Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — CSX Fertilizer Customer Forum 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 2 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
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 5 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 S O N D J F M A M J J A US$ BU New Crop Corn Price Daily Close of the New Crop Contract (Sep 1 - Aug 31) 2013 2014 2015 2016 Source: CME 0 1 2 3 4 5 6 7 8 9 00 01 02
Slide 6: Summer weather not planting date matters most
Summer weather not planting date matters most 6 2009 2012 y = 0.0008x - 0.057 R² = 0.0213 -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 20 40 60 80 100 P er ce nt D ev ia tio n fro n Tr en d Y ie ld Percent of Corn Acres Planted by Mid-May (Week 19) Planting Progress vs. Corn Yield - United States
Slide 7: A strong supply response to higher prices - and Mother Nature also cooperates
A strong supply response to higher prices - and Mother Nature also cooperates 7 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.0 3.1 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E15F Bil Tonnes World Grain and Oilseed Production and Use Production Use Source: USDA 2.50 2.60 2.70 2.80 2.90 3.00 3.10 3.20 3
Slide 8: Still a wide range of potential outcomes in 2015/16
Still a wide range of potential outcomes in 2015/16 8 606 579 494 407 469 461 424 436 512 570 551 538 524 586 626 350 400 450 500 550 600 650 700 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Mil Tonnes World Grain & Oilseed Stocks Actual/Estimate Mosaic Range Mosaic Medium Scenario USDA Current
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 9 0 7 14 21 28 35 42 49 56 63 70 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 70 75 80 85 90 95 00 05 10 15 PercentBil Bu U.S. Corn Stocks Stocks Percent of Use Source: USDA 175 151 127 105 131 123 109 130 145 144 128 132 137 174
Slide 10: Drivers other than weather
Drivers other than weather 10 70 75 80 85 90 95 100 05 06 07 08 09 10 11 12 13 14 15 Index U.S. Dollar Index Monthly Average of Daily Index Source: Forex y = 0.3556x2 - 76.676x + 4327.1 R² = 0.7036 100 200 300 400 500 600 700 70 80 90 100 110 120 TR-CCI U.S. Dollar Index Commodity Price Index vs. U.
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 12 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 750 775 800 825 850 875 900 925 950 975 80 85 90 95 00 05 10 15F 20F 25F 30F MT HaMil Ha World Harvested Area and Average Yield Actual Area Forecast Area Actual Yield Required Yield Source: USDA and
Slide 13: Phosphate Outlook
Phosphate Outlook
Slide 14: Continued positive global demand prospects
Continued positive global demand prospects 14 World Grain & Oilseed Nutrient Removal Mil Tonnes 2012 2014 Chg MT Chg % Product N Removal 59.3 64.6 5.3 8.9% 11.5 P2O5 Removal 22.9 24.8 1.9 8.5% 4.2 K2O Removal 19.2 20.9 1.7 8.8% 2.8 Source: USDA, IPNI, Mosaic 64.5-66.5 30 35 40 45 50 55 60 65 70 00 0
Slide 15: But recent declines in crop prices and increase in urea costs are reducing affordability
But recent declines in crop prices and increase in urea costs are reducing affordability 15 M o r e A f f o r d a b l e L e s s A f f o r d a b l e 0.50 0.75 1.00 1.25 1.50 1.75 05 06 07 08 09 10 11 12 13 14 15 Plant Nutrient Affordability Plant Nutrient Price Index / Crop Price Index Affordability
Slide 16: Banking on the beginning of a rebound in India
Banking on the beginning of a rebound in India 16 – Positive demand drivers • Profitable farm economics and good farm demand • A depleted retail distribution channel • Stable phosphate subsidy (a windfall from lower oil prices) • The rupee has remained relatively stable – Import economics work and I
Slide 17: A modest slowdown is expected in Brazil following rapid growth since 2010
A modest slowdown is expected in Brazil following rapid growth since 2010 17 0 1 2 3 4 5 6 7 8 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F Brazil Phosphate ShipmentsMMT Product DAP/MAP/MES/TSP Source: CRU and Mosaic 0.0 1.0 2.0 3.0 4.0 5.0 6.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F Mi
Slide 18: Strong and steady North America shipments
Strong and steady North America shipments 18 2014/15 forecast – 9.9 million tons – third highest in modern era • Increase of 3% or 330,000 tons from last year • Up 9% or ~800,000 tons from the seven-year Olympic average • Some tonnage inflation due to MicroEssentials® substituting for DAP/MAP, but
Slide 19: U.S. exports – more stable volumes and destinations
U.S. exports – more stable volumes and destinations 19 Lower but stable U.S. exports Focus on freight-advantaged Americas Growth of MicroEssentials® premium products Americas 2.92 35% India 0.16 2% Oceania 0.99 12% China 2.94 36% Other 1.21 15% U.S. DAP+MAP Exports by Destination 2002/03 Sourc
Slide 20: Recent supply losses
Recent supply losses Significant supply reductions – Permanent closures • Mainly non-integrated operations (outside India) • Others on the brink? • Suppliers exporting finished products vs. raw materials – Several temporary shut-downs or reduced rates North American adjustments – Fewer U.S. expo
Slide 21: China and Saudi Arabia fill the void
China and Saudi Arabia fill the void 21 China exported 8.1 million tonnes in 2014, up from 5.3 million in 2013 - Exports to India were down, but shipments to Brazil more than doubled. Deliveries to the U.S. topped 400,000t vs. zero in 2013 - Recent changes in China’s export tax are expected to faci
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 25 Record shattering shipments in 2014 due to: - More moderate potash prices - Profitable farm economics worldwide - Empty channel inventories at the end of 2013 - The Big Six (80+% of the increase) Moderate decline forecast for 2015 - But our point estimate of 59.
Slide 26: Brazil: Moderate decline from record 2014 levels
Brazil: Moderate decline from record 2014 levels 26 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Mil Tonnes Brazil MOP Import Demand Source: Fertecon and Mosaic Record shipments of 9.3 million tonnes in 2014, an increase of nearly 7% from 2013 Im
Slide 27: China: Continued strong growth expected in 2015
Russia 33% Belarus 22% Israel 16% Canada 16% Jordan 7% Other 6% China MOP Imports by Origin Calendar Year 2014 Source: China Customs China: Continued strong growth expected in 2015 27 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Mil Tonnes KCl China MOP S
Slide 28: India: Shipments back on an upward trend
India: Shipments back on an upward trend 28 Positive demand drivers: - Profitable farm economics - Low channel inventories - No changes in the potash subsidy - Relatively stable rupee Indian imports jumped to 4.3 million tonnes in 2014 due to a surge of Q4 contract deliveries Imports are proje
Slide 29: Indonesia/Malaysia: Positive and stable outlook
Indonesia/Malaysia: Positive and stable outlook 29 Combined shipments surged 38% or 1.4 million tonnes to a record 5.1 million in 2014 Shipments are forecast to decline modestly to 4.9 million tonnes in 2015 Palm oil prices have dropped in sync with petroleum prices but an increase in Indonesia
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 30 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Mil Tonnes KCl Th ou sa nd s North American MOP Shipments Calendar Year Source: IPNI, U
Slide 31: Record NA exports needed to meet projected demand
Record NA exports needed to meet projected demand 31 North America exports on a record pace with major contracts settled in China and India – 1.3 million tonnes for India – 1.8 mil plus 0.7 mil option for China Above average monthly exports for the first 4 months of the year – Canpotex exports p
Slide 32: Record NA production required to meet projected demand
Record NA production required to meet projected demand 32 Record production required in order to meet projected demand Record output in 2015 Q1 – Up 7% from 2014 Q4 and 13% greater than a year ago Further increases likely needed in 2015/16 5.0 7.5 10.0 12.5 15.0 17.5 20.0 95 96 97 98 99 00 01
Slide 33: North American imports from offshore origins also are expected to set a new record
North American imports from offshore origins also are expected to set a new record in 2014/15 33 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
Slide 34: Convergence of netbacks on U.S. and Brazilian sales
Convergence of netbacks on U.S. and Brazilian sales 34 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
Slide 35: Rebuilding of NA producer inventories prior to peak shipments and summer turnarounds
Rebuilding of NA producer inventories prior to peak shipments and summer turnarounds 35 North American producers also relied on large inventories to meet the surge in demand last year - Producer inventories plunged 1.7 million tonnes between the peak on January 31 and September 30, down 47% from a
Slide 36: FSU production jumped in 2014 but a repeat is unlikely in 2015
FSU production jumped in 2014 but a repeat it is unlikely to be repeated in 2015 36 FSU producers ratcheted up production by 5+ million tonnes to meet the demand surge last year: - Uralkali reported that production totaled 12.1 million tonnes in 2014, up from 10.0 million last year - Belaruskali r
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 39 http://www.mosaicco.com/resources/market_analysis.htm Mosaic Stakeholder Handbook Market Mosaic ▪ Market Alerts ▪ Past Presentations
Slide 40: 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 Thank You!