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PotashCorp.com
December 5, 2012
Q4 2012 Market Analysis Report
This presentation contains forward-looking statements or forward-looking information (forward-looking statements). These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. These statements are based on certain factors and assumptions including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to: variations from our assumptions with respect to foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective tax rates; fluctuations in supply and demand in the fertilizer, sulfur, transportation and petrochemical markets; costs and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; changes in competitive pressures, including pricing pressures; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract negotiations with major markets; economic and political uncertainty around the world, including the European sovereign debt crisis; timing and impact of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company’s investments; unexpected or adverse weather conditions; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflows; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake; strikes or other forms of work stoppage or slowdowns; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2011 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this presentation and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Forward-looking Statements
• World Agriculture and Fertilizer Market Update
• Latin America Agriculture Market Review
• Latin America Fertilizer Market Overview
Presentation Overview
Agriculture and Fertilizer Market Update
Source: USDA
Million Tonnes
Consumption Change 2012 vs 2011
Million Tonnes
Production Change 2012 vs 2011
Widespread Production Issues Have Impacted Consumption
World Grain Supply/Demand
Source: USDA
Percent
Inventories Are Tight in Major Producing and Consuming Regions
World Grain Stocks-to-Use Situation
2012 Stocks-to-Use Compared to 25-Year Average
2012F Stocks (million tonnes)
Source: Bloomberg
Price Index (10-Year Average = 100)Price Index (10-Year Average = 100)
Prices Remain Well Above Historical Levels
World Crop Prices
Source: DTN, Bloomberg, USDA, PotashCorp
US$/Acre
2013 Return Over Variable Costs Scenarios
Price Index (January 2011 = 100)
US Corn and Retail Fertilizer Prices
Affordability of Fertilizer Remains Extremely Strong
US Corn Economics
Corn Price Scenarios - $/bushel
Source: Fertecon
Million Tonnes - YTD
Ammonia Supply Has Been Constrained in Major Exporting Regions
Ammonia Exports by Major Region
Source: USDOC
Thousand Short Tons
Urea
Thousands Short Tons
Ammonia
Ammonia Imports Decline; Urea Imports Jump
US Nitrogen Imports
Source: Fertecon, Brilliant Pioneer Consultants
Thousand Tonnes
Surge in Chinese Exports Has Impacted the Global Market
China Urea Exports
Source: TFI
Thousand Short Tons
Inventory
Thousand Short Tons
Production
Production Issues Have Resulted in a Relatively Tight Market
US DAP/MAP Production and Inventory
Source: TFI
Thousand Short Tons
Sales Up 5 Percent in 2012 to Meet Strong Consumption
US DAP/MAP Producer Domestic Shipments
Source: Fertecon, CRU, Industry Publications, PotashCorp
Million Tonnes KCl
Inventory Destocking and Lower Indian Imports Affect Demand in 2012
World Potash Demand
Source: IPNI
Thousand Tonnes KCl
Sales Up 30 Percent in Second Half 2012 to Meet Strong Fall Consumption
NA Potash Producer Domestic Shipments
Source: Fertecon, CRU, Industry Publications, PotashCorp
Million Tonnes KCl
Expect Strong Rebound in Demand in 2013
World Potash Shipments
India China Latin America
Other Asia
North America
Other
Latin America Agriculture Market Review
Source: FAO, USDA
Percentage of Regional ProductionPercentage of World Production
Large Producer and Exporter of Major Livestock Products
Latin America Animal Protein Profile
Source: FAO, USDA
Percentage of Regional ProductionPercentage of World Crop Production
Leading Producer and Exporter of Major Crops
Latin America Crop Production Profile
Source: USDA
World Trade Share
Latin America Corn Exports
Million Tonnes
Latin America Soybean Exports
Rising Demand for Food Shows Latin American Potential
Latin America Soybean and Corn Export Profile
Million TonnesWorld Trade Share
Based on crop year data. For example, 2012F refers to the 2012/13 crop year.
Source: Macquarie Research, USDA
Brazil’s freight costs from US$ 80 to US$ 160 per tonne to move soybeans from the Mato Grosso to the southern ports.
US Infrastructure AdvantageBrazil’s Infrastructure Burden
New Land Requires Development and Marketing Infrastructure Investments
Brazil and US Infrastructure Profile
Rail
Road
Road
Rail
Water
Water
US freight costs range from US$ 30 to US$ 40 per tonne to move soybeans from the Midwest to Gulf ports.
Source: El Tejar, ANDA, Google Maps
Significant Investments Expected to Improve Competitiveness
Mato Grosso Infrastructure Developments
Source: USDA, CONAB, Macquarie Research
US$/bushel
FOB Soybean Cost Curve
US$/bushel
FOB Corn Cost Curve
Brazil Is a High-Cost Corn and Soybean Producer Due to Infrastructure Burden
Corn and Soybean Cost Curves
Source: USDA, Rabobank
Crop Production Activity Occurs During Most of The Year
South American Crop Calendar
- Planting - Pollination - Maturing - Harvest
ArgentinaWheatEarly CornLater Corn1st Soybeans2nd Soybeans
BrazilNorth East CornCentre-South Safra CornCentre-South Safrinha CornSoybeans
Mar Apr May Jun JulSep Oct Nov Dec Jan Feb
Source: USDA
Corn Growing RegionsWheat Growing Regions
Crops Are Primarily Produced in the Northern/Central Provinces
Soybean Growing Regions
Crop Producing Regions – Argentina
Source: USDA
Corn Producing RegionsSugar Producing Regions
Crops Are Produced Across Many States Under a Wide Range of Conditions
Soybean Producing Regions
Crop Producing Regions – Brazil
Source: USDA
Million Tonnes
The Second Crop Is No Longer Safrinha “Small Harvest”
Brazil Corn Production
Source: PIRA, FO Litcht, USDA, PRX,
Million Tonnes
Cane Used In Ethanol and SugarCorn vs Cane Debate
Rising Demand for Fuel and Food Expected to Support Cane Production
Brazil’s Sugar Cane Industry
Characteristic Brazil US
Feedstock Sugar Cane Corn
Total ethanol fuel production 5,573 13,900
Total area used for ethanol crop (2006) 3.6 (1% of Arable) 10 (3.7% of Arable)
Productivity per hectare 6,800-8,000 3,800-4,000
Energy balance 8.3 to 10.2 1.3 to 1.6
Estimated GHG emissions reduction 86-90% 10-30%
EPA's estimated 2022 GHG reduction for RFS2. 61% 21%
CARB's full life-cycle carbon intensity 73.4 105.1
Estimated payback time for GHG emissions 17 years 93 years
Total flex-fuel vehicles produced/sold 16.3 million 10 million
Ethanol fueling stations in the country 35,017 (100%) 2,326 (1%)
Ethanol's share in the gasoline market 50% 10%
Cost of production (USD/gallon) 1.75 2.48
Latin American Fertilizer Market Overview
Source: IFA, Fertecon
Fertilizer Consumption by RegionFertilizer Consumption by Crop
Corn, Soybeans and Sugar Account for Majority of Fertilizer Consumption
Latin America Fertilizer Consumption
Other
Mexico
Argentina
Brazil
Corn
Soybeans
Fruits & Vegetables
Sugar Crops
Wheat
Cotton
All Other Crops
Colombia
Chile
Source: Fertecon
Million Nutrient Tonnes
Strong Consumption Growth in Most Countries
Latin America Fertilizer Consumption
Million Nutrient Tonnes
Brazil Fertilizer Consumption Other Latin America Fertilizer Consumption
Source: Fertecon, PotashCorp
Million Tonnes K2O
Potash
Million Tonnes P2O5
Phosphate
Million Tonnes N
Nitrogen
Potash Consumption Met Primarily by Imports
Latin America Fertilizer Consumption Profile
Source: Fertecon, Potafertz, PotashCorp
2011 Imports – 3 million tonnes
Million Tonnes Product
Brazil Urea Consumption Brazil Urea Import Profile, 2011
FSU Is the Major Supplier to Brazil
Brazil Nitrogen Market Profile
Russia
Egypt
Oman
QatarOther
UkraineArgentina
Source: CRU, Fertecon, PotashCorp
Million Tonnes P2O5
Brazil Phosphate Fertilizer Consumption
Rising Domestic Production and Demand
Brazil Phosphate Operations
Rising Domestic Production and Demand
Brazil Phosphate Market Profile
Source: CRU, ANDA, PotashCorp
Brazil’s Potash Consumption by StatePotash Imports by Port, 2011
Consumption Is Concentrated in Cerrado Area
Brazil Potash Market Profile
Source: Fertecon, PotashCorp
Million Tonnes KCl
Expect Significant Growth in Potash Demand
Latin America Potash Demand Growth Potential
Source: ANDA
Cumulative - Million TonnesMonthly - Million Tonnes
Total Fertilizer Deliveries Remain Robust in 2012
Brazil Fertilizer Deliveries to End Consumers
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