Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Investor Day (November 2007)
29 slides from Mosaic Company (the)'s investor day presentation, Nov 7, 2007
Slide 1: The Medium Term Phosphate Outlook: The New Phosphate Cycle
Exhibit 99 The Medium Term Phosphate Outlook: The New Phosphate Cycle Dr. Michael R. Rahm Analysts Phosphate Tour Vice President November 7, 2007 Market Analysis and Strategic Planning Tampa, FL
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements contained herein constitute “forward-lookingstatements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Although we believe the assumptions made in connection with the forward-looking statements are reasonable, they do invo
Slide 3: The New Phosphate Cycle
The New Phosphate Cycle Topic of the November issue of Market Mosaic Market Analysis & Strategic Planning 2 November 7, 2007
Slide 4: Conclusions
Conclusions Our first conclusion is that recent developments by no means have repealed the laws of supply and demand. The phosphate market will remain global, competitive, commodity-based and cyclical. Our second conclusion, however, is that recent developments have shifted up the phosphate price cy
Slide 5: Structural Adjustments
Structural Adjustments MMT China Net Processed Phosphate Imports 6.0 China built a large phosphate industry during the 5.0 Source: IFA and Mosaic first half of this decade and transitioned from a 4.0 consistent importer of more than five million 3.0 tonnes of DAP per year to a large exporter of 2.0
Slide 6: Fundamental Strength
Fundamental Strength DAP Prices DAP Prices $ ST Central Florida Rail $ MT fob Tampa Vessel 450 500 Source: Green Markets Source: Fertecon 400 450 400 350 350 300 300 250 250 200 200 150 150 100 100 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Slide 7: Fundamental Strength
Fundamental Strength Phosphate demand has picked Bil Tonnes World Less China Grain and Oilseed Use 2.1 up in response to sharp Source: USDA increases in agricultural 2.0 Grain Use CAGR commodity prices during the last 1.9 97-02 02-07 12 months. Grain and oilseed 1.8 1.1% 2.5% markets are calling for
Slide 8: Fundamental Strength
Fundamental Strength Mil Tonnes World Less China Grain and Oilseed Stocks Percent Farmers responded to these 450 32% higher prices by planting more Source: USDA area and intensifying cropping 400 28% practices in order to increase yields this year. And they 350 24% succeeded. Farmers just harvested
Slide 9: Fundamental Strength
Fundamental Strength Hard Red Winter Wheat Price Mil Tonnes World Wheat Stocks Percent $ BU Daily Close of the Nearby Futures Contract 225 39% 10 Source: USDA Source: KCBOT 200 36% 9 175 33% 8 150 30% 7 125 27% 6 100 24% 5 75 21% 4 50 18% 3 25 15% 2 0 12% 95 96 97 98 99 00 01 02 03 04 05 06 07 70 72
Slide 10: Fundamental Strength
Fundamental Strength Soybean Price $ BU Daily Close of the CBOT Nearby Futures Contract Mil Bu U.S. Soybean Stocks Pct of Use 600 35 11 Source: USDA Source: CBOT 10 30 500 9 25 400 8 20 300 7 15 200 6 10 5 100 5 4 0 0 95 96 97 98 99 00 01 02 03 04 05 06 07 70 72 74 76 78 80 82 84 86 88 90 92 94 96 9
Slide 11: Fundamental Strength
Fundamental Strength New Crop Wheat Prices $ BU Daily Close June 1 to May 31 $ BU New Crop Corn Prices 7.00 Daily Close July 1 to June 30 4.4 Source: KCBOT Source: CBOT 6.50 4.2 4.0 6.00 3.8 5.50 3.6 5.00 3.4 4.50 3.2 3.0 4.00 2.8 3.50 2.6 3.00 2.4 0601 0731 0929 1128 0127 0328 0527 2.2 MM/DD 0701 0
Slide 12: Fundamental Strength
Fundamental Strength It’s more than corn, soybeans and wheat Rice Future Prices Palm Oil Future Prices $ CWT Daily Close of Nearby Option RM/MT Daily Close of Nearby Option 13 3000 Source: CBOT Source: Kuala Lumpur Exchange 12 2750 11 2500 10 2250 9 2000 8 1750 7 1500 6 1250 5 1000 4 750 3 500 95 96
Slide 13: Accelerating Demand Growth
Accelerating Demand Growth MMT World Less China Processed Phosphate Import Demand by Region 24 Source: Fertecon, IFA and Mosaic Both near term and medium 21 term phosphate demand prospects look very positive. 18 For example, processed 15 phosphate import demand outside of China is projected to 12 in
Slide 14: Accelerating Demand Growth
Accelerating Demand Growth MMT Brazil Fertilizer Shipments 30 Mil Tonnes India Nutrient Demand Source: ANDA & Mosaic 24 25 Source: IFA June 2007 22 20 20 Nitrogen Phosphate Potash 18 15 16 14 10 12 10 5 8 0 6 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 92 93 94 95 96 97 98 99 00 01 02 0
Slide 15: Accelerating Demand Growth
Accelerating Demand Growth Nutrient Demand Forecasts CAGR 2005-15 N P K Total Actual 1995-05 1.7% 1.8% 2.4% 1.9% Actual 1995-00 0.9% 1.2% 1.3% 1.0% Actual 2000-05 2.6% 2.4% 3.6% 2.7% Mosaic Model Forecast 2.6% 3.5% 3.9% 3.0% Mosaic Survey Forecast 1.5% 3.0% 3.7% 2.2% IFA Forecast 2.4% 3.2% 3.4% 2.8%
Slide 16: Accelerating Demand Growth
Accelerating Demand Growth MMT World Phosphate Use 55 50 Forecasts from these four 45 sources indicate that 40 phosphate use likely will total 35 45 to 47 million tonnes P2O5 in 30 2011 and 48 to 52 million 25 tonnes in 2015. 20 IFA estimates that phosphate 15 use totaled 37 million tonnes 10 P2O5 i
Slide 17: Accelerating Demand Growth
Accelerating Demand Growth Step One: Forecast global grain and oilseed demand Mil Tonnes World Grain and Oilseed Use The statistical model indicates 3,000 that variations in population and Source: USDA and Mosaic per capita GDP explained more 2,750 than 99% of the variation in 2,500 grain and oilsee
Slide 18: Accelerating Demand Growth
Accelerating Demand Growth Step Two: Assess global area and yield required to meet projected demand Mil Ha World Harvested Area and Average Yield MT Ha Harvested area has remained 925 3.2 relatively stable since 1980. 900 3.1 875 Source: USDA and Mosaic 3.0 Area increases slightly during 850 2.9 per
Slide 19: Accelerating Demand Growth
Accelerating Demand Growth Step Three: Quantify the relationship between yield and application rates World Average Application Rate and Yield There also is a strong statistical 1980-2006 relationship between the world 2.9 average grain and oilseed yield 2.8 and the world average nutrient 2.7 applica
Slide 20: Accelerating Demand Growth
Accelerating Demand Growth Step Three: Quantify the relationship between yield and application rates KG HA World Average Yield and Application Rate MT HA 240 3.250 This chart shows the average 230 3.125 application rate from 1980 to Source: IFA, USDA and Mosaic 2006 and the rate predicted by 220 3.0
Slide 21: A Tight Supply/Demand Situation
A Tight Supply/Demand Situation Cumulative Change in Phosphate Capacity vs. Demand Cumulative Change in Phosphate Capacity vs. Demand 16 16 Source: Fertecon and Mosaic - Model Demand Forecasts Source: Fertecon and Mosaic - Survey Demand Forecasts 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 2006 2007
Slide 22: A Tight Supply/Demand Situation
A Tight Supply/Demand Situation Cumulative Change in Phosphate Capacity vs. Demand Cumulative Change in Phosphate Capacity vs. Demand 11 11 Source: IFA June 2007 Source: Fertecon October 2007 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2
Slide 23: It's Still the Rock
It’s Still the Rock The first issue of Market Mosaic, published in February 2005, was titled “It’s the Rock” and concluded that demand likely would outpace the supply of phosphate dug from the world’s rock mines during the next five years. It emphasized that phosphate supply is increasingly determin
Slide 24: It's Still the Rock
It’s Still the Rock MMT Rock World Less China Phosphate Rock Production Percent It is increasingly evident in terms of recent 130 40% 120 Source: IFA 39% price increases that rock is becoming the 110 38% pinch point in the phosphate supply chain. 100 37% As a result, the rock supply/demand balance 9
Slide 25: A Shift Up in the Phosphate Cycle
A Shift Up in the Phosphate Cycle Price Required for New Capacity 3 • When demand exceeds supply Price price increases above this level to attract capital into this sector 1 • Increases in operating and capital costs are pushing up this ceiling Market prices determined by supply and demand Marginal
Slide 26: A Shift Up in the Phosphate Cycle: Higher Cyclical Lows
A Shift Up in the Phosphate Cycle Higher Cyclical Lows Recent developments provide compelling evidence that the phosphate price cycle has shifted up to a much higher range today. The floor has shifted up due to sharply higher raw materials and operating costs. Because both mining and processing oper
Slide 27: A Shift Up in the Phosphate Cycle: Higher Cyclical Highs
A Shift Up in the Phosphate Cycle Higher Cyclical Highs The ceiling of the phosphate price cycle also has shifted up due to both increases in operating costs and the sharp escalation in capital costs, especially for greenfield projects. Higher prices clearly are required to justify investments in ne
Slide 28: Swing Factors
Swing Factors China China played a critical part in filling the gap between demand and supply this year, but its long term role is not clear at this point. Entrepreneurial producers in the Southwest have strong incentives to export phosphate, but planners in Beijing who are battling a serious food i
Slide 29: Thank You
Thank You The Medium Term Phosphate Outlook: The New Phosphate Cycle Dr. Michael R. Rahm Analysts Phosphate Tour Vice President November 7, 2007 Market Analysis and Strategic Planning Tampa, FL