Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — 2006 Fertilizer and Technology Outlook Conference
32 slides from Mosaic Company (the)'s conference presentation, Nov 3, 2005
Slide 1: The Phosphate Outlook
Exhibit 99.1 The Phosphate Outlook by Michael R. Rahm Vice President Market & Economic Analysis The Mosaic Company 2006 Fertilizer and Technology Outlook Conference Tampa, Florida November 3, 2005 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward- Looking Statements Certain statements contained herein constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Although we believe the assumptions made in connection with the forward-looking statements
Slide 3: Outline of Presentation
Outline of Presentation 1. Offshore Demand Fundamentals remain positive in India and Pakistan China becomes self-sufficient Only a modest recovery is expected in South America 2. Domestic Demand Old wives tales and misconceptions How inelastic is nutrient demand? How will high energy prices impact d
Slide 4: Offshore Demand
Offshore Demand * IMPORTED DAP
Slide 5: World Processed Phosphate Import Demand
World Processed Phosphate Import Demand Processed phosphate includes DAP, MAP and TSP MMT Processed Phosphate Import Demand 24 Source: Fertecon and Mosaic 21 World processed phosphate import demand is projected to 18 stay flat at 21.4 mmt in 2005. 15 Gains in Asia have offset declines in Latin Ameri
Slide 6: World Processed Phosphate Export Supply
World Processed Phosphate Export Supply Processed phosphate includes DAP, MAP and TSP MMT Processed Phosphate Export Supply 24 Source: Fertecon and Mosaic The U.S. phosphate industry 21 exported 12 million tonnes of processed phosphate per year 18 during the last half of the 1990s. U.S. exports have
Slide 7: World Less China Import Demand by Region
World Less China Import Demand by Region Processed phosphate includes DAP, MAP and TSP MMT World Less China Processed Phosphate Import Demand by Region Import demand outside of 24 China increased more than 21 Source: Fertecon, IFA and Mosaic three million tonnes from 16.2 million in 2002 to 19.3 mil
Slide 8: China has become self-sufficient in phosphate
China has become self-sufficient in phosphate Processed phosphate includes DAP, MAP and TSP MMT China Net Processed Phosphate Imports 6.0 Source: IFA and Mosaic 5.0 China is expected to 4.0 transition from a small net importer of processed phosphates in 2005 to a small 3.0 net exporter in 2006. 2.0
Slide 9: China's Phosphate Strategy
China’s Phosphate Strategy At China Chemical Industry Prosperity Period Analysis Forum, official of National Development and Reform Commission said, in the course of Chinese eleventh five-year plan, China chemical industry need to adjust industry design, material and drive structure; to construct a
Slide 10: A lesson from Darwin
A lesson from Darwin It is not the strongest of the species that survive, nor the most intelligent; it is the one that is most adaptable to change Charles Darwin Theory of Evolution 1859 It is not the oldest or biggest or most revered players in the crop nutrition industry who will survive. Only tho
Slide 11: A pull-back in India from high levels this year
A pull-back in India from high levels this year Processed phosphate includes DAP, MAP and TSP MMT India and Pakistan Processed Phosphate Imports 4.5 India and Pakistan are 4.0 Source: IFA and Mosaic projected to import more than 3.5 million tonnes of 3.5 processed phosphate in 2005. 3.0 Continued st
Slide 12: Developments in India
Developments in India 1000 MT Indian DAP Sales 1000 MT India DAP Fabrication 8,000 600 04/05 05/06 Source: FAI 7,000 500 6,000 5,000 400 4,000 300 3,000 2,000 200 1,000 100 0 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 0 Fertilizer Year Ending March 31 Apr May Jun Jul Aug
Slide 13: No snap-back is expected in Brazil
No snap-back is expected in Brazil Processed phosphate includes DAP, MAP and TSP MMT Brazilian Processed Phosphate Imports Processed phosphate imports 4.0 are projected to plunge 40% or 1.4 million tonnes in 2005. 3.5 Source: ANDA and Mosaic The appreciation of the real, 3.0 lower soybean prices, hi
Slide 14: Signs of the beginning of inventory draws in Brazil
Signs of the beginning of inventory draws in Brazil 1000 MT Brazil MAP Imports 1000 MT Brazil Fertilizer Shipments 400 3500 350 3000 Source: ANDA 2004 2005 300 2500 2004 2005 250 2000 200 1500 150 1000 100 50 500 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 15: Help from other regions next year
Help from other regions next year MMT Latin American Less Brazil Processed Phosphate Import Demand Processed phosphate 4 Source: Fertecon and Mosaic includes DAP, MAP and TSP 3 Import demand in other Latin American markets is 2 projected to climb to record levels led by Argentina, Mexico and several
Slide 16: Domestic Demand
Domestic Demand 16
Slide 17: Old Wives Tales and Misconceptions
Old Wives Tales and Misconceptions Farmers spend the same amount on fertilizer each year Billion $ U.S. Fertilizer Expenditures $ Acre U.S. Fertilizer Expenditures Per Acre 14 $60 13 Source: USDA $55 12 Source: USDA $50 11 10 $45 9 $40 8 $35 7 $30 6 5 $25 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
Slide 18: Old Wives Tales and Misconceptions
Old Wives Tales and Misconceptions Prices received by farmers and farm income are low Supply $ Bu Prior to 1996, the loan rate established a market price floor (P3). At this level, Surplus farmers produced Q3 and consumers P3 Loan Rate used Q1. The government (CCC) bought and stored the surplus (Q3-
Slide 19: Old Wives Tales and Misconceptions
Old Wives Tales and Misconceptions Prices received by farmers and farm income are low Commodity programs today still provide Supply farmers a price floor called the loan rate $ Bu (P3), but the government no longer buys and stores grain in order to prop up market prices for competitors worldwide. Su
Slide 20: Old Wives Tales and Misconceptions
Old Wives Tales and Misconceptions Prices received by farmers and farm income are low Bil $ U.S. Net Cash Farm Income USDA estimates that U.S. net 90 cash farm income surged to a record $85.5 billion in 2004 as 80 a result of large crops and Source: USDA relatively strong grain and 70 livestock pric
Slide 21: How inelastic is nutrient demand?
How inelastic is nutrient demand? Percentage Change in Quantity Own Price Elasticity = Percentage Change in Price U.S. Nutrient Demand Elasticities for Corn Short Run Long Run Nitrogen -0.23 -0.48 Phosphorus -0.02 -0.30 Potassium -0.16 -0.27 Source: Vroomen and Denbaly 1991. There are no substitutes
Slide 22: Moderate declines in P application rates on corn
Moderate declines in P application rates on corn Percent U.S. Phosphate Application Rates 1988-92 Average = 100 $ BU 110 3.60 105 3.30 100 3.00 95 2.70 Data for the last 15 years show no 90 2.40 correlation between phosphate application rates on corn and 85 2.10 phosphate prices. Source: USDA and CB
Slide 23: Higher energy prices favor soybeans over corn
Higher energy prices favor soybeans over corn $ Acre Estimated Variable Cost for an Iowa Farm $300 $250 Source: Iowa State University and Mosaic $200 $150 $100 $50 $0 2002 2003 2004 2005 2006 Corn Soybeans $ Acre Estimated Revenue after Variable Cost for an Iowa Farm $350 $300 Source: Iowa State Uni
Slide 24: A modest switch from corn to soybeans is expected
A modest switch from corn to soybeans is expected Mil Acres U.S. Planted Acreage 84 82 Source: USDA and Mosaic 80 78 76 74 72 70 68 66 64 62 60 58 56 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05E 06F Corn Soybeans All Wheat 24
Slide 25: U.S. phosphate use is forecast to decline 5%
U.S. phosphate use is forecast to decline 5% Mil Tons P O5 U.S. Phosphate Use 2 5.0 4.5 4.0 U.S. phosphate use in 2005/06 is forecast to decline about 5% 3.5 from the estimated level of last 3.0 year. 2.5 The forecast is based on a 2.0 modest shift from corn to soybeans, a slight increase in 1.5 whe
Slide 26: U.S. phosphate shipments are forecast to decline 5%
U.S. phosphate shipments are forecast to decline 5% Processed phosphate includes DAP, MAP and TSP Mil Tons U.S. Processed Phosphate Domestic Shipments 9 8 U.S. shipments of processed phosphate in 2005/06 are 7 forecast to decline about 5% from last year. 6 5 Projected shipments are near the low end
Slide 27: U.S. DAP/MAP shipments were down 14% in Q1
U.S. DAP/MAP shipments were down 14% in Q1 U.S. DAP and MAP Domestic Shipments U.S. DAP and MAP Domestic Shipments 1400 1400 Source: TFI and Mosaic Source: TFI and Mosaic 1200 1200 1000 1000 800 800 600 600 400 400 200 200 0 0 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC J
Slide 28: Supply
Supply 28
Slide 29: U.S. phosphate production will decline significantly
U.S. phosphate production will decline significantly 1000 MT P2 O5 U.S. Phosphoric Acid Production 2,800 Source: TFI and Mosaic 2,700 The U.S. industry ran at higher rates during the first 2,600 quarter of the fertilizer year (JAS) due to large export commitments this year and greater hurricane loss
Slide 30: The drop in supply results in a draw-down in stocks
The drop in supply results in a draw-down in stocks U.S. DAP and MAP Producer Total Stocks U.S. DAP and MAP Producer Total Stocks 2200 2200 Source: TFI and Mosaic Source: TFI and Mosaic 2000 2000 1800 1800 1600 1600 1400 1400 1200 1200 1000 1000 800 800 600 600 400 400 200 200 JUL AUG SEP OCT NOV DE
Slide 31: DAP and MAP are not the whole story
DAP and MAP are not the whole story Phosphoric acid is the most MMT P 2O5 U.S. Phosphoric Acid Production and Operating Rate comprehensive measure of 13 100% phosphate production. 12 95% After bottoming at 78% of 11 90% capacity in 2000/01, the U.S. phosphoric acid operating rate 10 85% has climbed
Slide 32: Thank You!
Thank You! The Phosphate Outlook by Michael R. Rahm Vice President Market & Economic Analysis The Mosaic Company 2006 Fertilizer and Technology Outlook Conference Tampa, Florida November 3, 2005 32
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