Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Non-Deal Roadshow (March 2009)
62 slides from Mosaic Company (the)'s roadshow presentation, Mar 5, 2009
Slide 1: Phosphate and Potash Outlook
Phosphate and Potash Outlook Dr. Michael Rahm, Vice President Market Analysis and Strategic Planning BofA-Merrill Lynch Investor Visit Plymouth, MN March 5, 2009 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: Topics
Topics • Current Situation or . . . How did we get to where we’re at today? • Near Term Outlook or . . . What’s ahead for the spring season? • Long Term Outlook or . . . Have recent developments changed long term fundamentals?
Slide 4: What happened?
What happened? • Customers stepped out of the market • Distribution pipeline plugs • Stocks back-up at production points • Production declines as a result • Crop nutrient markets recalibrate • Supply chain exposed to large inventory valuation risk
Slide 5: Customers stepped out of the market
Customers stepped out of the market • Build up of distribution pipeline stocks last year • A late North American harvest • Reduced credit availability in some regions • Expectations of lower crop nutrient prices • Large drops in energy and raw materials costs • Declines in crop prices
Slide 6: Customers stepped out of the phosphate market last fall but began to buy again in January
Customers stepped out of the phosphate market last fall but began to buy again in January Year-to-date (Jul-Jan) DAP/MAP domestic shipments were down 45% from the high levels a year ago. Shipments during the last quarter of calendar 2008 (Oct-Dec) were off 61% from a year earlier. Domestic shipments
Slide 7: Phosphate inventories peaked in December and have begun to decline
Phosphate inventories peaked on December 31 and have begun to decline DAP/MAP inventories held by U.S. producers at on- and off-site warehouses 2008/09 2007/08 U.S. DAP and MAP Producer Stocks 0.0 0.5 1.0 1.5 2.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons MIN MAX Range (2002/03-2006/07
Slide 8: U.S. phosphate production decreases
U.S. phosphate production decreases Year-to-date (Jul-Jan) U.S. phosphoric acid production was down 28% from a year earlier. The U.S. industry operated at just 30% of capacity in January. U.S. Phosphoric Acid Production and Op. Rates 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Jul Aug Sep Oct Nov Dec Jan Feb Ma
Slide 9: Customers stepped out of the potash market
Customers stepped out of the potash market Year-to-date (Jul-Jan) domestic shipments were down 29% from a year ago. Shipments during the last quarter of calendar 2008 (Oct- Dec) were off 38% from last year. Estimated and implied domestic shipments dropped another 100,000 tons K O in January. Year-to
Slide 10: NA potash producer inventories increase
NA potash producer inventories increase MOP inventories held by NA producers at on- and off-site warehouses 2007/08 2008/09 North America MOP Producer Stocks 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2.1 2.4 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons K O MIN MAX Range (2002/03-2006/07) 2007/08 3-Yr
Slide 11: NA potash production begins to decline
NA potash production begins to decline Year-to-date (Jul-Jan) NA MOP production was down 12% from a year earlier. Production during the last quarter of calendar 2008 (Oct-Dec) was down 13% from a year ago. Output in January dropped further to less than 820,000 tons K O. A larger decline is expected
Slide 12: Expectations of lower crop nutrient prices
Expectations of lower crop nutrient prices Ammonia Prices c&f Tampa $ MT Source: Fertecon Sulphur Prices c&f India $ MT Source: Fertecon The rise and fall of phosphate raw materials costs
Slide 13: Crop nutrient markets recalibrate
Crop nutrient markets recalibrate Potash Prices Blend Grade fob U.S. Midwest Warehouse $ ST Source: Green Markets Prilled Urea Prices fob Yuzhnyy $ MT Source: Fertilizer Week America DAP Prices fob Tampa Vessel $ MT Source: Fertecon The entire supply chain captured large inventory gains on the way u
Slide 14: Near Term Outlook
Near Term Outlook • How much will nutrient demand decline this year? • Another record crop is required in 2009 • Lower crop input costs • Demand deferral vs. destruction • Reduction in production worldwide • Adjustments to get product moving through the supply chain • Inventory write-downs • Averagi
Slide 15: Another large crop is required in 2009
Another large crop is required in 2009 World Grain and Oilseed Stocks 08/09E 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) 2009/10 Scenario Assumptions Low Medium High Increase in Harvested Area (Mil HA) Yield (Deviat
Slide 16: The world needs another bumper crop in 2009 to prevent unsafe stock levels
The world needs to produce another bumper crop in 2009 in order to prevent global grain and oilseed stocks from declining to unsafe levels. This chart illustrates the main reason for that assessment. The bars show global stocks of the leading grain and oilseed crops. The cross-hatched bar is the USD
Slide 17: Record harvested area and average yield
Record harvested area and average yield World Grain and Oilseed Area and Yields 08/09E Mil Ha 2.50 2.56 2.63 2.69 2.75 2.81 2.88 2.94 3.00 MT Ha Harvested Area Yield Trend Source: USDA
Slide 18: Bumper crops resulted from record harvested area and yields
The world produced bumper crops during the last two years as a result of record harvested area and record yields. This chart illustrates the challenges of repeating last year’s performance. The bars show harvested area. Farmers harvested almost 25 million more hectares in 2008 than in 2006. That is
Slide 19: 2009 new crop prices
2009 new crop prices 2009 New Crop Prices Daily Close of New Crop Options Jan 2, 2008 to March 3, 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar $ BU Dec 09 Corn Nov 09 Soybeans Jul 09 Wheat Source: CBOT and KCBOT
Slide 20: Impact of reductions in P&K application rates on corn yields and profitability
Impact of reductions in P&K application rates on corn yields and profitability Economic P&K Cut Optimum 10% 50% 100% Yield Potential (bu acre): Estimated Yield Without N (bu acre): P Soil Test - Bray P1 (ppm): K Soil Test (ppm): Corn Price ($ bu): 4.25 4.25 4.25 4.25 Ammonia Price ($ ton) N Cost ($
Slide 21: Domestic Phosphate Outlook: Case 1
Domestic Phosphate Outlook: Case 1 2008/09 Change U.S. Phosphate Demand: -10.6% 2008/09 Change in U.S. DAP/MAP Shipments: -26.8% U.S. Phosphate Use and DAP/MAP Shipments 2.50 3.00 3.50 4.00 4.50 5.00 5.50 08E 09F Mil Tons P O 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 Mil Tons DAP/MAP Phosphate Us
Slide 22: Above-average shipments required this spring if DAP/MAP shipments decline 27%
Above-average shipments are required this spring if DAP/MAP shipments decline 27% this year U.S. DAP and MAP Domestic Shipments 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons MIN MAX Range (2003/04-2007/08) 2008/09 Act/Fcst 3-Yr Average Source: T
Slide 23: Domestic Phosphate Outlook: Case 2
Domestic Phosphate Outlook: Case 2 2008/09 Change U.S. Phosphate Demand: -17.9% 2008/09 Change in U.S. DAP/MAP Shipments: -38.5% U.S. Phosphate Use and DAP/MAP Shipments 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 08E 09F Mil Tons P O 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 Mil Tons DAP/MAP Phospha
Slide 24: Below average shipments required this spring if shipments run 39% below last year
Below average shipments required this spring if shipments run 39% below last year Case 2: 39% Drop in U.S. DAP/MAP Shipments in 2008/09 U.S. DAP and MAP Domestic Shipments 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons MIN MAX Range (2003/04-2007
Slide 25: Domestic Potash Outlook: Case 1
Domestic Potash Outlook: Case 1 2008/09 Change U.S. Potash Demand: -19.6% 2008/09 Change in NA MOP Shipments: -23.9% North America Potash Use and Shipments 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 08E 09F Mil Tons K O Ag Use Total Shipments Estimated Use Source: IPNI and Mosaic Fertilizer Year Ending
Slide 26: Average shipments required this spring if MOP shipments decline 24%
Average shipments are required this spring if MOP shipments decline 24% this year North America MOP Domestic Shipments 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons KCL MIN MAX Range (2003/04-2007/08) 2008/09 Act/Fcst 3-Yr Average Source: IPNI and Mosai
Slide 27: Domestic Potash Outlook: Case 2
Domestic Potash Outlook: Case 2 2008/09 Change U.S. Potash Demand: -31.5% 2008/09 Change in NA MOP Shipments: -37.5% North America Potash Use and Shipments 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 09F Mil Tons K O Ag Use Total Shipments Estimated Use Source: IPNI and Mosaic Fertilizer Year Ending Jun
Slide 28: Extremely slow movements this spring if shipments run 38% less
Extremely slow movements this spring if shipments run 38% less than last year Case 2: 38% Drop in MOP Shipments in 2008/09 North America MOP Domestic Shipments 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Mil Tons KCL MIN MAX Range (2003/04-2007/08) 2008/09 Act
Slide 29: Near term phosphate import demand outlook
Near term phosphate import demand outlook World Less China Phosphate Import Demand 08E Mil Tonnes DAP/MAP/TSP W Europe Asia Less China Oceania L America Other Source: Fertecon, IFA and Mosaic
Slide 30: Near term potash import demand outlook
Near term potash import demand outlook World MOP Import Demand 08E Mil Tonnes Asia Latin America West Europe US Other Source: Fertecon and Mosaic
Slide 31: Indian demand outlook remains strong
Indian demand outlook remains strong Indian subsidies insulate domestic farmers from higher crop nutrient costs India MOP Import Demand 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Mil Tonnes Source: Fertecon and Mosaic India Processed Phosphate Import Demand 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Mil Tonnes DAP MAP So
Slide 32: Brazilian demand outlook remains an issue
Brazilian demand outlook remains an issue Brazil Fertilizer Shipments Mil Tonnes Source: ANDA and Mosaic Brazil Monthly Fertilizer Shipments 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mil Tonnes Source: ANDA
Slide 33: Brazilian fertilizer shipments
Brazilian fertilizer shipments are estimated to have declined 9% to 22.3 million tonnes in 2008. That still would rank as the fourth highest usage on record. No recovery is expected at this point in 2009. In fact, use is forecast to decline to about million tonnes in based on current crop prices, in
Slide 34: China remains the wild card
China remains the wild card Chinese export taxes and procurement strategies cause uncertainty China DAP and MAP Export Supply 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Mil Tonnes DAP MAP Source: Fertecon, IFA, China Customs and Mosaic China MOP Import Demand Mil Tonnes Source: Fertecon and Mosaic
Slide 35: Long Term Outlook
Long Term Outlook • Solid long term nutrient demand outlook • Strong traditional demand drivers • Biofuels: a viable component of comprehensive energy policy • Demand growth requires significant supply increases • Limited capacity additions during the next few years • Relatively high prices required
Slide 36: Long term fundamentals remain intact and positive
While near term prospects are beginning to improve, long term fundamentals remain intact and positive. First, the long term nutrient demand outlook remains rock solid due to strong traditional drivers as well as the growing demand for biofuels. Second, projected demand growth requires significant su
Slide 37: The million tonne challenge
The 500 million tonne challenge World Grain and Oilseed Use 1,000 1,250 1,500 1,750 2,000 2,250 2,500 2,750 3,000 3,250 Source: USDA and Mosaic Mil Tonnes Actual Actual for US Ethanol Forecast Forecast for U.S. Ethanol
Slide 38: World grain and oilseed use forecast to keep increasing
We forecast that world grain and oilseed use will continue to increase at a faster pace than historical trends due to steady population growth, higher per capita incomes and further increases in biofuels production. We project that global grain and oilseed production will increase about 20% or more
Slide 39: Grain and oilseed demand drivers
Grain and oilseed demand drivers Projected Sources of Grain and Oilseed Demand Growth 2008-2020 Income Growth 48% Biofuels 13% Population Growth 39%
Slide 40: Long term demand forecasts derived from a model
These long term demand forecasts were derived from a model that predicts use based on population and real GDP per capita. The amount of corn ground into ethanol in the United States was excluded from the statistical analysis and then added back based on actual and future mandated use. This chart sho
Slide 41: The world adds the equivalent of another Thailand and Laos each year
The world adds the equivalent of another Thailand and Laos to global population each year World Population Growth By Region Source: Global Insight Million Asia Africa Latin America Other
Slide 42: Increases in population are steady and predictable
Let’s look at each of these drivers in more detail. Increases in population are steady and predictable. Global population is projected to increase from 6.6 billion today to 7.5 billion in 2020. The world sets the dinner table for 73 million more people each year. That is the equivalent of adding ano
Slide 43: Driven by population and income growth
Driven by population and income growth y = 17.913Ln(x) - 91.411 R ² = 0.6745 Meat Consumption vs GDP (per capita in 2002) Income per Capita (1997 US$) Source: FAO, Global Insight
Slide 44: People upgrade diets as incomes increase
You no doubt have seen a chart like this in most outlook presentations, but it illustrates a basic fact that people upgrade diets to more protein-rich and grain intensive foods as incomes increase.
Slide 45: Driven by population and income growth
Driven by population and income growth UAE 44.4 Brazil 16.1 Mexico 10.9 Russia 8.3 Australia 7.9 USA 7.4 Argentina 7.2 S Korea 3.7 EU27 3.1 Vietnam 2.9 China 2.7 Japan 1.6 India 1.4 Indonesia 0.9 Philippines 0.9 Thailand 0.6 Malaysia 6.9 kg per capita Change in Per Capita Broiler Consumption 1997 -
Slide 46: Change in per capita broiler consumption
A specific example may drive home this point. This chart shows the change in per capita broiler consumption in 17 countries during the last 10 years. Many developing countries such as the big three Latin American countries registered impressive gains. Other gains may look modest, but the impact of t
Slide 47: Large gains in many large developing countries
Large gains have occurred during the last 10 years in many large developing countries China 9.3 Brazil 6.1 Mexico 5.4 India 5.1 Indonesia 0.4 USA 0.2 Australia -0.8 Malaysia -0.9 Japan -5.3 EU27 -7.2 Russia -12.5 Argentina -14.3 Philippines -0.1 Thailand -0.6 -30 -20 -10 kg per capita Change in Per
Slide 48: Consumption of dairy products rising with incomes
Meat obviously is not the only way to upgrade one’s diet. People also consume more fish, eggs and dairy products as incomes increase. This chart shows the change in per capita consumption of dairy products for 14 countries during the last 10 years. Consumption of dairy products is on the rise in man
Slide 49: Biofuels – a viable component of energy policy
Biofuels – a viable component of energy policy • Long term viability • Bullish oil fundamentals • Strong demand outlook (same as food story) • Uncertainties about new supplies • Continued or faster agricultural productivity gains from biotechnology • U.S. Energy Independence and Security Act of 2007
Slide 50: Biofuels is also an important demand driver
Biofuels also is an important demand driver. Biofuels has passionate proponents and opponents and likely will remain a controversial issue. Our view is that biofuels is a viable component of energy policy. That assessment is based on a combination of bullish oil fundamentals and expectations of larg
Slide 51: U.S. ethanol – significant part of gas supply
U.S. ethanol – significant part of gas supply U.S. Ethanol Production Source: EIA and Mosaic Bil Gal 0% 2% 4% 6% 8% 10% 12% 14% 16% Percent Actual Forecast Percent of Gasoline Use
Slide 52: U.S. ethanol production estimate for 2008
We estimate that U.S. ethanol production totaled about 9.2 billion gallons in 2008. Ethanol currently accounts for 6% of U.S. gasoline supplies and is projected to account for about 10% of supplies by 2015. Ethanol is a significant part of U.S. gasoline supplies. By comparison, electricity generated
Slide 53: Solid long term phosphate demand prospects
Solid long term phosphate demand prospects 2.5% CAGR 1.5% CAGR 2.0% CAGR World Phosphate Demand Forecast Mil Tonnes P O Actual Low Growth Medium Growth High Growth IFA Fertecon Source: IFA , Fertecon and Mosaic
Slide 54: Solid long term demand growth for phosphate and potash
Based on these drivers, we see solid long term demand growth for both phosphate and potash. Global phosphate use totaled 39.3 million tonnes P2O5 in 2007, according to the latest estimates from the International Fertilizer Industry Association. The lines show potential demand for 1.5%, 2.0% and 2.5%
Slide 55: Significant additional supply required to meet projected phosphate demand
Significant additional supply is required to meet projected phosphate demand Rock Required to Meet Phosphate Demand Growth 2008-20 Actual 2008-20 Growth Scenario Million Tonnes 97-07 97-02 02-07 Low Medium High Crop Nutrient Demand Growth (P O ) 6.0 0.4 5.6 7.5 10.3 13.2 Crop Nutrient Demand Growth
Slide 56: Global phosphate demand growth and rock requirements
This chart shows that global phosphate demand increased 1.7% per year from to 2007. However, growth differed significant between the first five years and the second five years of this period. Based on a medium demand growth scenario, million tonnes of additional rock production are required to meet
Slide 57: Solid long term potash demand prospects
Solid long term potash demand prospects 3.50% CAGR 2.00% CAGR 2.75% CAGR World Potash Demand Forecast Mil Tonnes K O Actual Low Growth Medium Growth High Growth IFA Fertecon Source: IFA, Fertecon and Mosaic
Slide 58: Global potash use forecast
Global potash use totaled 28.9 million tonnes K2O in 2007, according to the latest IFA estimates. The lines show potential demand for 2.0%, 2.5% and 3.0% compound annual growth rates. Forecasts from IFA for and from Fertecon for 2012, and also are plotted on the chart. Again, our assessment is that
Slide 59: Significant additional supply required to meet projected potash demand
Significant additional supply required to meet projected potash demand MOP Required to Meet Potash Demand Growth 2008-20 Actual 2008-20 Growth Scenario Million Tonnes 97-07 97-02 02-07 Low Medium High Crop Nutrient Demand Growth (K 2 O) 6.5 0.9 5.5 8.4 10.6 14.1 Crop Nutrient Demand Growth (CAGR) 2.
Slide 60: Global potash demand growth and MOP requirements
This chart shows that global potash use increased 2.6% per year from to 2007. Growth rates again differed significant between the first five years and the second five years of this period. Based on a medium demand growth scenario, more than million tonnes of additional MOP production is required to
Slide 61: Take-Aways
Take-Aways • Current Situation • Crop nutrient markets recalibrate based on lower energy, raw materials and crop prices • Inventory valuation risk along the entire supply chain • Near Term Outlook • Another record crop is required in 2009 • Improving demand prospects: deferral vs. destruction? • Sig
Slide 62: Dr. Michael Rahm
Dr. Michael Rahm Vice President Market Analysis and Strategic Planning BofA-Merrill Lynch Investor Visit Plymouth, MN March 5, 2009 Thank You! Phosphate and Potash Outlook