Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — CIBC Agriculture Conference 2015
34 slides from Mosaic Company (the)'s conference presentation, Nov 18, 2015
Slide 1: The State of Agriculture & Outlook for P&K Markets
The State of Agriculture & Outlook for P&K Markets Andy J. Jung Director, Market and Strategic Analysis The Mosaic Company CIBC Agriculture Conference London, UK November 19, 2015
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: Topics and Take-Aways: More constructive fundamentals than the market is trading
Click to edit Master title style 3 Topics and Take-Aways: More constructive fundamentals than the market is trading ▪ Ag commodity fundamentals remain positive − Cautious sentiment in the ag space appears to be driven as much by the contagion of the more dramatic downturns seen in other commodities
Slide 4: The State of Agriculture
The State of Agriculture
Slide 5: Lower, but not a collapse of crop prices, and they have fared much better than other commodities
Click to edit Master title style 5 Lower, but not a collapse of crop prices, and they have fared much better than other commodities 30 40 50 60 70 80 90 100 110 120 2014 2015 Index Source: CRB Commodity Prices 2014 Q1=100 Oil WTI Iron Ore Corn Soybeans HRW Wheat 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 0
Slide 6: Other prices provide some good and bad news
Click to edit Master title style 6 Other prices provide some good nd bad news 1750 2000 2250 2500 2750 3000 Jan '14 Jul '14 Jan '15 Jul '15 RM/ Tonne Palm Oil Price Daily Close of Nearby Futures Contract Source: Kuala Lumpur Exchange 9 10 11 12 13 14 15 16 Jan '14 Jul '14 Jan '15 Jul '15 CTS/LB Rice
Slide 7: Mostly weather-related volatility and not long term structural imbalance
Click to edit Master title style 7 Mostly weather-related volatility and not long term structural imbalance 606 579 494 407 469 461 424 434 510 566 546 533 520 590 650 660 16% 18% 20% 22% 24% 26% 28% 30% 350 400 450 500 550 600 650 700 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E15F PercentMil Tonn
Slide 8: This is not the 1980s farm crisis!
Click to edit Master title style 8 This is not the 1980s farm crisis! 10% 12% 14% 16% 18% 20% 22% 24% 0 20 40 60 80 100 120 140 80 85 90 95 00 05 10 15F Debt:AssetBil $ U.S. Net Cash Farm Income Net Cash Farm Income Debt:Asset Source: USDA • The 2016 new crop corn price is trading about in line with
Slide 9: Some observations about China
Click to edit Master title style 9 Some observations about China ▪ The USDA is forecasting that China will build grain and oilseed inventories again in 2015/16 − Consequence of high support prices ▪ While they expect stocks in the rest of world to fall 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 200 225
Slide 10: Some observations about China
Click to edit Master title style 10 Some observations about China 0 10 20 30 40 50 60 70 80 90 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F Mil Tonnes China Soybean Imports Source: USDA ▪ No slowdown of soybean imports − China may build fewer skyscrapers but the population will continue to eat
Slide 11: The long term food story not in vogue, but still intact
Click to edit Master title style 11 The long term food story not n vogu , but still intact 1,000 1,500 2,000 2,500 3,000 3,500 4,000 80 85 90 95 00 05 10 15F 20F 25F 30F Mil Tonnes Source: USDA and Mosaic World Grain and Oilseed Use Actual for Biofuels Actual Forecast for Biofuels Forecast Increas
Slide 12: The long term food story not in vogue, but still intact
Click to edit Master title style 12 The long term food story not n vogu , but still intact 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 Actua
Slide 13: Plant nutrient prices have also been under pressure in 2015
Click to edit Master title style 13 Plant nutrient prices have also been under pressure in 2015… MOP Jan 2015: $370 Current: $285 Change: -23% DAP Jan 2015: $481 Current: $423 Change: -12% Urea Jan 2015: $337 Current: $244 Change: -28% 100 200 300 400 500 600 700 05 06 07 08 09 10 11 12 13 14 15 Pla
Slide 14: Lower prices underpin demand as crop nutrients become more affordable
Click to edit Master title style 14 …but these lower prices underpin demand as crop nutrients become more affordable More Affordable Less Affordable • Our plant nutrient affordability metric has bobbed and weaved with changes in agricultural commodity and plant nutrient prices, but the current readi
Slide 15: Phosphate Outlook
Phosphate Outlook
Slide 16: Phosphate margins have held up on raw material relief
Phosphate margins have held up on raw material relief 175 200 225 250 275 300 325 13 14 15 $ ST Weekly DAP Stripping Margin Calculated from Published Spot Prices for a Central Florida Plant* Source: Fertecon, Green Markets and Mosaic 100 200 300 400 500 600 700 800 13 14 15 $ MT Weekly Ammonia Price
Slide 17: NAM imports expected to shift lower in '15/16
Click to edit Master title style 17 NAM imports expected to shift lower in ’15/16 despite recent market focus Higher netbacks (and due to the relative demand vacuum elsewhere) prompted exporters to again look to NOLA – These volumes have been one driver pushing NOLA quotes sharply lower in the pas
Slide 18: India imports slowing (demand is largely satisfied)
Click to edit Master title style 18 India imports slowing (demand is largely sati fied) ▪ Very strong start: Fertilizer-year-to-date imports (Apr-Sep) of 4.9 million tonnes are nearly 3 million tonnes higher than a year ago ▪ Buying activity has slowed to a crawl despite attractive import economics
Slide 19: Chinese phosphate export volumes ramped up to meet Indian demand
Click to edit Master title style 19 Chinese phosphate export volumes ramped up to meet Indian demand Chinese phosphate exports through September of 8.4 million tonnes are up 66% (3.3mmt) versus a year ago: – The strength of Indian imports has absorbed much of the increased volume… – …while product
Slide 20: Brazil continues to underperform versus year-ago levels
Click to edit Master title style 20 Brazil continues to underperform versus year-ago levels ▪ DAP/MAP/TSP imports year-to-date are off 22% from last year’s record level − Though total phosphate shipments are down just 3% y-o-y, suggesting a drawdown of inventories is the main driver of lower imports
Slide 21: Constructive demand fundamentals shaping up for 2016
Click to edit Master title style 21 Constructive demand fundamentals shaping up for 2016 65-66 66-68 30 35 40 45 50 55 60 65 70 05 06 07 08 09 10 11 12 13 14 15E 16F Global Phosphate ShipmentsMMT Product DAP/MAP/NPS/TSP Source: CRU and Mosaic
Slide 22: Longer term, demand growth has the potential to outstrip the rise in effective capacity
Click to edit Master title style 22 Longer term, demand growth has the potential to outstrip the rise in effective capacity ▪ Global phosphates operating rate − Largely balanced global S/D − We expect a continuation of the recent pattern of production curtailments / capacity rationalizations at high
Slide 23: Potash Outlook
Potash Outlook
Slide 24: Potash prices soften in 2015
Click to edit Master title style 24 Potash prices soften in 2015 250 300 350 400 450 500 550 600 10 11 12 13 14 15 $ Tonne $ Ton Muriate of Potash Prices Blend Grade c&f Brazil Std Grade c&f SE Asia Blend Grade fob NOLA Source: Argus FMB ▪ Prices have been under pressure (but for reasons different t
Slide 25: A long litany of market concerns
Click to edit Master title style 25 A long litany of market c ncerns ▪ Further declines in crop prices • Could there be more above-trend harvests • Prospects of a strong dollar for years to come • Fallout from China’s economic slowdown • Other macroeconomic/financial market turbulence • Flat biofuel
Slide 26: More constructive fundamentals than the market is trading
Click to edit Master title style 26 More constructive fundamentals than the market is trading ▪ Shipments expected to decline about 3.6 million tonnes in 2015 − The decline follows a massive 16% or 8.7 million tonne surge in 2014 to 62.7mmt − Modest declines in use expected in some countries this ye
Slide 27: Global capacity 'overhang' is overstated
Click to edit Master title style 27 Global capacity ‘overhang’ is overstated ▪ Less operational capacity today than most analyst estimates − Consultants’ estimates look way too high to us • e.g. Canadian capacity based on Canpotex proving runs, not operational capacity • Optimistic estimates for mos
Slide 28: Lower shipments this year, but a decent rebound forecast for 2016
Click to edit Master title style 28 Lower shipments this year mainly due to large channel inventories, but a decent rebound forecast for 2016 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 14 15E16F Mil Tonnes KCl Brazil MOP Shipments Source: CRU, Fertecon and
Slide 29: North America shipments pull back modestly, while imports return to normal
Click to edit Master title style 29 North America shipments pull back modestly, while imports expected to return to historically normal level • NA MOP imports surged to over 1.7 million tonnes in 2014/15. Imports are forecast to drop to more normal levels due to lower U.S. prices (parity with other
Slide 30: Brazil volumes have eased back from record levels seen in 2014
Click to edit Master title style 30 Brazil volumes have eased back from record- shattering levels seen in 2014 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 95 97 99 01 03 05 07 09 11 13 15 YTD Mil Tonnes Product Brazil Total Plant Nutrient Shipments Actual Forecast Source: ANDA, Mosaic • Total product ship
Slide 31: China's fertilizer VAT has not derailed MOP demand
Click to edit Master title style 31 China’s fertilizer VAT has not derailed MOP demand • China imposed a 13% VAT on all fertilizer sales effective September 1, 2015. However, only a 3% VAT was levied on product in inventory. The VAT combined with a ~3% currency devaluation is expected to result in a
Slide 32: India and Indonesia/Malaysia note
Click to edit Master title style 32 India and Indonesia/Malaysia note 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E16F Mil Tonnes India MOP Imports Calendar Year Source: FAI 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 15E16F
Slide 33: Capacity increases do outpace demand growth, but by much smaller margins
Click to edit Master title style 33 Capacity increases do outpace demand growth, but by much smaller margins than many analyst forecasts 75.0% 77.5% 80.0% 82.5% 85.0% 87.5% 90.0% 92.5% 95.0% 97.5% 0 10 20 30 40 50 60 70 80 90 10 11 12 13 14 15F 16F 17F 18F 19F 20F Op RateMil Tonnes Source: Company R
Slide 34: Thank You!
The State of Agriculture & Outlook for P&K Markets Andy J. Jung Director, Market and Strategic Analysis The Mosaic Company Thank You! CIBC Agriculture Conference London, UK November 19, 2015