Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Investor Presentation (January 2014)
44 slides from Mosaic Company (the)'s investor presentation, Jan 14, 2014
Slide 1: Picking Up the Knife
Exhibit 99.1 Market Outlook Picking Up the Knife (and starting a fight?) Mosaic AgCollege Orlando, FL January 14, 2014 Michael R. Rahm Vice President Market and Strategic Analysis Andy Jung Director Market and Strategic Analysis
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 the proposed acquisition of the Florida phosphate assets and certain related liabi
Slide 3: Preliminaries
Preliminaries Welcome to AgCollege We value our “relationship” (a short story) We greatly appreciate your business and want to see us both succeed by delivering innovative solutions & value to our customers Introducing Andy Jung An explanation of the title of our presentation
Slide 4: An explanation of the title of our presentation
An explanation of the title of our presentation $ Ton/ne Plant Nutrient Prices 700 600 500 400 300 Let it hit the floor and pick it up 200 Source: Fertecon, CRU, FMB and ICIS 100 05 06 07 08 09 10 11 12 13 14 Urea - fob NOLA DAP - fob Tampa MOP - c&f Brazil Urea DAP MOP 2012 Peak: $740 2011 Peak: $6
Slide 5: Agenda
Agenda Agricultural Situation and Outlook Mike Phosphate Situation and Outlook Andy Potash Situation and Outlook Mike Factors to Watch and Handicap Andy Q&A
Slide 6: Agricultural Situation and Outlook
Agricultural Situation and Outlook
Slide 7: Key Features and Take Aways
Key Features and Take Aways Record-smashing global harvest and large stock build in 2013/14 – Record harvested area and yield – Significant pent-up demand – How low will prices have to fall in order to clear markets? • Need to reach the trigger point that unleashes pent-up demand and dulls supply gr
Slide 8: The view from 60,000 feet (dumping all crops in the same basket)
The view from 60,000 feet (dumping all crops in the same basket) Mil Ha World Grain and Oilseed Area and Yields MT Ha Bil Tonnes World Grain and Oilseed Production 940 3.20 3.0 Source: USDA Source: USDA 3.10 2.9 920 2.8 3.00 900 2.7 2.90 880 2.6 2.80 2.5 860 2.70 2.4 840 2.3 2.60 2.2 820 2.50 2.1 80
Slide 9: A different question this year
A different question this year 2012/13: How high to allocate the short crop to its highest valued uses? 2013/14: How low to unleash pent-up demand and dull supply growth? Corn Soybean Price HRW Wheat Price $ BU $ BU $ BU Daily Close of Nearby Futures Contract Daily Close of Nearby Futures Contract D
Slide 10: Other agricultural commodity prices also are lower
Other agricultural commodity prices also are lower Rice (#2) Price Sugar (#11) Price RM/ Palm Oil Price CTS/LB CTS/LB Daily Close of Nearby Futures Contract Daily Close of Nearby Futures Contract Tonne Daily Close of Nearby Futures Contract 18.5 36 4250 Source: ICE Source: Kuala Lumpur Exchange 17.5
Slide 11: Markets sending weaker signals this year
Markets sending weaker signals this year New Crop Corn Prices New Crop Soybean Prices US$ BU US$ BU Daily Close of the New Crop Option Jul 1 to Jun 30 Daily Close of the New Crop Option Jul 1 to Jun 30 8.00 17.0 Source: CME Source: CME 7.50 16.0 7.00 15.0 6.50 14.0 6.00 13.0 5.50 12.0 5.00 11.0 4.50
Slide 12: All eyes on the corn market
All eyes on the corn market Bil Bu U.S. Corn Stocks Percent Mil Tonnes Percent World Corn Stocks 5.0 70 225 50% Source: USDA Source: USDA 4.5 63 200 45% 4.0 56 175 40% 3.5 49 150 35% 3.0 42 125 30% 2.5 35 100 25% 2.0 28 1.5 75 20% 21 1.0 14 50 15% 0.5 7 25 10% 0.0 0 0 5% 70 73 76 79 82 85 88 91 94 9
Slide 13: Impact of a lower ethanol RFS is more psychological than economic at this point
Impact of a lower ethanol RFS is more psychological than economic at this point EISA 2007 RFS2 & Proposed Adjustments EPAct Total Conventional The ethanol blending mandate was Advanced Biofuel 2005 Renewable Total Biomass- or Total Less scheduled to increase to 14.4 Year RFS1 Fuel Advanced Cellulosi
Slide 14: Fewer U.S. corn acres are needed in 2014/15
Fewer U.S. corn acres are needed in 2014/15 -- if yield equals trend and demand remains at high levels USDA 14/15 Scenarios (mil bu) 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14F #1 #2 #3 Acreage and Yield Planted (mil acres) 81.8 78.3 93.5 86.0 86.4 88.2 91.9 97.2 95.4 95.0 91.0 87.6 Harve
Slide 15: A large rebound in global soybean stocks largely due to record South American production
A large rebound in global soybean stocks largely due to record South American production Mil Tonnes World Soybean Stocks Percent Mil Tonnes South American Soybean Production 80 35% 160 Source: USDA Source: USDA 70 30% 140 Brazil Argentina Paraguay 60 25% 120 50 20% 100 40 15% 80 30 60 10% 20 40 10 5
Slide 16: Oh Canada! What a wheat (and canola) crop
Oh Canada! What a wheat (and canola) crop World Wheat Stocks Percent Bil Bu U.S. Wheat Stocks Percent Mil Tonnes 225 39% 2.0 100 Source: USDA Source: USDA 1.8 90 200 36% 1.6 80 175 33% 1.4 70 150 30% 1.2 60 125 27% 1.0 50 100 24% 0.8 40 75 21% 0.6 30 50 18% 0.4 20 25 15% 0.2 10 0 12% 0.0 0 70 73 76
Slide 17: A wide range of potential outcomes in 2014/15
A wide range of potential outcomes in 2014/15, but likely case illustrates the challenge of the food story Mil Tonnes World Grain & Oilseed Stocks 650 Source: USDA and Mosaic 607 600 580 571 570 550 550 535 515 515 494 500 470 463 450 439 427 407 400 350 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14
Slide 18: Food story still intact in the long run
Food story still intact in the long run Mil Tonnes World Grain and Oilseed Use Mil Ha World Harvested Area and Average Yield MT Ha 3,500 975 3.75 Source: USDA and Mosaic 950 3.50 3,000 925 3.25 900 3.00 2,500 875 2.75 2,000 850 2.50 825 2.25 1,500 800 2.00 1,000 775 1.75 80 85 90 95 00 05 10 20F 30F
Slide 19: Less robust but still constructive demand drivers
Less robust but still constructive demand drivers Plant Nutrient Affordability Estimated Return After Variable Cost Plant Nutrient Price Index / Crop Price Index $ Acre for a U.S. Midwest High Yield Farm Operation 1.75 $1,000 Source: Weekly Price Publications, CME, Source: Iowa State University, USD
Slide 20: Phosphate Situation and Outlook
Phosphate Situation and Outlook
Slide 21: Key Features and Take Aways
Key Features and Take Aways Prices have rallied ~$75-$100 tonne since the end of November Positive demand prospects – Less robust but still constructive demand drivers – Record global shipments and a rebound in trade in 2014 Lean channel inventories worldwide (China the notable exception) – Limited
Slide 22: Prices have rallied ~$70-$100 since the end of November
Prices have rallied ~$70-$100 since the end of November Weekly DAP Prices $ ST Central Florida Rail 600 500 400 Weekly DAP Prices $ MT fob Tampa 700 300 Source: Fertecon 600 200 Source: Green Markets 500 100 05 06 07 08 09 10 11 12 13 14 400 Weekly DAP Prices $ ST NOLA Barge 600 300 500 200 05 06 07
Slide 23: What drove the decline in global DAP pricing? Collapse of Indian Import Demand
What drove the decline in global DAP pricing? Collapse of Indian Import Demand INR / MT India Retail Plant Nutrient Prices Mil Tonnes India Urea Imports 30,000 9.0 Source: FAI, Mosaic Source: FAI, Mosaic 8.0 25,000 Fertilizer Year Ending March 31 7.0 20,000 6.0 5.0 15,000 4.0 10,000 3.0 2.0 5,000 1.
Slide 24: Livin' off the Pipeline: India DAP Example
Livin’ off the Pipeline: India DAP Example Million Tonnes DAP 2013/14E 2014/15 Producer/Importer Beginning Inventory 1.45 Production 3.67 Imports 3.90 Producer/Importer Sales to Retailer Dealers 7.82 Retail Dealer Sales to Farmers 9.82 Retail Inventory Change -2.00 Producer/Importer Ending Inventory
Slide 25: Which Led to a Tale of Two Hemispheres
Which Led to a Tale of Two Hemispheres Mil Tons NA Phosphate Use and Mil Tons P2 O5 DAP/MAP/MES/TSP Shipments Product 6.0 12.0 Source: AAPFCO, TFI, IFA and Mosaic Fertilizer Year Ending June 30 5.5 10.5 Americas – Strong Demand in 2013 5.0 9.0 and Outstanding Prospects Remain 4.5 7.5 4.0 6.0 3.5 4.5
Slide 26: Which Led to a Tale of Two Hemispheres
Which Led to a Tale of Two Hemispheres Mil Tons North American Phosphate Product Shipments 6.0 7-Yr Min-Max Range 2013/14 7-Yr Olympic Average 5.0 4.0 3.0 Americas – Strong Demand in 2013 2.0 and Outstanding Prospects Remain 1.0 0.0 Jun-Nov 2013 Dec-May 2014 F North American Domestic Phosphate Shipm
Slide 27: Which Led to a Tale of Two Hemispheres
Which Led to a Tale of Two Hemispheres Americas – Strong Demand in 2013 and Outstanding Prospects Remain 1000 Tonnes Brazil DAP/MAP/TSP Imports MMT Brazil DAP/MAP/TSP Imports 800 Min/Max Range (2008-2012) 2013 Fcst Source: Brazil Mosaic 5.0 700 Souce: Fertecon, ANDA, Mosaic 7-Yr Olympic Average 4.5
Slide 28: India DAP Pipeline Example: 2014/15
India DAP Pipeline Example: 2014/15 Million Tonnes DAP 2013/14E 2014/15F Producer/Importer Beginning Inventory 1.45 1.20 Production 3.67 3.80 Imports 3.90 5.70 Producer/Importer Sales to Retailer Dealers 7.82 9.70 Retail Dealer Sales to Farmers 9.82 10.30 Retail Inventory Change -2.00 -0.60 Producer
Slide 29: Will Likely Remain a Tale of Two Hemispheres, but the Beginning of a Recovery in India
Will Likely Remain a Tale of Two Hemispheres, but the Beginning of a Recovery in India 1000 Tonnes India DAP Imports Mil Tonnes India DAP Imports 1,600 8.0 Source: FAI Source: FAI and Mosaic India Kariff (Apr 1-Sep 30) 1,400 7.0 2.1 Rabi (Oct 1-Mar 31) 3.4 1,200 6.0 3.0 2.2 1.5 2.3 1,000 5.0 5.5 800
Slide 30: No More Living off the Pipeline: Record Shipments and Rebound in Import Demand
No More Living off the Pipeline, so: Record Shipments and a Rebound in Import Demand MMT Product Global Phosphate Shipments MMT Global Phosphate Import Demand DAP/MAP/MES/TSP Likely Scenario Likely Scenario excluding China 64-66 25 70 Source: Fertecon & Mosaic 63-64 Source: CRU/FRC and Mosaic 65 63
Slide 31: 2014 Wildcard: China's exports likely will cap the recent rally in DAP prices
2014 Wildcard: China’s exports likely will cap the recent rally in DAP prices later in 2014 Mil Tonnes China DAP/MAP/TSP Exports 7.0 Source: Fertecon, China Customs, Mosaic Chinese phosphates exports declined in 2013 due to a 6.0 combination of lower Indian imports and profitability issues 5.0 durin
Slide 32: Potash Situation and Outlook
Potash Situation and Outlook
Slide 33: Key Features and Take Aways
Key Features and Take Aways Prices likely at or near a floor Expected demand rebound in response to lower prices in 2014 – Less robust but still constructive demand drivers – Rebound led by the “Big Six” Large producer but lean channel inventories worldwide Trigger event required to get product movi
Slide 34: Prices likely at or near a bottom
Prices likely at or near a bottom $ ST fob Blend Grade Muriate of Potash Prices $ MT c&f Midwest Brazil Terminal 700 700 Source: Green Markets and ICIS 600 600 500 500 400 400 300 300 200 200 100 100 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 fob U.S. Midwest Warehouse c&f Brazil 34
Slide 35: Demand rebound in response to lower prices in 2014
Demand rebound in response to lower prices in 2014 MMT Product Global Potash Shipments KCl Likely Scenario Global Potash Import Demand 60 57 -59 MMT KCl Likely Scenario excluding Canada => U.S. Source: Fertecon and Mosaic 54-55 40 54 55 55 Source: Fertecon and Mosaic 53 35 50 51 50 30 25 45 20 40 15
Slide 36: Rebound led by the "Big Six"
Rebound led by the “Big Six” MMT Brazil MOP Import Demand MMT China Net MOP Import Demand 9.0 10.0 Source: Fertecon and Mosaic Source: Fertecon and Mosaic 8.0 9.0 7.0 8.0 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 06 07 08 09 10 11 12 13E 14F 00 01 02 03 04 05 06 0
Slide 37: Large expected rebound in NA exports in response
Large expected rebound in NA exports in response Mil Tons North American MOP Exports Mil Tonnes KCl North America MOP Exports KCl 14 1.6 Source: IPNI and Mosaic U.S. Canada Source: IPNI Fertilizer Year Ending June 30 1.4 12 1.2 10 1.0 8 0.8 6 0.6 0.4 4 0.2 2 0.0 Jul Jan Jul Jan Jul Jan Jul Jan Jul J
Slide 38: Rebound led by the "Big Six" including high and steady NA shipments
Rebound led by the “Big Six” including high and steady NA shipments Mil Tons KCl North American Potash Shipments Mil Tons North American Potash Use and MOP Shipments Mil Tons K 2O KCl 8.0 8 13 7-Yr Min-Max Range 2013/14 7-Yr Olympic Average Source: IPNI and Mosaic Fertilizer Year Ending June 30 7.0
Slide 39: U.S. offshore imports expected to drop in 2013/14 and rebound in 2014/15
U.S. offshore imports expected to drop in 2013/14 and rebound to average levels in 2014/15 1,000 Tonnes Mil Tons North American MOP Imports U.S. MOP Offshore Imports KCl KCl 250 0.3 Source: U.S. Department of Commerce Source: IPNI and Mosaic U.S. trade data one month delayed 0.3 200 0.2 150 0.2 100
Slide 40: Large producer but lean channel inventories
Large producer but lean channel inventories – need a trigger to get the ‘K pig moving through the python’ Mil Tonnes KCl North America MOP Producer Stocks Mil Tons KCl North American MOP Stocks 4.0 4.5 Source: IPNI 3.5 Source: IPNI and Mosaic 4.0 3.0 3.5 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0
Slide 41: Factors to Watch and Handicap
Factors to Watch and Handicap
Slide 42: Factors to Watch and Handicap
Factors to Watch and Handicap Agricultural Commodity Prices – South American crop progress • The market likely has baked in a record soybean crop but it could further weigh on prices once it is in the bin (Feb/Mar) – Energy, biofuels and livestock prices • But proposed changes to the U.S. RFS in 201
Slide 43: Factors to Watch and Handicap
Factors to Watch and Handicap Other P&K Fundamentals – Global pipeline and producer inventories • The “P” pig is moving through the python but when will the python swallow the “K” pig? – Developments in India • Plant nutrient subsidy rates (2014/15 budget tabled by February 28) • Settlement of P&K c
Slide 44: Thank You for Your Business!
Thank You for Your Business! Market Outlook Picking Up the Knife (and starting a fight?) Mosaic AgCollege Orlando, FL January 14, 2014 Michael R. Rahm Vice President Market and Strategic Analysis Andy Jung Director Market and Strategic Analysis