Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — 19th Annual Citi Chemicals Conference (December 2008)
29 slides from Mosaic Company (the)'s conference presentation, Dec 3, 2008
Slide 1: Phosphate Primer and Market Outlook: Recalibration of the Phosphate Market
Phosphate Primer and Market Outlook Recalibration of the Phosphate Market Dr. Michael R. Rahm Vice President Market Analysis and Strategic Planning 19 Annual Citi Chemicals Conference New York, NY December 3, 2008 th Exhibit 99.2
Slide 2: Safe Harbor Statement
1 19 Annual Citi Chemicals Conference December 3, 2008 th Safe Harbor Statement Certain statements contained herein constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Although we believe the assumptions made in connection with
Slide 3: Topics
2 19 Annual Citi Chemicals Conference December 3, 2008 th Topics Phosphate Primer Crop nutrient and phosphate market overviews Key or unique features of the phosphate market Recalibration of the Phosphate Market The “Perfect Storm” Global financial crisis Collapse of raw materials costs Large distri
Slide 4: Crop nutrient overview
3 19 Annual Citi Chemicals Conference December 3, 2008 th Crop nutrient overview Macro Micro Ca Calcium Mg Magnesium S Sulfur Secondary Zn Zinc Mn Manganese Fe Iron Cu Copper Mo Molybdenum B Boron Cl Chlorine N Nitrogen P Phosphate K Potassium Primary C Carbon H Hydrogen O Oxygen Crop nutrients are
Slide 5: Crop nutrient overview
4 19 Annual Citi Chemicals Conference December 3, 2008 th Crop nutrient overview Each nutrient market is a separate and unique market Common demand drivers – derived demand Significantly different supply drivers Natural resources/raw materials Location of resources Technological processes Market cha
Slide 6: Phosphate market overview
5 19 Annual Citi Chemicals Conference December 3, 2008 th Phosphate market overview Natural resources/raw materials required for production Phosphate rock (mineral ore) Sulphur Ammonia Energy intensive production Main products Diammonium phosphate (DAP – 18-46-0) Monoammonium phosphate (MAP – 11-52-
Slide 7: Key or unique features of the phosphate market
6 19 Annual Citi Chemicals Conference December 3, 2008 th Key or unique features of the phosphate market A processing margin – a phosphate stripping margin? Soybean processor crushing margin Refiner cracking margin Non-integrated production Operations that buy rock, sulphur and ammonia or acid and a
Slide 8: Key or unique features of the phosphate market
7 19 Annual Citi Chemicals Conference December 3, 2008 th Key or unique features of the phosphate market Long and large supply chain or distribution pipeline Production Located near rock or sulphur and ammonia Operates 24-7-365 Farm application One or two short application windows Post-harvest (~ 40
Slide 9: Topics
8 19 Annual Citi Chemicals Conference December 3, 2008 th Topics Phosphate Primer Crop nutrient and phosphate market overviews Key/unique features of the phosphate market Recalibration of the Phosphate Market The “Perfect Storm” Global financial crisis Collapse of raw materials costs Large distribut
Slide 10: Recalibration of the phosphate market
9 19 Annual Citi Chemicals Conference December 3, 2008 th Recalibration of the phosphate market Diammonium Phosphate Prices DAP Prices Central Florida Rail $ ST Source: Green Markets DAP Prices fob Tampa Vessel $ MT Source: Fertecon
Slide 11: The "Perfect Storm"
10 19 Annual Citi Chemicals Conference December 3, 2008 th The “Perfect Storm” Impact of the global financial crisis Credit constraints limit sales in some regions Commodity sell-off erodes farm economics and nutrient demand A rush to liquidity The linkage to oil Slow down in world economic growth I
Slide 12: Credit constraints limit sales in some regions
11 19 Annual Citi Chemicals Conference December 3, 2008 th Credit constraints limit sales in some regions Brazil 2008 fertilizer sales forecasts lowered from ~26 to ~22 million tonnes 2008 fertilizer sales decline 10% from 24.6 million tonnes in 2007 2009 prospects flat based on today’s farm economi
Slide 13: Commodity sell-off erodes farm economics and nutrient demand
12 19 Annual Citi Chemicals Conference December 3, 2008 th Commodity sell-off erodes farm economics and nutrient demand Agricultural commodity sell-off A rush to liquidity The linkage to oil 2009 New Crop Prices Daily Close of New Crop Options Jan 1 to Nov 26 Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Slide 14: Commodity sell-off erodes farm economics and nutrient demand
13 19 Annual Citi Chemicals Conference December 3, 2008 th Commodity sell-off erodes farm economics and nutrient demand The linkage to oil: the case of corn Corn demand for U.S. ethanol production sets market price Key drivers of corn prices are the price of oil and exchange rates Strong growth & we
Slide 15: The linkage to oil: the case of corn
14 19 Annual Citi Chemicals Conference December 3, 2008 th The linkage to oil: the case of corn WTI Crude Oil vs. Corn Nearby Futures Prices - y = 0.0382x + 1.413 R = 0.8708 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 $ BBL Source: NYMEX and CBOT
Slide 16: Commodity sell-off erodes farm economics and nutrient demand
15 19 Annual Citi Chemicals Conference December 3, 2008 th Commodity sell-off erodes farm economics and nutrient demand Key Price Assumptions $ bu 2007 2008 2009 Corn $7.20 $7.52 $6.73 Soybeans $16.28 $16.10 $15.15 Note: Assumes 2007 crop was sold at the nearby price on July 1 and the 2008 and 2009
Slide 17: Commodity sell-off erodes farm economics and nutrient demand
16 19 Annual Citi Chemicals Conference December 3, 2008 th Commodity sell-off erodes farm economics and nutrient demand Farm Economics Estimates – December 1, 2008 Variable Cost for a U.S. Midwest High Yield Farm Operation $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 Source: Iowa State U
Slide 18: Commodity sell-off erodes farm economics and nutrient demand
17 19 Annual Citi Chemicals Conference December 3, 2008 th Commodity sell-off erodes farm economics and nutrient demand World Phosphate Use 27.5 30.0 32.5 35.0 37.5 40.0 42.5 45.0 07E 08E 09F Source: IFA November 2008 MMT P O World Phosphate Use 27.5 30.0 32.5 35.0 37.5 40.0 42.5 45.0 07E 08E 09F So
Slide 19: Collapse of raw materials costs
18 19 Annual Citi Chemicals Conference December 3, 2008 th Collapse of raw materials costs Sulphur Prices c&f India $ MT Source: Fertecon Ammonia Prices fob Yuzhnyy $ MT Source: Fertecon
Slide 20: Large distribution pipeline stocks
19 19 Annual Citi Chemicals Conference December 3, 2008 th Large distribution pipeline stocks U.S. DAP/MAP Shipments vs. Use 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 08E 09F Source: AAPFCO, TFI and Mosaic Mil Tons P2O5 6.00 6.25 6.50 6.75 7.00 7.25 7.50 7.75 8.00 Mil Tons Phosphate Use DAP/MAP S
Slide 21: Late North American fall application season
20 19 Annual Citi Chemicals Conference December 3, 2008 th Late North American fall application season U.S. Corn Harvest Progress Report Week Ending (Sunday) Avg. 2003-07 Sep Oct Nov
Slide 22: Lower Chinese export tax Dec 1-Jan 31
21 19 Annual Citi Chemicals Conference December 3, 2008 th Lower Chinese export tax Dec 1-Jan 31 Announced on November 13 Applies to 373 different products or commodities Designed to stimulate domestic economy Valid from December 1, 2008 to December 31, 2009 Phosphate export duties: 10% during low s
Slide 23: Consequences
22 19 Annual Citi Chemicals Conference December 3, 2008 th Consequences Customers step out of the market due to expectations of lower prices Producers curtail production in response to stock builds Large inventory risk exposure along the entire supply chain A “Perfect Storm” of another kind during t
Slide 24: Customers step out of the market
23 19 Annual Citi Chemicals Conference December 3, 2008 th Customers step out of the market U.S. DAP and MAP Domestic Shipments JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN MIN MAX Range (2003/04-2007/08) 08/09 Actual/Forecast 3-Yr Avg Source: TFI and Mosaic YTD (Jul-Oct) DAP/MAP domestic shipmen
Slide 25: Topics
24 19 Annual Citi Chemicals Conference December 3, 2008 th Topics Phosphate Primer Crop nutrient and phosphate market overviews Key or unique features of the phosphate market Recalibration of the Phosphate Market The “Perfect Storm” Global financial crisis Collapse of raw materials costs Large distr
Slide 26: Factors to Watch
25 19 Annual Citi Chemicals Conference December 3, 2008 th Factors to Watch Agricultural commodity prices Oil prices Value of U.S. dollar Traditional drivers U.S. fall/Brazil spring application season There was one Drawdown of the distribution pipeline Energy and raw materials costs Quick move to “n
Slide 27: Another bumper crop is required in 2009
26 19 Annual Citi Chemicals Conference December 3, 2008 th Another bumper 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)
Slide 28: China – still a wildcard
27 19 Annual Citi Chemicals Conference December 3, 2008 th China – still a wildcard China Monthly DAP and MAP Exports Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1000 MT Source: China Customs China DAP/MAP Phosphate Exports 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 08E Source: IFA and Mosaic MMT D
Slide 29: Thank You!
28 19 Annual Citi Chemicals Conference December 3, 2008 th Phosphate Primer and Market Outlook Recalibration of the Phosphate Market Thank You! Dr. Michael R. Rahm Vice President Market Analysis and Strategic Planning 19 Annual Citi Chemicals Conference New York, NY December 3, 2008 th
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