Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — 2012 CoBank Knowledge Exchange Forum: The Globalization of Agriculture
37 slides from Mosaic Company (the)'s conference presentation, Jun 6, 2012
Slide 1: Navigating Today's Volatile Crop Nutrient Markets
Navigating Today’s Volatile Crop Nutrient Markets 2012 CoBank Knowledge Exchange Forum: The Globalization of Agriculture: An Era of Promise and Challenge Chicago, Ill June 6-7, 2012 Dr. Michael R. Rahm Vice President, Market and Strategic Analysis The Mosaic Company Exhibit 99.1
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results. Such statements are based upon the current
Slide 3: Agenda
Agenda • Crop Nutrients Overview • Demand Drivers and Prospects • Market Outlook – Expected Features • Risk Management Challenges • Factors to Watch or Game Changers
Slide 4: Crop Nutrients Overview
Crop Nutrients Overview
Slide 5: Crop Nutrients Overview
Crop Nutrients Overview • Crop nutrients are plant food • 17 chemical elements are required for plant growth • Justus von Liebig’s Law of the Minimum • N-P-K: the carbohydrates, protein and fat of a plant’s diet • Growing importance of secondary nutrients and micronutrients • Nutrients delivered in
Slide 6: Primary Crop Nutrients Overview: Nitrogen
Primary Crop Nutrients Overview • Nitrogen (N) – Basic production process: highly energy intensive Haber-Bosch process to synthesize anhydrous ammonia – Key input: a hydrocarbon feed stock (two-thirds from natural gas) – Global agricultural use: ~108 million tonnes N contained in ~ million tonnes of
Slide 7: Gross Ammonia Production
Gross Ammonia Production a % Average 2006-2010 - @ ° — <1.0 million tonnes @ = 1.0-5.0 million tonnes a e@ @ 5.0 - 9.0 million tonnes eo >9.0 million tonnes Source: IFA . Mosaic
Slide 8: A re-birth of the U.S. nitrogen industry?
Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 $ MM Btu Henry Hub Natural Gas Price Daily Closing Price of the Front Month Contract Source: NYMEX A re-birth of the U.S. nitrogen industry? 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0 Mil Tons North American Ammonia Production Canada U.
Slide 9: Primary Crop Nutrients Overview: Phosphate
Primary Crop Nutrients Overview • Phosphate (P) – The production process - making phosphorus water soluble – Key inputs: phosphate rock mineral ore, sulphur and ammonia – Global agricultural use: ~41 million tonnes P O or ~ million tonnes of product – Main products • Diammonium phosphate (DAP) (46%
Slide 10: Phosphate Rock Production
Phosphate Rock Production Average 2006-2010 q ¢ — <3.0 million tonnes @ 3.0- 10 million tonnes @ 10 - 30 million tonnes @ >30 million tonnes Source: IFA aic Pay
Slide 11: U.S. – large but smaller role
U.S. – large but smaller role Source: TFI and Mosaic Fertilizer Year Ending June 30 Source: TFI and Mosaic Fertilizer Year Ending June 30
Slide 12: Primary Crop Nutrients Overview: Potash
Primary Crop Nutrients Overview • Potash (K) – Production process: simple separation processes – Key inputs: potash mineral ore (sylvinite, carnallite and langbeinite) • Conventional underground mines (500 to 1000+ meters deep) • Solution mines • Salt lake brines (e.g. Dead Sea, Qinghai and Great Sa
Slide 13: MOP Production
MOP Production Average 2006-2010 ¢ — <1.0 million tonnes @ 1.0-3.0milliontonnes * e 3.0 - 8.0 million tonnes >8.0 million tonnes @ Source: IFA ac Pay
Slide 14: Canada – a large and growing role
11E 12F Mil Tons KCl North American MOP Production U.S. Canada Source: IPNI and Mosaic Fertilizer Year Ending June 30 11E 12F Mil Tons KCl North American MOP Exports U.S. Canada Source: IPNI and Mosaic Fertilizer Year Ending June 30 Canada – a large and growing role
Slide 15: Crop Nutrient Markets
Crop Nutrient Markets • A separate and unique market for each nutrient – Common demand drivers – Different supply drivers • Natural resources required • Other raw materials • Location of resources • Technological processes • Market characteristics – Global – Commodity based – Cyclical – Long and lar
Slide 16: Market Characteristics
Market Characteristics • Global – Highly traded commodities – By a large number of successful trading companies Exports as a World Use Total Exports Percent of Use Coarse Grain 1,074.8 119.1 11.1% Wheat 634.4 127.7 20.1% Rice 432.0 31.2 7.2% Total Grain 2,141.2 278.1 13.0% Nitrogen (N) 100.3 40.6 40
Slide 17: Market Characteristics: Cyclical, But the Cycle Has Shifted Up
New Scenario • $5.00-$7.00 bu Corn • $80-100 bbl Oil • $4.50 MM Btu Gas • $100-$200 MT Rock • $2000+ MT K Capacity Old Scenario • $2.00-$2.50 bu Corn • $10-$20 bbl Oil • $2.00 MM Btu Gas • $30-$40 MT Rock • $1000 MT K Capacity Market Characteristics • Cyclical – But the cycle has shifted up Time Pri
Slide 18: Crop Nutrient Markets
Crop Nutrient Markets • Long and large supply chain/distribution pipeline – Production – beginning of the supply chain • Typically located near the source of the natural resource (i.e. long pipeline) • Operations run 24-7-365 – Farm application – end of the supply chain • One or two short applicatio
Slide 19: Demand Drivers and Prospects
Demand Drivers and Prospects
Slide 20: The food story by the numbers
2 3 1 The food story by the numbers 1. Population growth and increases in per capital GDP are expected to generate steady and predictable increases in global grain and oilseed (food) demand. 2. Farmers around the globe will need to harvest record area and produce yields that exceed the 30-year trend
Slide 21: World Nutrient Use
Mi Tomes NPE World NutrientUse MiTornes N World Nitrogen Use moa 1150 Source: IFA May 2012 Source: IFA May 2012 190.0 z 1100 180.0 re 170.0 100.0 160.0 4 90 180.0 F 900 140.0 | 3 ry 20.0 i t qe 250 f woo AO |..|. i ! i , Uh GEE el a 100.0 700 95195 97198 96/00 O12 ONL O8/GE 0708 OSHO 11M2E 13/KF 181
Slide 22: U.S. Nutrient Use
Source: AAPFCO, TFI and Mosaic 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 11E 13F 15F 17F Mil Tons P O Fertilizer Year Ending June 30 U.S. Phosphate Use 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 11E 13F 15F 17F Mil Tons K O Fertilizer Year Ending June 30 U.S. Potash Use 11E 13F 15F 17F Fertilizer Ye
Slide 23: U.S. Fertilizer Use by Crop 2007/08
Corn 45.9% Wheat 11.7% Rice 1.7% Other Coarse Grains 2.7% Sugar Crops 1.4% Other Oilseed 1.8% Soybean 6.0% Cotton 2.5% Fruits & Veg. 5.3% Other Crops 21.0% U.S. Fertilizer Use by Crop 2007/08 Source: IFA
Slide 24: Market Outlook – Expected Features
Market Outlook – Expected Features
Slide 25: Phosphate
Phosphate Strong demand growth underpinned by the food and energy stories - Relatively high commodity prices - Profitable farm economics worldwide - Global phosphate demand growth of 2.5%-3.0% per year - DAP/MAP/TSP shipment growth of ~3% per year Net capacity increases expected to keep pace with de
Slide 26: Potash
Potash Global market tightened beginning in 2004 - Strong demand growth (BIC + Indonesia/Malaysia) - FSU supplies absorbed - Capacity atrophy Also strong demand growth underpinned by the food and energy stories - Global potash demand and MOP shipment growth of 3.0%- 3.5% per year Large number of bro
Slide 27: Risk Management Challenges
Risk Management Challenges
Slide 28: Crop Nutrient Price Charts
$ ST Granular Urea Prices NOLA Barge Source: Green Markets $ MT DAP Prices fob Tampa Vessel Source: Fertecon $ ST MOP Prices Blend Grade fob U.S. Midwest Warehouse Source: Green Markets $ LT Sulphur Prices c&f Tampa Source: Green Markets
Slide 29: Extraordinary commodity price volatility
Extraordinary commodity price volatility Index (2000 = 100) Crop Nutrient and Other Commodity Prices Urea DAP MOP Oil Corn Copper Source: CBOT, NYMEX, Green Markets, ICIS and Mosaic
Slide 30: DAP Price
$ MT DAP Price Quarterly Average fob Tampa Vessel Actual Model Forecast “Just because crop nutrient prices are volatile does not mean large price movements are not explainable. However, just because statistical models explain price movements does not imply that prices are predictable.” Market Mosaic
Slide 31: Futures Markets
Futures Markets Forward Pricing – Temporary substitute for a cash market transaction that will be made in the future – Forward price output and raw material to establish a margin • Soybean Processing • Petroleum Refining Hedging – True hedge: having equal and opposite priced positions in a cash and
Slide 32: Lack of Industry Interest?
Lack of Industry Interest? More risk-loving than risk-averse? Ability to pass price volatility on to the end user Shift as much price risk as possible back to the manufacturers Smaller and more frequent purchases Relying on just-in-time inventory Entering into warehousing and consignment arrangement
Slide 33: The Mosaic Company
The Mosaic Company Voice of Customers – Customers want risk management tools – But are they willing to pay for this insurance? – Way for a crop nutrient producer to differentiate its offering from that of competitors Expanding Toolkit – Consistent forward pricing programs – Final Price Deferred (FPD
Slide 34: Factors to Watch or Game Changers
Factors to Watch or Game Changers
Slide 35: Forecasting = Developing and handicapping plausible scenarios
Forecasting = Developing and handicapping plausible scenarios Key Crop Nutrient Market Drivers Income Growth Exchange Rates Ag Commodity Prices Farm Profitability Energy Costs Raw Materials Costs New Project Development New Industry Entrants Consumer Tastes/Preferences Uncontrollable and Unpredictab
Slide 36: What are the Game Changers?
1. Macroeconomic Environment: Impact of Dollar on Crop Prices 2. Political Change: Political Unrest Impact on Key Economies 3. Government Policies: Political Support for Biofuels 4. Government Policies: NPK Capacity Expansions for Diversification Goals 5. Technical Change: Cheap Energy Era Returns D
Slide 37: Thank You!
Navigating Today’s Volatile Crop Nutrient Markets 2012 CoBank Knowledge Exchange Forum: The Globalization of Agriculture: An Era of Promise and Challenge Chicago, Ill June 6-7, 2012 Dr. Michael R. Rahm Vice President, Market and Strategic Analysis The Mosaic Company Thank You!
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