11.5%) 2.88 12.80

Cotton 0.66 0.66 0.64 0.66 0.65 0.67 (1.8%) 0.64 0.76 (16.8%) 0.39 2.15



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Table 8: Crop Progress - Conditions

Very Poor Poor Fair Good Excellent

Corn (Jul 19) 2% 7% 22% 52% 17%

Corn (Jul 12) 2% 7% 22% 54% 15%

Soybean (Jul 19) 3% 8% 27% 50% 12%

Soybean (Jul 12) 3% 8% 27% 50% 12%

Wheat (Jul 19) 1% 6% 23% 55% 15%

Wheat (Jul 12) 1% 5% 23% 56% 15%

Cotton (Jul 19) 1% 7% 35% 46% 11%

Cotton (Jul 12) 1% 7% 35% 47% 10%

Source: USDA. Note: Corn and soybeans represents 18 states, cotton 15 states, Spring wheat: 6 states.

Table 9: U.S. Crop Budgets

Corn Soybeans Wheat Cotton ($/lb)

03/04-

11/12Avg

2013/14

2014/15

2015/16

03/04-

11/12Avg

2013/14

2014/15

2015/16

03/04-

11/12Avg

2013/14

2014/15

2015/16

03/04-

11/12Avg

2013/14

2014/15

2015/16

Price $/bu or lb. 3.64 4.39 3.56 4.09 8.97 13.00 9.53 9.55 4.73 6.87 4.74 5.22 0.66 0.78 0.64 0.65

Yield bu or lb./acre 152 158 171.0 166.8 41 44 47.8 46.0 44 47 43.7 44.3 814 821 838 819

Gross Revenue $/acre 555 694 609 683 372 572 456 439 210 323 207 231 537 640 536 532

Seed $/acre 63 109 111 110 43 66 67 69 10 17 16 16 64 104 106 106

Fertilizer $/acre 86 131 104 112 15 21 17 19 37 55 44 47 68 109 88 94CropProtection

$/acre25 29 26 29 18 28 28 28 10 15 14 14 64 72 70 70

Other $/acre 85 106 111 111 60 72 87 87 59 72 73 73 245 292 285 285Total CashCosts

$/acre259 375 352 362 136 187 200 202 116 159 148 150 441 577 549 555

Margin $/acre 296 319 257 321 236 385 256 237 94 164 59 81 96 63 (13) (26)

Source: USDA, Doanes, Green Markets, Agrium, Bloomberg and J.P.Morgan estimates. Cotton prices in $/lb.


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Figure 1: North American Fertilizer Producer Inventories

United States Phosphate (P2O5) Inventories (in short tons)

1Q:15s ending inventory increased by 59,000 short tons versus 4Q:14 and is 15.5% above the previous 5-year avg.

North American Potash (KCl) Inventories (in metric tons)

1Q:15s ending inventory increased by 641,000 metric tons versus 4Q:14 and is (2.9%) below the previous 5-year avg.

North American Urea Inventories (in short tons based on 3-month lag)

4Q:14s ending inventory increased by 208,000 short tons versus 3Q:14 and is (14.3%) below the previous 5-year avg.

Source: The Fertilizer Institute and J.P. Morgan estimates.

0

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1Q 2Q 3Q 4Q

5-year average 2013 2014 2015

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4,000

1Q 2Q 3Q 4Q

5-year average 2013 2014 2015

0

100

200

300

400

500

600

700

800

1Q 2Q 3Q 4Q

5 Year Average 2014 2013 2012


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Table 10: Chinese Fertilizer Tariff Schedule 2015

Product Season Period Provisional Tax Special Tax Base Price (if applicable)

Urea All Year Jan 1 - Dec 31 Rmb80 None None

DAP All Year Jan 1 - Dec 31 Rmb100 None None

MAP All Year Jan 1 - Dec 31 Rmb100 None None

Source: ARGUS FMB, Fertecon.

Chart 1: Chinese Glyphosate Price

Source: Bloomberg.

$3,000$3,250$3,500$3,750

$4,000$4,250$4,500$4,750$5,000$5,250$5,500$5,750$6,000$6,250$6,500$6,750$7,000

China Glyphosate Price in $/mt - CHCNGLYP


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Currencies

Table 11: Global Currencies

USD ($) Denominated

Global Currencies (Spot) Price Week Month Quarterly Average % Change Annual Average % Change Since 2005

USD Denominated 24-Jul Ago Ago QTD 2Q:15 3Q:14 QTD YTD 2014 YTD Low Hi

Euro 0.910 0.923 0.895 0.909 0.903 0.730 24.53% 0.897 0.753 19.17% 0.625 0.9

Chinese Renminbi 6.208 6.211 6.209 6.209 6.201 6.101 1.76% 6.217 6.161 0.91% 6.041 8.2

Brazilian Real 3.353 3.189 3.129 3.177 3.070 2.362 34.54% 2.982 2.346 27.08% 1.540 3.3

Canadian Dollar 1.305 1.297 1.232 1.279 1.229 1.103 15.97% 1.239 1.104 12.25% 0.920 1.3

Japanese Yen 123.808 124.054 123.854 123.202 121.319 102.796 19.85% 120.583 105.614 14.17% 75.827 125.

Mexican Peso 16.265 15.929 15.555 15.845 15.319 13.228 19.79% 15.215 13.297 14.43% 9.858 16.2

Australian Dollar 1.373 1.357 1.306 1.344 1.286 1.115 20.49% 1.286 1.108 16.03% 0.907 1.6

South Korea Won 11.705 11.505 11.230 11.398 10.975 10.699 6.54% 11.039 10.528 4.85% 9.022 15.8

Global Currencies (Spot) Price Week Month Quarterly Average % Change Annual Average % Change Since 2005

Offshore Denominated 24-Jul Ago Ago QTD 2Q:15 3Q:14 QTD YTD 2014 YTD Low Hi

Euro 1.098 1.083 1.117 1.101 1.107 1.370 (19.70%) 1.115 1.328 (16.09%) 1.050 1.5

Chinese Renminbi 0.161 0.161 0.161 0.161 0.161 0.164 (1.73%) 0.161 0.162 (0.90%) 0.121 0.1

Brazilian Real 0.298 0.314 0.320 0.315 0.326 0.423 (25.67%) 0.335 0.426 (21.31%) 0.298 0.6

Canadian Dollar 0.767 0.771 0.812 0.782 0.814 0.907 (13.77%) 0.807 0.906 (10.91%) 0.767 1.0

Japanese Yen 0.008 0.008 0.008 0.008 0.008 0.010 (16.56%) 0.008 0.009 (12.41%) 0.008 0.0Mexican Peso 0.061 0.063 0.064 0.063 0.065 0.076 (16.52%) 0.066 0.075 (12.61%) 0.061 0.1

Australian Dollar 0.728 0.737 0.766 0.744 0.778 0.897 (17.01%) 0.778 0.902 (13.81%) 0.601 1.1

South Korea Won 0.085 0.087 0.089 0.088 0.091 0.093 (6.14%) 0.091 0.095 (4.63%) 0.063 0.1



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The S&P 500 decreased -2.2% for the week. The top performers for 2015 are Pall(+24.1%), Novozymes (+22.5%), and Axalta (+15.9%). The largest decliners are

Chemours (-45.8%), Axiall (-32.3%) and Potash Corp. (-21.7%).

Table 12: Weekly Pricing Table

YTD Pricing Table JPM Price Price YTD Increase/ Weekly Pricing Table Price 1-Week Increase

Company Ticker Rating 12/31/14 7/24/15 (Decrease) Company 7/24/15 (Decrease)

Specialty, Commodity & Agricultural Specialty, Commodity & Agricultural

Chemicals Chemicals

Pall Corp. PLL N 101.21 125.60 24.1% Novozymes 51.93 0.8%

Novozymes NZYMB.DC N 42.40 51.93 22.5% Sherwin-Williams 267.12 0.4%

Axalta AXTA OW 26.02 30.16 15.9% Pall Corp. 125.60 -0.1%

Avery Dennison AVY N 51.88 60.11 15.9% Scotts Miracle-Gro 59.33 -0.6%

Ferro FOE N 12.96 14.98 15.6% Valspar Corp. 80.61 -1.2%

LyondellBasell LYB OW 79.39 90.37 13.8% Intl. Flavors & Fragrances 111.10 -1.4%CF Industries Holdings CF N 54.51 60.85 11.6% WD-40 Company 87.96 -1.4%

Intl. Flavors & Fragrances IFF N 101.36 111.10 9.6% Compass Minerals 81.55 -2.3%

Agrium Inc. AGU N 94.72 101.18 6.8% Ashland 115.02 -2.3%

Orion OEC OW 16.99 18.14 6.8% RPM International 45.97 -2.4%

Ecolab ECL OW 104.52 109.53 4.8% Avery Dennison 60.11 -2.8%

Celanese CE N 59.96 62.47 4.2% Ecolab 109.53 -2.9%

WD-40 Company WDFC N 85.08 87.96 3.4% Axalta 30.16 -3.2%

Sherwin-Williams SHW N 263.04 267.12 1.6% Praxair 112.98 -3.4%

Dow Chemical DOW OW 45.61 45.97 0.8% Monsanto 102.86 -3.9%

Westlake Chemical Corp. WLK OW 61.09 60.63 -0.8% Minerals Technologies 61.52 -4.0%

Eastman Chemical EMN OW 75.86 73.55 -3.0% Air Products & Chemicals 130.06 -4.5%

Ashland ASH N 119.76 115.02 -4.0% DuPont 56.94 -4.6%

Scotts Miracle-Gro SMG OW 62.32 59.33 -4.8% H.B. Fuller 38.83 -4.6%

Mosaic Company MOS OW 45.65 42.89 -6.0% Agrium Inc. 101.18 -4.7%

Compass Minerals CMP N 86.83 81.55 -6.1% Orion 18.14 -5.0%Valspar Corp. VAL OW 86.48 80.61 -6.8% Celanese 62.47 -5.0%

RPM International RPM N 50.71 45.97 -9.3% Cabot Corp. 34.80 -5.1%

Air Products & Chemicals APD N 144.23 130.06 -9.8% Mosaic Company 42.89 -5.2%

PPG Industries PPG OW 115.58 103.25 -10.7% Potash Corp. Saskatchewan 27.65 -5.4%

Minerals Technologies MTX OW 69.45 61.52 -11.4% Ferro 14.98 -5.7%

Praxair PX N 129.56 112.98 -12.8% Eastman Chemical 73.55 -5.9%

H.B. Fuller FUL N 44.53 38.83 -12.8% Albemarle Corp. 49.81 -6.0%

Monsanto MON NR* 119.47 102.86 -13.9% Westlake Chemical Corp. 60.63 -6.3%

Albemarle Corp. ALB N 60.13 49.81 -17.2% LyondellBasell 90.37 -7.3%

Huntsman Corp. HUN N 22.78 18.82 -17.4% PPG Industries 103.25 -7.6%

DuPont DD N 70.24 56.94 -18.9% Huntsman Corp. 18.82 -8.4%

Cabot Corp. CBT OW 43.86 34.80 -20.7% Axiall Corp. 28.75 -8.7%

Potash Corp. Saskatchewan POT OW 35.32 27.65 -21.7% Dow Chemical 45.97 -10.2%

Axiall Corp. AXLL N 42.47 28.75 -32.3% CF Industries Holdings 60.85 -11.7%

Chemours CC UW 20.85 11.31 -45.8% Chemours 11.31 -13.3%Major Indices Major Indices

Dow Jones Industrial Average DJII 17823.07 17569 -1.4% Dow Jones Industrial Average 17569 -2.9%

Nasdaq Composite COMP 4736.05 5089 7.4% Nasdaq Composite 5089 -2.3%

S&P 500 Index SPX 2058.90 2080 1.0% S&P 500 Index 2080 -2.2%

Key: OW = Overweight, N = Neutral, UW = Underweight.Source: Bloomberg and J.P. Morgan estimatesNOTE: Companies at and above the shaded line represent companies that outperformed the S&P 500.**Chemours (CC) began trading on June 19, 2015.*Due to J.P. Morgan's involvement in the proposed transaction, we are suspending our rating, price target, and estimates for Monsanto (MON)


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Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple researchanalysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document

individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the viewsexpressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part ofany of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or viewsexpressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as perKOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence orintervention.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available forcompendium reports and all J.P. Morgancovered companies by visiting https://jpmm.com/research/disclosures , calling 1-800-477-0406,or e-mailing [email protected] with your request. J.P. Morgans Strategy, Technical, and QuantitativeResearch teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected] .

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform theaverage total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelvemonths, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return ofthe stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, ifapplicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policyreasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not arecommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return iscompared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appearin the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans researchwebsite, www.jpmorganmarkets.com.

Coverage Universe: Zekauskas, Jeffrey J: Agrium (AGU), Air Products and Chemicals (APD), Albemarle Corporation (ALB), AshlandInc. (ASH), Avery Dennison (AVY), Axalta Coating Systems Ltd. (AXTA), Axiall Corp (AXLL), CF Industries Holdings, Inc. (CF),

Cabot Corporation (CBT), Celanese (CE), Chemours (CC), Compass Minerals International, Inc. (CMP), Dow Chemical (DOW), DuPont(DD), Eastman Chemical Company (EMN), Ecolab Inc. (ECL), Ferro Corp (FOE), H.B. Fuller (FUL), Huntsman Corporation (HUN),International Flavors & Fragrances (IFF), LyondellBasell Industries (LYB), Minerals Technologies (MTX), Monsanto (MON),

Novozymes (NZYMb.CO), Orion Engineered Carbons (OEC), PPG Industries (PPG), Pall Corporation (PLL), Polypore International(PPO), Potash Corp. (POT), Praxair (PX), RPM International Inc. (RPM), Scotts Miracle-Gro Co. (SMG), Sherwin-Williams (SHW), TheMosaic Company (MOS), Valspar Corp (VAL), WD-40 Company (WDFC), Westlake Chemical Corp. (WLK)

J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2015

Overweight

(buy)Neutral

(hold)Underweight

(sell)

J.P. Morgan Global Equity Research Coverage 44% 43% 13%

IB clients* 51% 48% 38%

JPMS Equity Research Coverage 45% 47% 9%IB clients* 71% 66% 57%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a holdrating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the tableabove.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for coveredcompanies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analystor your J.P. Morgan representative, or email [email protected] .

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation basedupon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Other Disclosures


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