Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — 2008 ABA National Conference
54 slides from Mosaic Company (the)'s conference presentation, Nov 17, 2008
Slide 1: Why are Crop Nutrient Markets so Volatile?
Why are Crop Nutrient Markets so Volatile? Dr. Michael R. Rahm Vice President Market Analysis and Strategic Planning 2008 ABA National Conference Des Moines, IA November 17, 2008 Exhibit 99.1
Slide 2: Safe Harbor Statement
1 2008 ABA National Conference November 17, 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 forwa
Slide 3: Topics
2 2008 ABA National Conference November 17, 2008 Topics Preliminaries Crop nutrients Crop nutrient markets Market volatility 2007/08 Overview Cost drivers Demand drivers Current situation Where are markets headed from here?
Slide 4: Crop Nutrients Overview
3 2008 ABA National Conference November 17, 2008 Crop Nutrients Macro Micro Ca Calcium Mg Magnesium S Sulfur Secondary Zn Zinc Mn Manganese Fe Iron Cu Copper Mo Molybdenum B Boron Cl Chlorine N Nitrogen P Phosphate K Potassium Primary C Carbon H Hydrogen O Oxygen Overview Crop nutrients are plant fo
Slide 5: Crop Nutrients: Nitrogen
4 2008 ABA National Conference November 17, 2008 Crop Nutrients Primary nutrients Nitrogen (N) Highly energy intensive (Haber - Bosch process to synthesize ammonia) Key input: natural gas (or another hydrocarbon feedstock) Global use 2007/08: ~ 100 million tonnes N Main products: - Anhydrous ammonia
Slide 6: Crop Nutrients: Phosphate
5 2008 ABA National Conference November 17, 2008 Crop Nutrients Primary nutrients Phosphate (P) Energy intensive Key inputs: phosphate rock mineral ore, sulphur and ammonia Global use 2007/08: ~ 40 million tonnes P O Main products: - Diammonium phosphate (DAP) - Monoammonium phosphate (MAP) - Triple
Slide 7: Crop Nutrients: Potash
November 17, 2008 2008 ABA National Conference 6 Crop Nutrients Primary nutrients Potash (K) Key inputs: potash mineral ore Global use 2007/08: ~ million tonnes K O Main products: - Potassium chloride or muriate of potash (MOP) - Potassium sulphate or sulphate of potash (SOP) - Potassium-magnesium-s
Slide 8: Crop Nutrient Markets
7 2008 ABA National Conference November 17, 2008 Crop Nutrient Markets Each nutrient is a separate and unique market Common demand drivers Different supply drivers Natural resources/raw materials costs Location of resources Technological processes Market characteristics Global Commodity based Cyclic
Slide 9: Crop Nutrient Markets
8 2008 ABA National Conference November 17, 2008 Crop Nutrient Markets Long and large supply chain or distribution pipeline Production Located at the source of the natural resource (i.e. long pipeline) Operates 24-7-365 Farm application One or two short application windows (i.e. large pipeline) - Po
Slide 10: Topics
9 2008 ABA National Conference November 17, 2008 Topics Preliminaries Crop nutrients Crop nutrient markets Market volatility 2007/08 Overview Cost drivers Demand drivers Current situation Where are markets headed from here?
Slide 11: Nitrogen: Urea Prices
10 2008 ABA National Conference November 17, 2008 Overview Granular Urea Prices NOLA Barge $ ST Source: Green Markets Prilled Urea Prices fob Yuzhnyy $ MT Source: Fertilizer Week America Nitrogen: Urea Prices
Slide 12: Phosphate: DAP Prices
11 2008 ABA National Conference November 17, 2008 Overview DAP Prices Central Florida Rail $ ST Source: Green Markets Phosphate: Diammonium Phosphate (DAP) Prices DAP Prices fob Tampa Vessel $ MT Source: Fertecon
Slide 13: Potash: MOP Prices
12 2008 ABA National Conference November 17, 2008 Overview Potash: Muriate of Potash (MOP) Prices Potash Prices Blend Grade c&f Brazil $ MT Source: ICIS Potash Prices Blend Grade fob U.S. Midwest Warehouse $ ST Source: Green Markets
Slide 14: CRB Index
13 2008 ABA National Conference November 17, 2008 Overview CRB Index Monthly Average of Daily Close of Cash Price Source: CRB
Slide 15: Copper and Aluminum Prices
14 2008 ABA National Conference November 17, 2008 Overview Copper High Grade Scrap #2 Wire Cash Prices Monthly Average of Daily Close of Cash Prices CTS/LB Source: COMEX Aluminum Pig Ingots Cash Prices Monthly Average of Daily Close of Cash Prices 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.
Slide 16: Market Volatility 2007/08
15 2008 ABA National Conference November 17, 2008 Market Volatility 2007/08 Cost drivers – the rise and fall of: Energy costs (e.g. oil and natural gas) Sulphur and ammonia prices Freight rates Demand drivers Agricultural commodity price volatility Farm economics Nutrient demand growth An industry n
Slide 17: Rise and fall of energy costs
16 2008 ABA National Conference November 17, 2008 Rise and fall of energy costs Crude Oil Prices Monthly Average of Daily Close of WTI Nearby Option $ BBL Source: NYMEX
Slide 18: Henry Hub Natural Gas Prices
17 2008 ABA National Conference November 17, 2008 Rise and fall of energy costs Henry Hub Natural Gas Prices Monthly Average of Daily Close of Nearby Options $ MM Btu Source: NYMEX
Slide 19: Rise and fall of sulphur costs
18 2008 ABA National Conference November 17, 2008 Rise and fall of sulphur costs Sulphur Prices c&f India $ MT Source: Fertecon Sulphur Prices c&f Tampa $ LT Source: Green Markets
Slide 20: Rise and fall of ammonia costs
19 2008 ABA National Conference November 17, 2008 Rise and fall of ammonia costs Ammonia Prices Tampa CNF $ MT Source: Fertecon Ammonia Prices fob Yuzhnyy $ MT Source: Fertecon
Slide 21: Rise and fall of (ocean) freight costs
20 2008 ABA National Conference November 17, 2008 Rise and fall of (ocean) freight costs Dry Bulk Avg TC Rates Apr06 Jul06 Oct06 Jan07 Apr07 Jul07 Oct07 Jan08 Apr08 Jul08 Oct08 $1,000 / day Cape 4TC Panamax 4TC Supramax 5TC
Slide 22: Assessment of 2007/08 Market Volatility
21 2008 ABA National Conference November 17, 2008 Assessment of 2007/08 Market Volatility Cost drivers – the rise and fall of: Energy costs (e.g. oil and natural gas) Sulphur and ammonia prices Freight rates Demand drivers Agricultural commodity price volatility Farm economics Nutrient demand growth
Slide 23: Agricultural Commodity Price Volatility: Corn
22 2008 ABA National Conference November 17, 2008 Agricultural Commodity Price Volatility New Crop Corn Prices Daily Close of the December Contract from July 1 to June 30 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun $ BU 2007Z 2008Z 2009Z 2010Z 2011Z Source: CBOT
Slide 24: Agricultural Commodity Price Volatility: Soybeans
23 2008 ABA National Conference November 17, 2008 Agricultural Commodity Price Volatility New Crop Soybean Prices Daily Close of the November Contract from July 1 to June 30 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun $ BU 2007X 2008X 2009X 2010X 2011X Source: CBOT
Slide 25: Agricultural Commodity Price Volatility: Wheat
24 2008 ABA National Conference November 17, 2008 Agricultural Commodity Price Volatility New Crop Hard Winter Wheat Prices Daily Close of the July Contract from July 1 to June 30 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun $ BU 2007N 2008N 2009N 2010N 2011N Source: KCBOT
Slide 26: Agricultural Commodity Price Volatility: Palm Oil, Rice
25 2008 ABA National Conference November 17, 2008 Agricultural Commodity Price Volatility Palm Oil Price Daily Close of Nearby Futures Contract 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Rg Tonne Source: Kuala Lumpur Exchange Rice Price Daily Clos
Slide 27: Farm Economics – July 1, 2008
26 2008 ABA National Conference November 17, 2008 Farm Economics – July 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 Source: Iowa State University and Mosaic $ Acre Soybeans Corn Following Soybeans Corn Following Corn RAV
Slide 28: Farm Economics – November 14, 2008
27 2008 ABA National Conference November 17, 2008 Farm Economics – November 14, 2008 Variable Cost for a U.S. Midwest High Yield Farm Operation $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 Source: Iowa State University and Mosaic $ Acre Soybeans Corn Following Soybeans Corn Following Cor
Slide 29: Farm Economics – U.S. NCFI and D:A Ratio
28 2008 ABA National Conference November 17, 2008 Farm Economics – U.S. NCFI and D:A Ratio U.S. Net Cash Farm Income Bil $ 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% Debt:Asset Ratio Market Direct Government Payments Debt-to-Asset Ratio Source: USDA
Slide 30: World Nutrient Demand Growth Accelerated
29 2008 ABA National Conference November 17, 2008 World Nutrient Demand Growth Accelerated E E E orld Potash Use 17.5 20.0 22.5 25.0 27.5 30.0 32.5 Source: IFA May MMT K O orld Phosphate Use 27.5 30.0 32.5 35.0 37.5 40.0 42.5 Source: IFA May MMT orld Nitrogen Use Source: IFA May MMT N P O W W W
Slide 31: World Processed Phosphate Import Demand
30 2008 ABA National Conference November 17, 2008 World Processed Phosphate Import Demand World Less China Processed Phosphate Import Demand by Region MMT Asia less China L Amer Europe Oceania Other Source: Fertecon, IFA and Mosaic Processed phosphate includes DAP, MAP and TSP E
Slide 32: Global demand growth slows
31 2008 ABA National Conference November 17, 2008 World Global demand growth slows E World Potash Import Demand MMT K O Asia US Latin America Europe Other Source: IFA and Mosaic
Slide 33: Assessment of 2007/08 Market Volatility
32 2008 ABA National Conference November 17, 2008 Assessment of 2007/08 Market Volatility Cost drivers – the rise and fall of: Energy costs (e.g. oil and natural gas) Sulphur and ammonia prices Freight rates Demand drivers Agricultural commodity price volatility Farm economics Nutrient demand growth
Slide 34: An Industry not Equipped to Meet a Demand Surge
33 2008 ABA National Conference November 17, 2008 An Industry not Equipped to Meet a Demand Surge Low earnings during the first half of this decade Rising natural gas and energy costs New nitrogen capacity from regions with low cost gas Development of a phosphate industry in China Consequences Under
Slide 35: U.S. Nitrogen Production
34 2008 ABA National Conference November 17, 2008 U.S. Nitrogen Production North American Ammonia Production Fertilizer Year Ending June 30 Mil ST U.S. Canada Source: TFI and Mosaic
Slide 36: U.S. Phosphate Rock Production
35 2008 ABA National Conference November 17, 2008 U.S. Phosphate Rock Production U.S. Phosphate Rock Production 25.0 27.5 30.0 32.5 35.0 37.5 40.0 42.5 45.0 47.5 Mil Tonnes Source: IFA
Slide 37: Current Situation
36 2008 ABA National Conference November 17, 2008 Current Situation On the farm: delayed and below-average fall season Late harvest Lower crop prices Falling crop nutrient prices Along the supply chain: slow flow Large pipeline stocks Reduced fall purchases Inventory valuation risk At the production
Slide 38: Topics
37 2008 ABA National Conference November 17, 2008 Topics Preliminaries Crop nutrients Crop nutrient markets Market volatility 2007/08 Overview Cost drivers Demand drivers Current situation Where are markets headed from here?
Slide 39: Factors to Watch
38 2008 ABA National Conference November 17, 2008 Factors to Watch Agricultural commodity prices U.S. fall/Brazil spring application season Energy and raw materials costs China
Slide 40: Agricultural Commodity Prices
39 2008 ABA National Conference November 17, 2008 Agricultural Commodity Prices Prevailing view of traders/academics Key drivers are exchange rates and oil prices Corn price correlations (corn price linked to energy) Weak dollar & strong global growth cause oil prices to increase Higher oil prices i
Slide 41: Nearby oil vs. corn prices
40 2008 ABA National Conference November 17, 2008 Nearby oil vs. corn prices WTI Crude Oil vs. Corn Nearby Futures Prices y = 0.0393x + 1.2791 R = 0.8522 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 42: Grain and oilseed demand growth has accelerated
41 2008 ABA National Conference November 17, 2008 Grain and oilseed demand growth has accelerated World Grain and Oilseed Use 1,700 1,800 1,900 2,000 2,100 2,200 2,300 2,400 2,500 2,600 Mil Tonnes 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Food/Feed/Other U.S. Ethanol U.S. Ethanol Percent of Total Source: USDA E
Slide 43: Outstanding supply responses in 2007 and 2008
42 2008 ABA National Conference November 17, 2008 Outstanding supply responses in 2007 and 2008 World Grain and Oilseed Production 16 Leading Crops 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Bil Tonnes Source: USDA E
Slide 44: From record area and yields
43 2008 ABA National Conference November 17, 2008 From record area and yields E World Grain and Oilseed Area and Yields Mil Hectares 1.50 1.75 2.00 2.25 2.50 2.75 3.00 Tonnes per Hectare Harvested Area Yield Source: USDA and Mosaic
Slide 45: Stock drawdown stopped but not reversed
44 2008 ABA National Conference November 17, 2008 Stock drawdown stopped but not reversed 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 46: Factors to Watch
45 2008 ABA National Conference November 17, 2008 Factors to Watch Agricultural commodity prices U.S. fall/Brazilian spring application season Energy and raw materials costs China
Slide 47: U.S. Fall Application Season
46 2008 ABA National Conference November 17, 2008 U.S. Fall Application Season Long and large supply chain or distribution pipeline Source: AAPFCO and TFI What is the capacity of the supply chain? U.S. Crop Nutrient Use by Application Season 2004/05 2005/06 2006/07 Three-Year Total 1000 Tons Fall To
Slide 48: U.S. Fall Application Season
47 2008 ABA National Conference November 17, 2008 U.S. Fall Application Season Long and large supply chain or distribution pipeline Significant differences in application by season across states Source: AAPFCO and TFI Iowa Crop Nutrient Use by Application Season 2004/05 2005/06 2006/07 Three-Year To
Slide 49: U.S. Fall Application Season
48 2008 ABA National Conference November 17, 2008 U.S. Fall Application Season Long and large supply chain or distribution pipeline Significant differences in application by season across states Source: AAPFCO and TFI Nebraska Crop Nutrient Use by Application Season 2004/05 2005/06 2006/07 Three-Yea
Slide 50: Are markets sending the right signals today?
49 2008 ABA National Conference November 17, 2008 Are markets sending the right signals today? “Brazilian farmers are still concerned there won’t be ample credit to fully fund this year’s crops. The planting window will start to close near the end of November, so there is still time to receive their
Slide 51: Factors to Watch
50 2008 ABA National Conference November 17, 2008 Factors to Watch Agricultural commodity prices U.S. fall application season Energy and raw materials costs China
Slide 52: Chinese DAP/MAP Exports
51 2008 ABA National Conference November 17, 2008 Chinese DAP/MAP Exports 2009 export tax policy announced last week 10% during low season (Nov - Jan and Jun - Jul) 110% during peak domestic season (Feb - May and Aug - Oct) 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 Sour
Slide 53: Chinese Potash Imports
52 2008 ABA National Conference November 17, 2008 Chinese Potash Imports China Potash Imports 08E MMT KCL Source: China Customs and Mosaic China Monthly MOP Imports Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1000 MT Source: China Customs
Slide 54: Thank You!
53 2008 ABA National Conference November 17, 2008 Why are Crop Nutrient Markets so Volatile? Thank You! Dr. Michael R. Rahm Vice President Market Analysis and Strategic Planning 2008 ABA National Conference Des Moines, IA November 17, 2008