Fertilizer Markets and Finance

On this blog I publish posts & news about what's new in the fertilizer industry and how it's markets are affected by geopolitical developments, environmental changes and monetary policies. I also focus on how farmers are affected by government decisions, and economic fundamentals of the market place. I am passionate about agriculture in Trinidad and write about problems farmers face in the agriculture industry especially in rural areas. Thanks for viewing.

Jonathan Mohan

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The geopolitics and economic stratagem of Uralkali’s bombshell will change the global potash oligopoly.
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Belarus exported 377,200 tons of potash in January and February 2012, 50.9 percent less than in the same period of the previous year, according to the National Statistics Committee (Belstat). 

Potash prices for foreign customers averaged out at $757 per ton, a year-on-year increase of 22.1 percent, Belstat said. A total of 5,800 tons of potash was supplied to countries of the Commonwealth of Independent States (CIS), a decrease of 70.5 percent, with the average per-ton price rising by 19.9 percent to $715. 

Potash exports to non-CIS countries decreased by 50.3 percent and total 371,400 tons, while the average price being $758 per ton, a 22.1-percent increase. 

Experts link the decrease in Belarus’ potash exports to a decline in the demand, which they say caused many producers to reduce their sales to keep the prices up. Potash consumption in Brazil and Asian countries in 2012 is expected to stay at last year’s level, but their import of potash fertilizers may decrease because of large stockpiles. 

Belarus exported 17,400 tons of nitrogen fertilizers in January and February 2012, 6.6 percent less than in the same period of the previous year, according to Belstat. 

A total of 144 tons of nitrogen was supplied to CIS countries, an increase of 120 percent, and 17,270 tons of nitrogen was supplied to non-CIS countries, a decrease of 7.1 percent. The average price decreased by 17.3 percent to $735 per ton. //BelaPAN 

No middleman in the industrialized world is offering potential buyers a cheaper way to export wheat to Asia than Australia’s GrainCorp Ltd. (GNC)

While Glencore International Plc’s purchase of Viterra Inc.’s grain assets in Australia andCanada this month helped spur an 11 percent jump in GrainCorp’s shares on takeover speculation, the Sydney-based wheat handler still traded yesterday at 10.7 times profit, according to data compiled by Bloomberg. That’s the lowest among agricultural product wholesalers valued at more than $500 million in developed economies. It’s also a 57 percent discount to Glencore’s bid of 24.9 times earnings for Viterra, the data show.

GrainCorp, which operates seven of the eight ports that ship grain in bulk from Australia’s east coast, has tripled its sales since the world’s second-largest wheat exporting nation began deregulating the industry in 2006, and is projected by analysts to report record profit this year. A takeover offer is “inevitable,” according to Citigroup Inc., and GrainCorp could lure a bid of A$2.2 billion ($2.3 billion), 23 percent more than yesterday’s close, RBS Morgans Ltd. said.

Read more at Bloomberg

The global economy faces “major downside risks” as its recovery continues to be threatened by stresses in the euro area, the International Monetary Fund said in a report prepared for the Group of 20 nations.

The world economic expansion will slow to 3.3 percent this year from 3.8 percent in 2011, according to the surveillance report prepared for the meeting of G-20 finance ministers and central bank governors in Mexico City Feb 25-26. The euro economy is forecast to contract 0.5 percent this year, compared with growth of 1.6 percent in 2011.

“The overarching risk remains an intensified global ‘paradox of thrift’ as households, firms, and governments around the world reduce demand,” the Washington-based IMF said in the report. “This risk is further exacerbated by fragile financial systems, high public deficits and debt and already-low interest rates.”

“Advanced economies are experiencing weak and bumpy growth, reflecting both the legacies from the crisis and spillovers from Europe,” according to the report.

Read more at Bloomberg

Russia, for the fourth time in four days, changed its tune over grain shipments, signalling it had raised its ceiling on curbs, hours after briefing that a decision had again been postponed.

The government used the elbow room allowed by a grain harvest which, at 93.9m tonnes, beat earlier forecasts to waive a limit 23m-25m tonnes on shipments it would allow before threatening, unspecified, restrictions.

"Given a revised harvest figure of 93.9m tonnes … the forecast for grain exports in the 2011-12 crop year has been raised to 27m tonnes," Viktor Zubkov, Russian deputy prime minister, said.

There would be no need for grain restrictions in April, as had looked likely after a strong pace of trade left shipments at roughly 20m tonnes by the end of last month, leaving little headroom for further sales.

Read more at Agrimoney

russian wheat

Russia has, again, delayed an announcement to clarify its grain exports policy, even as uncertainty over curbs appears to be stemming the tide of buying which has sparked fears of depleted supplies.

Viktor Zubkov, Russian deputy prime minister, will not after all reveal later the government’s thinking on grain exports, after a meeting scheduled for Friday was postponed.

The delay represents the second, after an initial date Mr Zubkov set for a statement, on Thursday, passed without an announcement.

The meeting had been widely expected to lift from 23m-25m tonnes a ceiling at which Moscow will impose export curbs.

"It seems recent meetings with government officials in Russia will likely yield a new target, probably in the neighbourhood of 27m tonnes, on total grain exports," Brian Henry, at US broker Benson Quinn Commodities, said.

Too fast for comfort

The strong pace of 2011-12 exports - which were expected to end January, the season’s seventh month, at about 20m tonnes - has left them potentially on course to run into the ceiling as early as next month.

Read more at Agrimoney

Ukraine should be able to offer a better price for milling wheat than Russia in North African and Middle Eastern markets after it won a tender in Egypt on Oct. 29, according to UkrAgroConsult.

Egypt, the world’s biggest wheat importer, bought 120,000 metric tons of Ukrainian wheat, half from Toepfer International at $247.92 a ton and half from Venus International at $249.30 a ton. Ukrainian wheat was $8 a ton less than the lowest Russian offer, the Kiev-based researcher said today by e-mail.

“We will be competing with Russia all the time on the Egypt market now,” Liza Malyshko, an analyst at UkrAgroConsult, said by phone today. ’’I think Ukraine will be able to sustain a lower price in this market. A lot will depend on the domestic price. Internal prices in Russia have started to increase and we see that this trend is starting here.’’

Ukrainian authorities scrapped a 9 percent export tax for wheat, which came into force on July 1, from Oct. 22. The government expects Ukraine’s grain harvest to increase by 35 percent to 53 million tons this year, helped by favorable weather. The Agriculture Ministry expects 27 million tons of grain to be shipped this year, Mykola Prysyazhnyuk, the minister, said on Oct. 19.

Buyers’ interest in Ukrainian wheat and the number of traders at tenders suggest that exporters will buy in the domestic market and that the price for milling wheat will gradually increase, according to the researcher.

Wheat prices are not seen declining in Russia nor in Ukraine until the status of the 2012 harvest is known, according to Malyshko.

To contact the reporter on this story: Kateryna Choursina in Moscow at kchoursina@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

OAO Uralkali (URKA), the world’s largest potash producer by output, doesn’t pay any export duties and doesn’t believe it should pay such tariffs, said Vladislav Baumgertner, the company’s chief executive officer.

The Russian mining industry is subject to “very competitive” taxation, he said at a conference in New York. “We feel very comfortable compared to our international partners.”

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

Russia is poised to again become the world’s second-biggest wheat exporter as the nation’s biggest grain-port overhaul raises shipping capacity by as much as 67 percent in four years.

Government and private operators are spending $574 million to develop and add terminals on the Baltic, Azov and Black Seas and the nation’s rivers to end bottlenecks that keep trains waiting for weeks to unload. Supply is surging following an almost yearlong ban imposed by Prime Minister Vladimir Putin to conserve grain after the worst drought in half a century.

Russia’s emergence as a leading supplier may reduce global grain prices, said Peter Biermann, a trader at Aston FFI in Lausanne, Switzerland. “Russia could easily become the No. 1 exporter of wheat in the world” on the expansion plans, Biermann said. Aston is a trading unit of Russian grain and oilseed producer OAO Aston.

Russia is seeking to again become a leading wheat supplier about three decades after the cost of imports helped push the Soviet Union to the brink of bankruptcy in the 1980s. Exports began climbing in 2001, and in 2002 Russia was among the top three wheat-exporting countries, according to U.S. Department of Agriculture data.

It may export more than 12 percent of global wheat this season, the International Grains Council says, making it the world’s fourth-biggest supplier. The ban was lifted on July 1.

Hidden Costs

The new investment may increase grain loading capacity to almost 42 million metric tons in 2014 from 25 million tons this year, according to Bloomberg calculations based on investors’ plans.

More terminals will reduce the hidden costs of grain shipments by at least $15 a ton because exporters won’t have to pay for the idle hours that rail cars and ships spend in bottlenecks or for fines for delayed cargoes, said Igor Pavensky, head of Rusagrotrans’s market analysis department. Rusagrotrans is the country’s bigger carrier of grain by rail.

Russia may be able to widen the discount at which it sells grain in international tenders by $7 to $8 a ton by 2015, Pavensky said. Russian wheat now sells at a discount of about $10 a ton compared with French milling wheat from Rouen, he said.

Government and private operators plan to invest at least 18.2 billion rubles ($574 million) to add 18.9 million metric tons of capacity at grain terminals in the five years through 2014, according to Bloomberg calculations based on company plans. That includes additions last year during the export ban.

Asia, Cuba

Lower logistics fees will allow traders to open up new markets, Rusagrotrans’s Pavensky said. Russia may supply up to 4 million tons of grain to the Asia-Pacific region and up to 2 million tons to South America and Cuba by 2020, he said.

Dry weather is hurting crops from the U.S. to Ukraine. Mexico’s Grupo Bimbo SAB, the world’s largest bread maker, and CSM NV of the Netherlands, the biggest manufacturer of bakery ingredients, are among companies that have increased prices to pass on higher costs.

The Russian ban sent wheat futures to a 29-month high on Feb. 14, with prices jumping as much as 91 percent from the end of June 2010 to that peak. Since then, prospects for rising global output in countries including Russia, and the slowing economy, have cooled the increase. Prices, at $6.58 a bushel today on the Chicago Board of Trade, are down 28 percent from their high.

Weather and Politics

“Cheaper input costs will allow Russia to export at more competitive prices to the Mediterranean and beyond,” said Swithun Still, a trader at Switzerland’s Alegrow SA. “However, as last year showed, we are at the mercy of the weather and politics, two things we cannot predict very well or control.”

Putin imposed the grain export ban to shore up domestic supply after the drought caused Russia’s grain crop to plummet 37 percent to 60.9 million tons last year, from 97 million tons a year earlier.

Handling prices have been rising because of capacity limitations, spurring state and private investors to build terminals, Alexander Korbut, vice president of Russia’s Grain Union, said by phone on Sept. 22. At one terminal in the port city of Novorossiysk on the Black Sea, fees jumped about 40 percent to $28 a ton from a year ago and at another by about 35 percent to $23, he said.

Grain handling is “extremely profitable in Russia,” Korbut said. “When small ports appeared on the Azov Sea in 2006 to 2008, investors made a return in just one season.”

Rail Cars

Plans to boost exports may stumble on a lack of railway infrastructure and rail cars; rising transportation costs; and market demand, according to the Institute for Agricultural Market Studies, known as Ikar.

About half of the projects are located in the city of Novorossiysk, where OAO Russian Railway banned rail shipments on Aug. 27 because of congestion. The restriction to one terminal was lifted after 10 days and to the other after almost three weeks.

Most of the new projected capacity, or about 13 million tons, may be devoted to wheat exports, according to Ikar. This amounts to 10 percent of the world’s wheat imports, a quantity Russia will find hard to grab from existing suppliers, Ikar director Dmitry Rylko said by phone on Sept. 26.

Ukraine, Russia’s neighbor and the world’s third-biggest barley exporter last season, may compete with Russian projects as it has about 6 million tons of surplus export capacity already, according to Rylko.

Ukraine, Kazakhstan

While Ukraine increases capacity, now at about 30 million tons, Kazakhstan also has ambitious plans to expand its wheat- export potential and the U.S. may also increase grain shipments in five years, he said.

“Still, we need the terminals,” Rylko said. “They’re being built with room to grow and so we can at least maintain exports.”

Private building efforts are already underway. Delo Group, beneficially owned by Sergei Shishkarev, head of the transport committee in Russia’s lower house of parliament, opened a terminal in Novorossiysk this year, according to the group’s press service. Vladimir Lisin, the billionaire owner of OAO Novolipetsk Steel, built a terminal in Tuapse last year, according to his UCL Holding company.

In addition to Novorossiysk and Tuapse, investment is also flowing into construction of terminals and expansion of existing capacity in Kaliningrad on the Baltic Sea, in Taman on the Black Sea, on Azov Sea ports and on the Volga and Don rivers.

A government plan to construct another deep-water grain terminal at the port of Taman, on a peninsula between the Black and Azov Seas, may further expand capacity at least 6 million tons by 2017, state-controlled United Grain Co. said last week. The terminal may cost 10 billion rubles, according to a company presentation last year.

“A fight for clients who supply grain will emerge,” Korbut said. “This will increase the profitability of growing grain.”

To contact the reporters on this story: Marina Sysoyeva in Moscow msysoyeva@bloomberg.net Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net;

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Egypt, the world’s biggest wheat importer, agreed to purchase 240,000 metric tons of soft Russian wheat at a tender today, Nomani Nomani, the vice chairman of the General Authority for Supply Commodities, said in Cairo.

The authority, also known as GASC, bought 60,000 tons of the grain at $261.44 a ton from Louis Dreyfus, 60,000 tons at $263.25 a ton from Aston, 60,000 tons at $263.25 from Nidera International and 60,000 tons at $263.25 a ton from Bunge Ltd., Nomani said.

The grain, which was bought on a free-on-board basis, is for shipment Dec. 11-20, he added.

Ukraine exported 283,600 metric tons of grain in this month’s first nine days, ProAgro said, citing preliminary information from local ports.

Wheat accounted for 154,500 tons of deliveries, the Kiev- based commodities researcher said in an e-mailed statement yesterday, without giving a comparative figure. Shipments came to 121,900 tons for barley and 7,100 tons for corn.

The biggest batch of wheat, at 65,000 tons, was shipped to Saudi Arabia, according to ProAgro. Barley was exported to Saudi Arabia and Iran, and corn went to Iran, it said.

While there hasn’t been much discussion or news going out to the public, the idea of Canpotex locating a massive potash export facility in Prince Rupert is far from dead.

“The process is back on track, but that doesn’t mean it is a done deal. Right now the environmental review process is taking place…I can say that we will have a clear decision by the end of this calendar year,” said Michael Gurney of the Prince Rupert Port Authority noting that the decision to proceed will have to be made by both the Federal Government and Canpotex.

Earlier this summer a final project description for both a potash export terminal on Ridley Island proposed by Canpotex and a road, rail and utility corridor proposed by the Prince Rupert Port Authority was submitted to the federal government and it outlines the two massive projects.

The Canpotex portion of the report calls for a marine wharf, access tressle, causeway and ship loading facility, a 180,000 tonne potash stoarge building and associated conveyor and dust collection system, an automated railcar unloading and conveyor system, a seddlement pond for storm water and washdown, administration, personnel, maintenance and storage buildings and site services including water, gas and sewage.

Aging trees will cause a drop in cocoa output in Nigeria, the world’s fourth-biggest producer of the chocolate ingredient, a researcher said.

The age of the trees has created a “wide yield gap,” Chris Okafor, of the International Institute of Tropical Agriculture, said by phone from Akure in southwestern Nigeria.

Nigerian farmers are reluctant to replace aging trees because it can take 10 years for soils to recover sufficiently to be able to support new plantings, David Onyenweaku, an 84- year-old farmer, said by phone today from Umuahia in southeastern Nigeria.

“I started planting cocoa in the 1950s and some of the trees I planted then are still standing,” Onyenweaku said. The trees are still producing beans, “but not much,” he said.

The farmers have to wait so long before replanting their land because of “poor soil nutrient management,” said Okafor, who manages the Nigerian sustainable tree crops program at the institute in Ibadan, southwestern Nigeria. Soil is seriously depleted and farmers aren’t using fertilizers, “which tells on the yield,” he said.

Russia, the world’s second-biggest wheat exporter before halting sales last year, is offering the largest discount on the grain in at least four years and targeting buyers in Southeast Asia to regain its share of the world market after lifting an export ban a month ago.

Russian wheat costs at least $40 a metric ton less than North American, French or Australian supplies, according to the Moscow-based Institute for Agricultural Market Studies researcher, also known as IKAR. That makes shipping to countries such as Malaysia viable after freight rates fell 44 percent in the past 12 months.

Iran will become self-sufficient in wheat production in the nation’s current calendar year, Jam-e- Jam reported, citing Agriculture Minister Sadegh Khalilian.

The country will be able to export as much as 2 million metric tons of the grain, Khalilian said, according to a report published July 30 on the Tehran-based newspaper’s website.

ISLAMABAD, July 27 (APP)  -  Minister for Finance and Economic Affairs Dr.Abdul Hafeez Shaikh on Wednesday assured the fertilizer companies thatgovernment would ensure the supply of natural gas to them in order to overcome the shortages of fertilizer to the agriculture sector.“If the natural gas is properly provided to the fertilizer plants which would not only help overcome the shortages of the fertilizer in the country butwe would be in a position to export the commodity for the benefit of the country”, he said while chairing a meeting regarding the supply of gas to the fertilizer plants and import of urea for season 2011 and Rabi 2011-12.
The meeting was also attended by the Minister for Petroleum and Natural resources Dr.Asim Hussain, Deputy Chairman Planning Commission Dr.Nadeem ul Haq and senior officials of the ministry.
The meeting discussed in details various options for the supply of natural gas to fertilizer plants in the country.
Dr.Asim assured the meeting that the fertilizer plants would get the natural gas in order to ensure the sufficient production of the commodity foragriculture sector in the country.
The meeting was also informed that 150000 tons of imported urea has  available in the country while 50,000 shortage of the commodity would be met by providing regular supply of natural gas to eight fertilizers plants in the country so that these could be able to overcome the shortages.
It was also decided that under the directives of the Prime Minister, the next meeting will be convened shortly to discuss various options in this regards in which the senior minister and minister for industries and production, Chaudhry Pervaz Ellahi and Syed Khursheed Shah  will also attend the meeting.