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November 2012 Archive for Inputs Insights

RSS By: Davis Michaelsen, Pro Farmer

Inputs Monitor Editor Davis Michaelsen adds his perspective into the happenings of the inputs markets.

Canpotex Players Lagging -- Potash Isn't Paying the Bills

Nov 16, 2012

Canpotex is feeling the pinch from swelling potash inventories and waning demand. Potashcorp, Mosaic and Agrium are the three mastheads of Canpotex and World events have affected each of the three to different degrees. North American demand has been good this year through the fall application season, but more product needs to move out of Saskatchewan to make Canpotex's fiscal benchmarks.

Late in the summer, Canpotex, historically, has been a major supplier of potash to India and China. Typical August/September contracts have moved 3-5 million tonnes of product from Canada to China, India and other Asian markets. It is no secret by now that these Asian markets are not going to place orders, and have already started to put low price demands on upcoming shipments.

The loss of the fall shipment to Asia has taken it's toll on Canpotex, and the degree to which each of the big three rely on potash revenue dictates how much the present situation will affect each.

pot logoPotashCorp (POT) has the most to lose as the company's main focus is on potash. As part of Canpotex, PotashCorp provides 58% of the potash the company exports. POT has mines in several locations and has announced shutdowns in four of the Saskatchewan mines currently in operation. The shutdowns have already started and will continue until February 2013 -- or until a large export order crosses the desk, and POT can move a mountain of product and resume regular production levels.

PotashCorp's Q3 2012 earnings report states, "The decline from 2011’s third quarter was primarily the result of weaker phosphate margins and reduced offshore potash sales due to the delay of new supply contracts with China and India. Our gross margin for the first three quarters of 2012 reached $2.8 billion, which compared to $3.4 billion generated in the same period last year.

mosaiclogoMosaic (MOS) provides 37% of the potash Canpotex exports but is reporting problems of its own. The same spike in inventory and dip in international demand that has POT skidding to a halt has inspired production slowdowns at Mosaic as well. While Mosaic holds a more balanced nutrient production profile, potash is still the golden egg at Mosaic. Production slowdowns have been announced, but at least the factories are still open. The company reports that slumping demand for potash has spilled over into the phosphate market as well.

Mosaic President and Chief Executive Officer Jim Prokopanko remarked, "In the short term, we are seeing lower than expected shipments to the export market, in spite of very strong demand in North America for the fall application season. As a result, we have lowered our volume guidance for both the Phosphates and Potash segments in the second fiscal quarter of 2013 while also tightening the price forecasts to the upper end of the previously announced ranges."

agriumlogo Agrium (AGU) is likely to be the least affected by low potash demand. AGU not only carries both a retail and a wholesale division, but also focuses more on nitrogen-based fertilizers than the other two -- providing only 9% of Canpotex's total potash output.

"Our results this quarter were impacted by the downtime at our potash operations associated with our substantial potash mine expansion and a weaker potash market stemming from uncertainties from ongoing negotiations with India and China," said Mike Wilson, Agrium President and CEO. "Agrium’s third quarter results demonstrated our competitive strengths in nitrogen and the ability of our Retail business to deliver solid earnings, even given the early spring season and after experiencing one of the worst droughts in U.S. history."

When the Dow plummeted after the November 6th U.S. Presidential elections, inputs went with it. Down times are bound to crop up now and again. All three Canpotex members have fared moderately well in this sanguine post-election market.

As of now...

  • PotashCorp (POT) sliding toward the lowside -- 0.52 lower today to $37.07. POT fell sharply on news of further production shutdowns on Wednesday this week and has trailed toward the lowside since.
  • Mosaic (MOS) dropped off Wednesday along with PotashCorp on its own news of production slowdowns -- dead even on the day adding 0.00 after the fat lady sang to end the day where it started at $49.12.
  • Agrium Inc. (AGU) came out on top today after testing the downside before noon and added 1.10 before moderating sideways to end the day up 0.20 at $97.06.

 

The technicals clearly show what the fundamentals suggest -- the potash market has been rough on nutrient producers and the fiscal damage is proportional to the stake each holds in potash. In this 'bust' phase of the season, it may be difficult to be optimistic for Canadian workers spending the holidays off work. But business will pick up in the spring, and if India and China have any import catch-up to play, Canadian potash workers will more than make up the difference in overtime pay this spring.


 

Inputs Monitor October Wrap-Up

Nov 05, 2012

Inputs Monitor Regional Index Composite 6.05 higher over last month. Anhydrous, DAP and farm diesel all spent the month moving higher, while Urea spent the entire month of October in decline.

Anhydrous $27.14 higher month-over to $861.75; DAP $8.92 higher to 653.75; MAP $12.40 higher to end the month at $667.58.

Potash $0.36 lower all told at $604 even; UAN28 $8.21 higher to 380.58; UAN32 $17.38 higher to $441.66.

Urea shucked $19.22 over the month to end at $587.50.

Farm diesel added $0.06 to $3.68 on four weeks of solid gains and LP wavered week-to-week, ending the month $0.067 higher at $1.416.

For weekly pricing analysis and complete coverage of inputs news, click here to visit the Inputs Monitor.

In the news...

October was an active month in Inputs news. PotashCorp announced production shutdowns on waning Asian demand, Japan and China circled each other in the East China Sea, legislation encouraging trade between the U.S. and Panama took effect, and Iowa ok's the use of manure on soybeans amid controversy and public outcry.

Click on the headlines below for the full stories and look to your Inputs Monitor for pricing updates and analysis as well as Inputs industry news as it happens.

On the farm...

Iowa Panel Affirms Right to Spread Manure -- 10/19/2012

The Des Moines Register reported yesterday on a decision by the Iowa Environmental Protection Commission (IEPC) on Tuesday to allow farmers to use limited amounts of liquid manure as fertilizer for soybean fields. The news comes as a rule from five years ago came up for discussion.

NPK Levels in Manure -- 10/05/2012

These handy tables including data from Iowa State University Extension give specific N, P & K values for a variety of manures. .

World news...

U.S.-Panama Trade Promotion Agreement Takes Effect Today -- 10/31/2012

Acting U.S. Commerce Secretary Rebecca Blank released a statement on Monday in praise of the U.S.-Panama Trade Promotion Agreement (TPA) which goes into effect today. The agreement will encourage trade between the two nations, allowing goods to move more freely between one of Latin America's fastest growing economies and the U.S.

Sinopec's Q3 Results Cry Havoc -- 10/30/2012

China Petroleum and Chemical Corp. (Sinopec) released third-quarter results this week and the state-owned company showed upticks in production and sales, but fell short year-over on net-profit attributable to shareholders and basic earnings per share. This comes as tensions rise between China and Japan who both claim rights to resources in the East China Sea.

Look for sabre rattling to escalate as each nation has initiated military exercises in the area.

Industry players...

PotashCorp Stalls Production -- Earnings Down -- 10/18/2012

Saskatchewan's PotashCorp (POT) today announced earnings guidance for full-year 2012 will fall below the low end of the previous range of $2.80-$3.20 per share provided in July 2012. The change primarily reflects lower than forecasted potash sales volumes due to delays in new contracts with buyers in China and India. Earnings for third-quarter 2012 are expected to be at the low-end of the $0.70-$0.90 per share guidance range previously provided.

PotashCorp announced yesterday that it will exert some inventory control by shutting down two of its production facilities, each for eight weeks beginning in mid-November.

Agrium Unlocks Value for Shareholders -- 10/22/2012

Agrium Inc. (AGU) has been one of the best performing stocks in North America. The company’s share price in U.S. dollars has increased 56 percent year-to-date and by 87 percent over the past three years on the NYSE, versus 14 percent and 31 percent respectively for the S&P 500.

Agrium had been discussing a split of its retail and wholesale divisions with activist shareholder JANA Holdings who suggest that such a move would unlock more value for shareholders. Agrium has repeatedly shot down the notion in favor of its long-standing, successful business model which includes retail as well as wholesale components.


 

 

 

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