Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — The Mosaic Company — The CSX Fertilizer Customer Forum (June 2015)
40 slides from Mosaic Company (the)'s conference presentation, Jun 2, 2015
Slide 1: Agricultural and Plant Nutrient Outlook
Agricultural and Plant Nutrient Outlook The CSX Fertilizer Customer Forum Crowne Plaza Downtown Union Station Indianapolis, IN June 2, 2015 Dr. Michael R. Rahm Vice President Market and Strategic Analysis
Slide 2: Safe Harbor Statement
Safe Harbor Statement This document 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 the Wa’ad Al Shamal Phosphate Company (also known as the Ma’aden joint venture), the a
Slide 3: Agenda and Take-Away Sound Bites
Agenda and Take-Away Sound Bites Agricultural Outlook – Near term: Mother Nature’s call – Long term: Food story still solidly intact Phosphate Outlook – Near term: Steady demand growth but significant supply losses – Long term: A new supply ballgame Potash Outlook – Near term: Demand growth is
Slide 4: Agricultural Outlook
Agricultural Outlook
Slide 5: Another summer of 'Whiskey and The Weather Channel' for agricultural commodity traders
Another summer of ‘Whiskey and The Weather Channel’ for agricultural commodity traders $ BU Corn Price New Crop Corn Price US$ BU Daily Close of Front Month Futures Contract Daily Close of the New Crop Contract (Sep 1 - Aug 31) 9 7.00 8 6.50 Source: CME 7 6.00 6 5.50 5 5.00 4 4.50 3 4.00 2 3.50 Sour
Slide 6: Summer weather not planting date matters most
Summer weather not planting date matters most Planting Progress vs. Corn Yield - United States Planting Progress vs. Corn Yield - Illinois 1980-2014 1980-2014 20% 30% y = 0.0008x - 0.057 15% R² = 0.0213 2009 20% Percent Deviation fron Trend Yield Percent Deviation fron Trend Yield 10% 2009 10% 5% 0%
Slide 7: A strong supply response to higher prices
A strong supply response to higher prices - and Mother Nature also cooperates Bil Tonnes World Grain and Oilseed Production and Use Mil Ha World Grain and Oilseed Area and Yields MT Ha 3.1 960 3.30 Source: USDA Source: USDA 3.0 940 3.20 2.9 2.8 920 3.10 2.7 900 3.00 2.6 880 2.90 2.5 2.4 860 2.80 2.3
Slide 8: Still a wide range of potential outcomes in 2015/16
Still a wide range of potential outcomes in 2015/16 Mother Nature’s Call Mil Tonnes World Grain & Oilseed Stocks 700 Source: USDA and Mosaic 650 626 606 600 579 586 570 551 538 550 524 512 494 500 469 461 450 436 424 407 400 350 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Actual/Estimate Mosai
Slide 9: Corn and soybeans and North America account for most of the stock build
Corn and soybeans and North America account for most of the stock build Mil Tonnes World Corn Stocks U.S. Corn Stocks Bil Bu Percent 250 5.0 70 225 Source: USDA and Mosaic Source: USDA 193 4.5 63 200 175 174 4.0 56 175 151 145 144 137 3.5 49 150 131 130 128 132 127 123 125 109 3.0 42 105 100 2.5 35
Slide 10: Drivers other than weather
Drivers other than weather U.S. Dollar Index Index Monthly Average of Daily Index 100 Source: Forex 95 90 The Dollar 85 There is a negative correlation between the trade-weighted 80 dollar index and a commodity price index 75 A stronger dollar increases the local currency cost of an imported com
Slide 11: Factors to Watch
Factors to Watch Mother Nature USDA June 30 acreage and stocks reports Exchange rates Demand response to price changes Positions of large speculative traders 11
Slide 12: Food story still solidly intact in the long run
Food story still solidly intact in the long run Mil Tonnes World Grain and Oilseed Use Mil Ha World Harvested Area and Average Yield MT Ha 4,000 975 4.00 Source: USDA and Mosaic Source: USDA and Mosaic 950 3.75 3,500 925 3.50 3,000 900 3.25 875 3.00 2,500 850 2.75 825 2.50 2,000 800 2.25 1,500 775 2
Slide 13: Phosphate Outlook
Phosphate Outlook
Slide 14: Continued positive global demand prospects
Continued positive global demand prospects MMT Product Global Phosphate Shipments DAP/MAP/MES/TSP Global shipments have notched new highs for six 70 years in a row, but the rate of growth has slowed Source: CRU and Mosaic 64.5-66.5 65 during the last three mainly due to the large drop in 60 Indian
Slide 15: Declines in crop prices and increase in urea costs reducing affordability
But recent declines in crop prices and increase in urea costs are reducing affordability – But three of the top four nutrient consuming countries are insulated to Plant Nutrient Affordability Less Affordable Plant Nutrient Price Index / Crop Price Index some extent from lower crop prices 1.75 Source
Slide 16: Banking on the beginning of a rebound in India
Banking on the beginning of a rebound in India Mil Tonnes India DAP/MAP/TSP Imports 9.0 Source: CRU, IFA, Mosaic 8.0 7.0 – Positive demand drivers 6.0 • Profitable farm economics and good farm demand 5.0 • A depleted retail distribution channel 4.0 • Stable phosphate subsidy (a windfall from lower o
Slide 17: A modest slowdown is expected in Brazil following rapid growth
A modest slowdown is expected in Brazil following rapid growth since 2010 MMT Product Brazil Phosphate Shipments DAP/MAP/MES/TSP 8 Source: CRU and Mosaic – Rapid demand growth since 2010 7 • Shipments climbed 13% per year or 2.9 million tonnes 6 (from 4.5 to 7.4 million) from 2010 to 2014 • Imports
Slide 18: Strong and steady North America shipments
Strong and steady North America shipments Mil Tons North America Product DAP/MAP/MES/TSP Shipm ents 11 10 Source: AAPFCO, TFI, IFA and Mosaic 2014/15 forecast 9 – 9.9 million tons – third highest in modern era 8 • Increase of 3% or 330,000 tons from last year 7 • Up 9% or ~800,000 tons from the se
Slide 19: U.S. exports – more stable volumes and destinations
U.S. exports – more stable volumes and destinations U.S. DAP/ MAP/ MES Exports Mil Tonnes 12 Source: TFI and Mosaic Fertilizer Year Ending June 30 10 8 Lower but stable U.S. exports 6 Focus on freight-advantaged Americas 4 Growth of MicroEssentials® premium products 2 0 00 01 02 03 04 05 06 07
Slide 20: Recent supply losses
Recent supply losses Mil Tonnes U.S. Phosphoric Acid Production P2O5 Significant supply reductions 11.0 – Permanent closures Calendar Year Source: TFI and Mosaic • Mainly non-integrated operations (outside India) 10.0 • Others on the brink? • Suppliers exporting finished products vs. raw materials
Slide 21: China and Saudi Arabia fill the void
China and Saudi Arabia fill the void Mil Tonnes China DAP/MAP/TSP Exports Mil Tonnes Saudi Arabia DAP Exports 9.0 3.0 Source: Fertecon, China Customs, Mosaic Source: CRU and Mosaic 8.0 2.5 7.0 6.0 2.0 5.0 1.5 4.0 1.0 3.0 2.0 0.5 1.0 0.0 0.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 00 01 02 0
Slide 22: New supply ballgame in the long term
New supply ballgame in the long term China has stopped building phosphate plants – The massive 8-3-6 based expansion program has come to an end – China has accounted for all of the net increase in global phosphate capacity this century – China has transitioned from the largest phosphate importer t
Slide 23: Factors to Watch
Factors to Watch Agricultural commodity prices and impact on demand Indian subsidy policy, exchange rate and demand growth OCP and Ma’aden – timing of start-ups China – always the wild card – Phosphate demand growth – Production and exports – Export policies – Pace of phosphate sector re-str
Slide 24: Potash Outlook
Potash Outlook
Slide 25: Demand growth is back on track
Demand growth is back on track Global Potash Shipments Mil Tonnes KCl Record shattering shipments in 2014 due to: 65 Source: CRU and Mosaic 59-60 - More moderate potash prices 60 - Profitable farm economics worldwide 55 - Empty channel inventories at the end of 2013 50 - The Big Six (80+% of the i
Slide 26: Brazil: Moderate decline from record 2014 levels
Brazil: Moderate decline from record 2014 levels Mil Tonnes Brazil MOP Shipments Mil Tonnes Brazil MOP Import Demand KCl 10.0 10.0 Thousands Source: Fertecon and Mosaic 9.0 Source: CRU, Fertecon, and Mosaic 9.0 8.0 8.0 7.0 7.0 6.0 6.0 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 00 01 02 03 04 05
Slide 27: China: Continued strong growth expected in 2015
China: Continued strong growth expected in 2015 Mil Tonnes China MOP Shipments KCl Mil Tonnes China MOP Imports 16.0 10.0 Source: Company Reports, Fertecon and Mosaic Source: China Customs, Mosaic 14.0 9.0 8.0 12.0 7.0 10.0 6.0 8.0 5.0 6.0 4.0 3.0 4.0 2.0 2.0 1.0 0.0 0.0 00 01 02 03 04 05 06 07 08 0
Slide 28: India: Shipments back on an upward trend
India: Shipments back on an upward trend Positive demand drivers: Mil Tonnes India MOP Import Demand - Profitable farm economics 7.0 Source: Fertecon and Mosaic - Low channel inventories 6.0 - No changes in the potash subsidy - Relatively stable rupee 5.0 4.0 Indian imports jumped to 4.3 million
Slide 29: Indonesia/Malaysia: Positive and stable outlook
Indonesia/Malaysia: Positive and stable outlook Mil Tonnes Indonesia/Malaysia MOP Import Demand 6.0 Source: Fertecon and Mosaic 5.0 4.0 3.0 Combined shipments surged 38% or 1.4 million 2.0 tonnes to a record 5.1 million in 2014 1.0 Shipments are forecast to decline modestly to 0.0 4.9 million to
Slide 30: NA shipments surged last year but likely will drop in 2015
NA shipments surged last year but likely will drop in 2015 due to early positioning by distributors last year Mil Tonnes North American MOP Shipments Mil Tonnes North American Potash Shipments KCl 11.0 Source: IPNI, USDC, and Mosaic 6.0 Thousands 10.0 9.0 5.0 8.0 7.0 4.0 6.0 5.0 3.0 4.0 3.0 2.0 2.0
Slide 31: Record NA exports needed to meet projected demand
Record NA exports needed to meet projected demand Mil Tonnes North America MOP Exports KCl North America MOP Statistics 1.4 Current Quarter % Chg % Chg 7-Yr % Chg Source: IPNI Q3 Q2 Prior Q3 Prior Oly 7-Yr 1.2 1000 MT 14/15 14/15 Qtr 13/14 Yr Avg Avg Production 5,381 5,039 7% 4,792 12% 4,517 19% 1.0
Slide 32: Record NA production required to meet projected demand
Record NA production required to meet projected demand Mil Tonnes North American MOP Production Mil Tonnes North America MOP Production KCl KCl 20.0 2.00 Source: IPNI 1.75 17.5 1.50 15.0 1.25 12.5 1.00 10.0 0.75 0.50 7.5 0.25 5.0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 0.00 J
Slide 33: North American imports from offshore origins expected to set a new record
North American imports from offshore origins also are expected to set a new record in 2014/15 Imports from offshore origins are projected total a record 1.7 million tons in 2014/15 – More than 500,000 tonnes imported in Feb-Mar bringing the total for Jul-Mar to 1.57 million tons – The majority of
Slide 34: Convergence of netbacks on U.S. and Brazilian sales
Convergence of netbacks on U.S. and Brazilian sales Estimates of Current Blend Grade Potash Netbacks $ MT Unless Noted Brazil NOLA fob Price ($ ST) na $330 Less Vessel Discharge/Shrink ($ ST) na $7 c&f Price $335 $356 FSU Mine Netback $285 $303 Ocean Freight $15 $18 Rail Freight $35 $35 U.S. NOLA Ba
Slide 35: Rebuilding of NA producer inventories prior to peak shipments
Rebuilding of NA producer inventories prior to peak shipments and summer turnarounds Mil Tonnes North America MOP Ending Stocks KCl 3.5 Source: IPNI 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 2010/11 2011/12 2012/13 2013/14 2014/15 North American producers also relied on l
Slide 36: FSU production jumped in 2014 but unlikely to repeat in 2015
FSU production jumped in 2014 but a repeat it is unlikely to be repeated in 2015 Mil Tonnes KCl FSU MOP Production 25 .0 Source: Fertecon, Uralkali and Belaruskali FSU producers ratcheted up production by 5+ 22 .5 million tonnes to meet the demand surge last year: 20 .0 - Uralkali reported that pr
Slide 37: Our long term perspective
Our long term perspective (from March 30 Analyst Day presentation) Why we are not as concerned as some analysts: – Positive demand prospects – Less current operational capacity than most estimates – Overly optimistic capacity forecasts and ramp-up timelines – Optimization mode by leading producers
Slide 38: Factors to Watch
Factors to Watch Demand and sentiment (driven by agricultural commodity prices) The Big Six appetite Distribution channel inventory changes FSU production Start-up of new brownfield and greenfield capacity 38
Slide 39: Look for our products on the Mosaic website
Look for our products on the Mosaic website Mosaic Stakeholder Handbook ▪ Market Alerts Market Mosaic ▪ Past Presentations http://www.mosaicco.com/resources/market_analysis.htm 39
Slide 40: Thank You!
Thank You! Agricultural and Plant Nutrient Outlook The CSX Fertilizer Customer Forum Crowne Plaza Downtown Union Station Indianapolis, IN June 2, 2015 Dr. Michael R. Rahm Vice President Market and Strategic Analysis
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