phosphate outlook - fertilizer industry round table | fot - phosphate outlook.pdf · phosphate...

Phosphate Outlook

Dr. Michael R. RahmVice President, Market and Strategic AnalysisThe Mosaic Company

TFI Outlook ConferenceMarriott Marriott Waterside Hotel and MarinaTampa, FLNovember 20, 2013

2

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Suchstatements include, but are not limited to, statements about the proposed acquisition of the Florida phosphate assets and certain relatedliabilities of CF Industries, Inc. (“CF”) and the ammonia supply agreements with CF; the benefits of the transactions with CF; futurestrategic plans and other statements about future financial and operating results. Such statements are based upon the current beliefs andexpectations of The Mosaic Company's management and are subject to significant risks and uncertainties. These risks and uncertaintiesinclude but are not limited to risks and uncertainties arising from the possibility that the closing of the proposed phosphate assetacquisition may be delayed or may not occur, including delays arising from any inability to obtain governmental approvals of thetransaction on the proposed terms and schedule and the ability to satisfy other closing conditions; difficulties with realization of the benefitsof the transactions with CF, including the risks that the acquired assets may not be integrated successfully or that the cost or capitalsavings from the transactions may not be fully realized or may take longer to realize than expected, regulatory agencies might not take, ormight delay, actions with respect to permitting or regulatory enforcement matters that are necessary for Mosaic to fully realize the benefitsof the transactions including replacement of CF’s escrowed financial assurance funds, or the price of natural gas or ammonia changes to alevel at which the natural gas based pricing under one of the long term ammonia supply agreements with CF becomes disadvantageous toMosaic; customer defaults; the effects of our decisions to exit business operations or locations; the predictability and volatility of, andcustomer expectations about, agriculture, fertilizer, raw material, energy and transportation markets that are subject to competitive andother pressures and economic and credit market conditions; the level of inventories in the distribution channels for crop nutrients; changesin foreign currency and exchange rates; international trade risks; changes in government policy; changes in environmental and othergovernmental regulation, including greenhouse gas regulation, implementation of numeric water quality standards for the discharge ofnutrients into Florida waterways or possible efforts to reduce the flow of excess nutrients into the Mississippi River basin or the Gulf ofMexico; further developments in judicial or administrative proceedings, or complaints that Mosaic's operations are adversely impactingnearby farms, business operations or properties; difficulties or delays in receiving, increased costs of or challenges to necessarygovernmental permits or approvals or increased financial assurance requirements; resolution of global tax audit activity; the effectivenessof the Company's processes for managing its strategic priorities; the ability of the Northern Promise joint venture among Mosaic, Ma'adenand SABIC to obtain project financing in acceptable amounts and upon acceptable terms, the future success of current plans for the jointventure and any future changes in those plans; adverse weather conditions affecting operations in Central Florida or the Mississippi Riverbasin or the Gulf Coast of the United States, and including potential hurricanes, excess rainfall or drought; actual costs of various itemsdiffering from management's current estimates, including, among others, asset retirement, environmental remediation, reclamation or otherenvironmental regulation, Canadian resources taxes and royalties, or the liabilities Mosaic is assuming in the proposed phosphate assetsacquisition; brine inflows at Mosaic's Esterhazy, Saskatchewan, potash mine or other potash shaft mines; other accidents and disruptionsinvolving Mosaic's operations, including potential mine fires, floods, explosions, seismic events or releases of hazardous or volatilechemicals, as well as other risks and uncertainties reported from time to time in The Mosaic Company's reports filed with the Securitiesand Exchange Commission. Actual results may differ from those set forth in the forward-looking statements.

Safe Harbor Statement

Topics and Take Aways

Current Situation: A Slow Burn (continues)

– Weaker Fundamentals– Cautious Sentiment

2014 Outlook: Hitting Bottom and Beginning to Recover– Record global shipments and a rebound in import demand

• Positive demand drivers• Lower channel inventories worldwide: India DAP example• Still a tale of two Hemispheres – Americas vs. Asia

– Supply uncertainties or the ‘when’ and ‘how much’ questions

Long Term Outlook: Balanced and Positive – Strong demand outlook underpinned by the food story– A new supply ballgame– Stable global operating rates

Current Situation:A Slow Burn (continues)

Current Situation: A Slow Burn (continues)

Weaker Fundamentals– Collapse of Indian import demand– Livin’ off the pipeline– Additional capacity/supplies

Cautious Sentiment– Negative price expectations– Lower agricultural commodity prices– Spillover from high profile events in Russia/Belarus

A Slow Burn: Prices Down ~40% from 2011 Peaks

6

MOP2011 Peak: $555Current: $335Change: -40%

DAP2011 Peak: $656Current: $350Change: -47%

Urea2011 Peak: $505Current: $318Change: -37%

100

200

300

400

500

600

700

05 06 07 08 09 10 11 12 13

$ MT Plant Nutrient Prices

Urea - fob Yuzhny DAP - fob Tampa MOP - c&f Brazil

Source: Fertecon,CRU and ICIS

Collapse of Indian Import Demand

7

0

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011 2012 2013

India Retail Plant Nutrient Prices

Urea MOP DAP

INR / MT

Source: FAI, Mosaic

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14YTD

Mil Tonnes India DAP Imports

Actual Forecast

Source: FAI, Mosaic

Fertilizer Year Ending March 31

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 14YTD

Mil Tonnes India MOP Imports

Actual Forecast

Source: FAI, Mosaic


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14YTD

Mil Tonnes India Urea Imports

Actual Forecast

Source: FAI, Mosaic


Livin’ off the Pipeline: India DAP Example

8

Million Tonnes DAP 2013/14 2014/15Producer/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/Importer Ending Inventory 1.20 1.00

Producer/Importer Inventory Change -0.25 -0.20

Total Pipeline Inventory Change -2.25 -0.85

Our Delhi team estimates that DAP demand by farmers remains strong due to an outstanding monsoon andprofitable farm economics. The government has raised minimum support prices for major crops, retail urea pricesremain stable at the extremely low level of $80-$85 per tonne, and retail P&K prices, while up sharply from pre-reform levels, have declined modestly in 2013/14. As a result, retail dealer DAP sales to farmers are projected tototal 9.8 million tonnes this fertilizer year.

Producer and importer sales, however, are projected to drop to 7.8 million tonnes, implying of retail inventorydecline of 2.0 million tonnes. In addition, producer/importer inventories also are projected to decline 250,000tonnes in 2013/14.

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

Jan-10 Jan-11 Jan-12 Jan-13

$ BUSoybean Price

Daily Close of Nearby Futures Contract

Source: CBOT

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0


$ BUCorn


Source: CBOT

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0


$ BUHRW Wheat Price


Source: KCBOT

Lower Agricultural Commodity Prices

9

2012/13: How high to allocate the short crop to its highest valued uses?2013/14: How low to unleash pent-up demand?

HRW Wheat2012/13: $8.20Current: $6.992013/14: ????

Corn2012/13: $6.79Current: $4.222013/14: ????

Soybeans2012/13: $14.74Current: $12.812013/14: ????

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

800

820

840

860

880

900

920

940

00 01 02 03 04 05 06 07 08 09 10 11 12 13E

MT HaMil Ha World Grain and Oilseed Area and Yields

Harvested Area Yield Trend

Source: USDA

2.02.12.22.32.42.52.62.72.82.93.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13E

Bil Tonnes World Grain and Oilseed Production

Production Use

Source: USDA

15.0%

17.5%

20.0%

22.5%

25.0%

27.5%

30.0%

350

400

450

500

550

600

650

00 01 02 03 04 05 06 07 08 09 10 11 12 13E

PercentMil Tonnes World Grain & Oilseed Stocks

Stocks Percent of Use

Source: USDA

Lower Agricultural Commodity Prices

10

The USDA projects that 2013/14 global grain and oilseed production will surge to a record-smashing 2.93 billion tonnes due to record harvested area and a record average yield.

Global grain and oilseed use increased at a compound annual growth rate of 2.4% during the five years prior to 2012. Use increased just 0.4% in 2012 due to the short crop last year (but still the second largest ever produced!). USDA projects that global use will jump 3.5% in 2013 due to ample supplies and more moderate prices.

If current supply and demand projections are on target, global grain and oilseed stocks will increase significantly this year and make up most of the declines during the last three years.

2014 Outlook:Hitting Bottom and Beginning to Recover

Hitting Bottom and Beginning to Recover

Record Global Shipments and a Rebound in Import Demand– Positive demand drivers– Lower channel inventories worldwide – India DAP example– Still a tale of two Hemispheres – Americas vs. Asia

Supply Uncertainties or the When and How Much Questions– How much will China export?– When will Ma’aden Phase I ramp up to capacity?– How much will OCP produce and export?– When will the first Jorf Phosphate Hub come online?– How much will Tifert produce and when will Jifco start up?

Record Shipments and a Rebound in Import Demand

13

5147

52

5962 63

63-6464-66

30

35

40

45

50

55

60

65

70

00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F

Global Phosphate ShipmentsLikely Scenario

MMT ProductDAP/ MAP/ MES/TSP

Source: Fertecon & Mosaic

0

5

10

15

20

25

00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F

MMT

Source: CRU/ FRC and Mosaic

Global Phosphate Import DemandLikely Scenario excluding China

Asia and Oceania Latin America Europe MideastAfrica North America FSU

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

J A S O N D J F M A M J

US$ BUNew Crop Corn Prices

Daily Close of the New Crop Option Jul 1 to Jun 30

2008 2012 2013 2014

Source: CME

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0


US$ BUNew Crop Soybean Prices


2008 2012 2013 2014

Source: CME

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00


US$ BUNew Crop Hard Red Winter Wheat Prices


2008 2012 2013 2014

Source: CME

Positive Demand Drivers

14

Lower but still relatively high 2014 new crop prices

S/C Ratio 11/15/13: 2.51

0.50

0.75

1.00

1.25

1.50

1.75

05 06 07 08 09 10 11 12 13

Plant Nutrient AffordabilityPlant Nutrient Price Index / Crop Price Index

Affordability Metric Average

Source: Green Markets, CME, USDA, AAPFCO, Mosaic


15

Our homemade Plant Nutrient Affordability metric is a ratio of a plant nutrient price index and a crop price index.

The plant nutrient price index is a weighted average of indices for urea, DAP and MOP prices. These indices arecalculated using weekly published spot prices at key U.S. pricing points. Weights are N, P, and K percentages of totalU.S. nutrient use from 2005 to 2007.

The crop price index is a weighted average of indices for corn, soybeans and wheat. These indices are calculatedusing the weekly average of the daily closing price of the front month futures contract. Weights are the shares of totalU.S. production of these three crops from 2005 to 2007. The base year for all indices is 2005.

Affordable plant nutrients

0

20

40

60

80

100

120

140

80 83 86 89 92 95 98 01 04 07 10 13F

Bil $ U.S. Net Cash Income

Government Payments Market

Source: USDA


16

Near Record U.S. Net Cash Farm Income

Lower Channel Inventories: India DAP Example

17

Million Tonnes DAP 2013/14 2014/15Producer/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 9.80 10.30

Retail Inventory Change -2.00 -0.60

Producer/Importer Ending Inventory 1.20 1.00

Producer/Importer Inventory Change -0.25 -0.20

Total Pipeline Inventory Change -2.25 -0.85

Our Delhi team estimates that DAP demand by farmers remains strong due to an outstanding monsoon andprofitable farm economics. The government has raised minimum support prices for major crops, retail urea pricesremain stable at the extremely low level of $80-$85 per tonne, and retail P&K prices, while up sharply from pre-reform levels, have declined modestly in 2013/14. As a result, retail dealer DAP sales to farmers are projected tototal 9.8 million tonnes this fertilizer year.

Producer and importer sales, however, are projected to drop to less than 7.8 million tonnes, implying of retailinventory change of 2.0 million tonnes. In addition, producer/importer inventories also are projected to decline250,000 tonnes in 2013/14.

Still a Tale of Two Hemispheres

18

Americas – Outstanding Demand Prospects

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Mil Tons U.S. DAP and MAP/ MES Shipments

MIN MAX Range (05/ 06-11/12) 2012/13 7-Yr Olympic Avg

Source: TFI and Mosaic

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Mil Tons U.S. DAP and MAP/ MES Shipments

MIN MAX Range (06/ 07-12/13) 2013/14 7-Yr Olympic Avg

Source: TFI and Mosaic

5.7 5.6 5.5

8.6

9.4

6.4

7.9

9.9

8.9

10.19.8

3.0

4.5

6.0

7.5

9.0

10.5

12.0

3.0

3.5

4.0

4.5

5.0

5.5

6.0

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Mil Tons Product

Mil TonsP2O5

NA Phosphate Use and DAP/ MAP/ MES/ TSP Shipments

Phosphate Use Phosphate Product Shipments

Source: AAPFCO, TFI, IFA and Mosaic Fertilizer Year Ending June 30


19

Americas – Outstanding Demand Prospects

0

100

200

300

400

500

600

700

800

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1000 Tonnes Brazil DAP/ MAP/ MES/ TSP ImportsMin/ Max Range (2008-2012)20132013 Fcst7-Yr Olympic Average

Source: Brazil Mosaic, ANDA

0.00.51.01.52.02.53.03.54.04.55.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F

MMT Brazil DAP/ MAP/ TSP Imports

DAP MAP/ MES TSP

Souce: Fertecon, ANDA, Mosaic


20

India – The Beginning of a Recovery

1.21.8

1.3

3.33.6

5.5

3.84.2

2.6

3.4

1.21.0 1.5

3.02.2

2.13.4

1.5

1.3

2.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

06 07 08 09 10 11 12 13 14 15

Mil Tonnes


India DAP Imports

Kariff (Apr 1-Sep 30)

Rabi (Oct 1-Mar 31)

Source: FAI and Mosaic India

0

200

400

600

800

1,000

1,200

1,400

1,600

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

1000 Tonnes India DAP ImportsMin/ Max Range (07/ 08-11/ 12)20132013 Fcst7-Yr Olympic Average

Source: FAI andIndia Mosaic

Supply Uncertainties – How Much . . .

21

. . . phosphate will China export? . . . phosphate will Saudi Arabia export?

Key Issues Mine and plant ramp-up to capacity Indian import demand

Key Issues 2014 export tax (potentially less restrictive) Production economics Domestic off-take Indian import demand

0

1

2

3

4

5

6

7

00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F

MMT ProductsDAP/ MAP/ TSP

China Phosphate Exports

Source: CRU October 2013

0.0

0.5

1.0

1.5

2.0

2.5

3.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F

MMT ProductDAP/ MAP/ TSP

Saudi Arabia Phosphate Exports

Exports

Production Capacity

Source: CRU October 2013

2014/15: Wide Range of Potential Scenarios

22

2013/14– Rebuilds the drawdown of the last three years

2014/15– Wide range of potential scenarios– Most likely scenario results in a significant drawdown– Low scenario depletes stocks to food-crisis levels– High scenario builds stocks to 2000/01 levels

607

580

494

407

470 463

427438

514

571549

535516

563

350

400

450

500

550

600

650

00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14F

Mil Tonnes World Grain & Oilseed Stocks

Historical 2014/ 15 Range 2014/ 15 Medium Scenario USDA

Source: USDA and Mosaic

2014/15 Grain and Oilseed Scenario Assum ptions

Low M edium High Harvested Area Change -0.50% 0.00% 0.50% Yield Deviation from Trend * Largest Negative 0.00 Largest Positive Dem and Growth 2.0% 2.5% 3.0%* Trend yield for 2000/01 to 2012/13 crop years.

2.582.62 2.61

2.58

2.812.77 2.77

2.85

2.933.00 2.96

3.022.98

3.15

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14F

MT HA World Grain & Oilseed Average Yield

Historical2013/ 14 Range2014/ 15 Medium ScenarioTrendUSDA


Long Term Outlook:Balanced and Positive

Solid Demand Drivers

24

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

3.75

775

800

825

850

875

900

925

950

975

80 85 90 95 00 05 10 15 20 25 30

MT HaMil Ha


World Harvested Area and Average Yield

Actual Area Forecast Area Actual YieldRequired Yield 1980-10 Yield Trend

1,000

1,500

2,000

2,500

3,000

3,500

80 85 90 95 00 05 10 20 30

Mil Tonnes


World Grain and Oilseed Use

Actual for Biofuels Actual Forecast for Biofuels Forecast

Available on Mosaicco.com

Strong Demand Prospects

25

Global Phosphate Shipm ents ForecastM osaic CRU/FRS

M M T DAP/M AP/TSP Low Likely High P2O5 D/M /T P2O5

2010 Shipm ents 58.7 40.6 60.5 42.92020 Forecast 76.0 77.6 79.1 50.8 72.9 52.1Change 17.3 18.8 20.4 10.1 14.2 9.2CAGR 2010-20 2.6% 2.8% 3.0% 2.3% 1.9% 2.0%Source: CRU/Fertecon Research Centre Data File August 2013

20

30

40

50

60

70

80

95 00 05 10 15 20

Mil Tonnes

Source: Fertecon and Mosaic

World Processed Phosphate Shipments

Actual Low Forecast High Forecast Likely Forecast CRU/ FRC - Aug 2013

Key Assumptions

Agricultural commodity prices continue to trade at elevated levels

Farm economics remain profitable worldwide

More moderate and less volatile phosphate prices

More balanced nutrient use in China and India

Continued strong growth of phosphate intensive crops such as soybeans and palm oil.

Balanced and Positive Outlook

26

50%55%60%65%70%75%80%85%90%95%100%

0102030405060708090

100

2000 2004 2008 2012 2016 2020

Op RateMMT

Source: CRU/ FRC and Mosaic

Global Phosphate Capacity, Production and Oper RateLikely Scenario

Capacity Production Acid Op Rate

Based on our likely demand scenario and capacity estimates, global phosphoric acid operating rates are projected to remain relatively stable at about 85% of capacity from 2014 through 2020. This is in line with the average since 2000, but projected rates do not exhibit as much volatility as during the last decade.

Phosphate Outlook Key Features

27

1. New Supply Ballgame: China’s Expansion Program Expected to End

On the supply side of the ledger, a key feature of our analysis is the expectation that China’s massive 15-year expansion program will come to an end and that new low cost capacity planned or under construction, mostly in Morocco and Saudi Arabia, will supply the bulk of projected demand growth during the last half of this decade and beyond.

2. Brazil Remains a Key Growth Market and Still Largely Dependent on Imports

Brazil shipments are forecast to climb 5.7% per year or 3.4 million tonnes from 4.5 million in 2010 to 7.9 million in 2020. Increases in domestic production are projected to meet roughly one-third of this growth with imports capturing the remaining two-thirds. Brazil’s imports are forecast to climb from 2.5 million tonnes in 2010 to 4.8 million in 2020.

3. Demand Growth Gets Back on Track in India

In India, a combination of expected subsidy changes and more stable and moderate prices is projected to put phosphate demand back on a growth trajectory during the last half of the decade. Shipments are projected to grow 2.3% per year or 3.0 million tonnes from 11.1 million in 2010 to 13.8 million in 2020. Domestic DAP fabrication is expected to remain at about 4.0 million tonnes, so imports of high analysis solid products are forecast to increase to around 10.0 million tonnes by the end of the decade. Imports peaked at 8.1 million tonnes in 2010.

4. Generally Positive Demand Prospects Elsewhere

0

10

20

30

40

50

60

70

95 97 99 01 03 05 07 09 11 13F

MMT China DAP/ MAP/ TSP Production

Rest of World China

Source: Fertecon, IFA and Mosaic

0

2

4

6

8

10

12

14

00 02 04 06 08 10 12 14 16 18 20

MMT

Source: Fertecon Research Centre/ CRU and Mosaic

India Phosphate Shipments and Imports

Shipments Imports

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

00 02 04 06 08 10 12 14 16 18 20

MMT

Source: Fertecon Research Centre/ CRU and Mosaic

Brazil Phosphate Shipments and Imports

Shipments Imports

Phosphate Outlook

Dr. Michael R. RahmVice President, Market and Strategic AnalysisThe Mosaic Company

TFI Outlook ConferenceMarriott Marriott Waterside Hotel and MarinaTampa, FLNovember 20, 2013

Thank You!

phosphate outlook - fertilizer industry round table | fot - phosphate outlook.pdf · phosphate...

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