Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — OABA Annual Meeting 2008
34 slides from Mosaic Company (the)'s conference presentation, Dec 2, 2008
Slide 1: The story of the Perfect Storm… Phosphate & Potash Market Situation and Outlook
The story of the Perfect Storm… Phosphate & Potash Market Situation and Outlook OABA Annual Meeting December 2, 2008 Exhibit 99.1
Slide 2: Safe Harbor Statement
OABA Conference 1 December 2, 2008 Safe Harbor Statement 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 sta
Slide 3: A perfect storm hit the crop nutrient markets
2 OABA Conference December 2, 2008 A perfect storm hit the crop nutrient markets A perfect storm hits crop nutrient markets this fall Impact of the global financial crisis Credit constraints limit sales in some regions Commodity sell-off erodes farm economics and nutrient demand prospects Slower eco
Slide 4: The effect of the perfect storm ....
3 OABA Conference December 2, 2008 The effect of the perfect storm ….
Slide 5: Credit constraints limit sales in some regions
OABA Conference 4 December 2, 2008 Credit constraints limit sales in some regions Brazil 2008 fertilizer sales forecasts lowered from ~26 to ~22 million tonnes 2008 fertilizer sales decline 10% from 24.6 million tonnes in 2007 2009 prospects flat based on today’s farm economics Brazil Monthly Fertil
Slide 6: But limited impacts in other regions
5 OABA Conference December 2, 2008 But limited impacts in other regions United States Record net cash farm income in 2008 Farmer resistance to higher input costs due to 2009 margin squeeze U.S. Net Cash Farm Income 08E Bil $ 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% Debt:Asset Ratio Market Direct
Slide 7: Commodity sell-off erodes farm economics and nutrient demand
6 OABA Conference December 2, 2008 Commodity sell-off erodes farm economics and nutrient demand Agricultural commodity sell-off A rush to liquidity The linkage to oil 2009 New Crop Prices Daily Close of New Crop Options Jan 1 to Nov 26 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov $ BU Dec 09 Corn Nov
Slide 8: Commodity sell-off erodes farm economics and nutrient demand
7 OABA Conference December 2, 2008 Commodity sell-off erodes farm economics and nutrient demand The linkage to oil: the case of corn Corn demand for U.S. ethanol production sets market price Key drivers of corn prices are the price of oil and exchange rates Strong growth & weak dollar cause oil pric
Slide 9: The linkage to oil: the case of corn
8 OABA Conference December 2, 2008 The linkage to oil: the case of corn WTI Crude Oil vs. Corn Nearby Futures Prices - y = 0.0382x + 1.413 R = 0.8708 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 $ BBL Source: NYMEX and CBOT
Slide 10: Slide 10
Slide 11: Grain and oilseed demand drivers
10 OABA Conference December 2, 2008 Grain and oilseed demand drivers Projected Sources of Grain and Oilseed Demand Growth 2008-2020 Income Growth 48% Biofuels 13% Population Growth 39%
Slide 12: More area and higher yields are required to meet projected grain and oilseed demand
11 OABA Conference December 2, 2008 More area and higher yields are required to meet projected grain and oilseed demand World Harvested Area and Average Yield Source: USDA and Mosaic Mil Ha 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 MT Ha Actual Area Forecast Area Actual Yield Required Yield
Slide 13: Higher application rates to achieve required yields
12 OABA Conference December 2, 2008 Higher application rates to achieve required yields World Average Yield and Application Rate Source: IFA, USDA and Mosaic KG HA 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 MT HA App Rate - Actual App Rate - Model Yield - Actual Yield -Rqrd
Slide 14: Another bumper crop is required in 2009
13 OABA Conference December 2, 2008 Another bumper crop is required in 2009 World Grain and Oilseed Stocks L M H Mil Tonnes 10% 13% 16% 19% 22% 25% 28% 31% 34% Percent Stocks Percent of Use Source: USDA and Mosaic (for 09/10 estimates)
Slide 15: Commodity sell-off erodes farm economics and nutrient demand
14 OABA Conference December 2, 2008 Commodity sell-off erodes farm economics and nutrient demand Key Price Assumptions $ bu 2007 2008 2009 Corn $7.20 $7.52 $6.73 Soybeans $16.28 $16.10 $15.15 Note: Assumes 2007 crop was sold at the nearby price on July 1 and the 2008 and 2009 crops were sold at the
Slide 16: Commodity sell-off erodes farm economics and nutrient demand
15 OABA Conference December 2, 2008 Commodity sell-off erodes farm economics and nutrient demand Farm Economics – December 1, 2008 Variable Cost for a U.S. Midwest High Yield Farm Operation $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 2008E 2009F Source: Iowa State University and Mosaic
Slide 17: A perfect storm hits crop nutrient markets this fall
16 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Impact of the global financial crisis Commodity sell-off erodes farm economics and demand prospects World Nutrient Use 08E 09F Source: IFA May 2008 Mil Tonnes World Nutrient Use 08E 09F Source: IFA November 2008
Slide 18: A perfect storm hits crop nutrient markets this fall
17 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall U.S. Potash Use 3.50 3.75 4.00 4.25 4.50 4.75 5.00 5.25 5.50 5.75 08E 09F Fertilizer Year Ending June 30 Source: AAPFCO and Mosaic Impact of the global financial crisis Commodity sell-off erodes farm economics a
Slide 19: A perfect storm hits crop nutrient markets this fall
18 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Impact of the global financial crisis Slower economic growth prospects reduce energy demand and prices - Lower operating and raw materials costs Crude Oil Prices Monthly Average of Daily Close of WTI Nearby Opti
Slide 20: A perfect storm hits crop nutrient markets this fall
19 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Impact of the global financial crisis Slower economic growth prospects reduce energy demand and prices - Lower operating and raw materials costs Sulphur Prices c&f India $ MT Source: Fertecon Ammonia Prices fob
Slide 21: A perfect storm hits crop nutrient markets this fall
20 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Impact of the global financial crisis Slower economic growth prospects reduce energy demand and prices - Lower freight rates Dry Bulk Avg TC Rates Apr06 Jul06 Oct06 Jan07 Apr07 Jul07 Oct07 Jan08 Apr08 Jul08 Oct0
Slide 22: A perfect storm hits crop nutrient markets this fall
21 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Large distribution pipeline stocks in the Americas U.S. DAP/MAP Shipments vs. Use 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 09F Source: AAPFCO, TFI and Mosaic Mil Tons P2O5 6.00 6.25 6.50 6.75 7.00 7.25 7.50
Slide 23: A perfect storm hits crop nutrient markets this fall
22 OABA Conference December 2, 2008 A perfect storm hits crop nutrient markets this fall Extremely late North American fall season U.S. Corn Harvest Progress Report Week Ending (Sunday) Avg. 2003-07 Sep Oct Nov
Slide 24: Lower Chinese export tax Dec 1-Jan
23 OABA Conference December 2, 2008 Lower Chinese export tax Dec 1-Jan 31 Announced on November 13 Applies to 373 different products or commodities Designed to stimulate domestic economy Valid from December 1, 2008 to December 31, 2009 Phosphate export duties: 10% during low season and 110% during h
Slide 25: China – still the wildcard
24 OABA Conference December 2, 2008 China – still the wildcard China Monthly DAP and MAP Exports Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1000 MT Source: China Customs China DAP/MAP Phosphate Exports 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 08E Source: IFA and Mosaic MMT DAP MAP
Slide 26: Consequences
25 OABA Conference December 2, 2008 Consequences Customers step out of the market due to expectations of lower prices U.S. DAP and MAP Domestic Shipments JUL AUG SEP OCT NOV DEC JAN FEB MA APR MAY JUN MIN MAX Range (2003/04-2007/08) 2008/09 3-Yr Avg Source: TFI and Mosaic U.S. DAP and MAP Exports JU
Slide 27: World import demand projected to drop 6% in 2008 and remain flat in 2009
26 OABA Conference December 2, 2008 World import demand projected to drop 6% in 2008 and remain flat in 2009 Processed phosphate includes DAP, MAP and TSP World Less China Processed Phosphate Import Demand by Region 08E 09F MMT Asia less China L Amer Europe Oceania Other Source: Fertecon, IFA and Mo
Slide 28: Consequences
27 OABA Conference December 2, 2008 Consequences Customers step out of the market due to expectations of lower prices Potash shipments “grind to a halt” North America MOP Exports 2008/09 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ma Jun Mil Tons KCL MIN MAX Range (2003/0
Slide 29: World MOP trade
28 OABA Conference December 2, 2008 World MOP trade World MOP Import Demand 08E 09F Mil Tonnes KCL Asia Latin America West Europe US Other Source: Fertecon and Mosaic
Slide 30: Consequences
29 OABA Conference December 2, 2008 Consequences Producers curtail production in response to stock builds US DAP/MAP Stocks at Month End JUL AUG SEP OCT NOV DEC JAN FEB MA APR MAY JUN 1000 ST MIN MAX Range (2003/04-2007/08) 2008/09 3 Year Average Source: TFI and Mosaic JUL AUG SEP OCT NOV DEC JAN FE
Slide 31: Consequences
30 OABA Conference December 2, 2008 Consequences Producers curtail production in response to stock builds OCP – shutting down the Jorf Lasfar complex for 30-40 days GCT – shutting down the Gabes and Skhira facilities for 60 days Eurochem – reducing production 50% at Lifosa and Kingisepp in November
Slide 32: Potash Production Curtailments
31 OABA Conference December 2, 2008 Potash Production Curtailments Announced/Estimated Nation Producer production cutback Note Brazil Vale -60,000 tonnes shutdown for one month starting Nov. 5 Russia Silvinit -450,000 tonnes adjust turnaround in Q4 Uralkali -500,000 tonnes reduce production in Q4 Be
Slide 33: Consequences
32 OABA Conference December 2, 2008 Consequences Inventory valuation risk along the supply chain The re-calibration of crop nutrient markets Prilled Urea Prices fob Yuzhnyy $ MT Source: Fertilizer Week America DAP Prices fob Tampa Vessel $ MT Source: Fertecon Potash Prices Blend Grade fob U.S. Midwe
Slide 34: How & when will we get out of this Storm?
33 OABA Conference December 2, 2008 How & when will we get out of this Storm? These are the variables that will eventually turn the market around: More stable financial markets and improved credit availability Farm margins improve due to : Lower input costs Agricultural commodity price rally Raw mat