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Fertilizer Trends-Growth in Drip/Water Soluble
Mark D. Roeder
Sales Manager-North America
North America-Specialty Agriculture
• Born and raised on a Corn and Soybean farm in Illinois
• Agronomy degree
• Grain elevator manager/trader (Co-op)
• Ag Retail Sales (Independent)
• Ag Retail Management (Independent-Major)
• Ag Retail Area Management
• Bought and sold fertilizer (poorly at times 08-09)
• ICL North American Sales Manager Specialty Fertilizers (Global)
2
“Street Creds”
* Source: USDA Foreign Agricultural Service PSD
Long Term Fundamentals
• Average growth rate over past 25 years = 42 mmt/year (1.653B bu corn)
• 5 year average growth = 68 mmt/year (2.677 B bu corn)
• Record demand growth in 2013/14: = 129 mmt/year (5.078 B bu corn)
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
1989/90 1992/93 1995/96 1998/99 2001/02 2004/05 2007/08 2010/11 2013/14
Mill
ion
Met
ric
Ton
ne
s
Grain & Oilseed World Consumption
3
4
2.20
2.40
2.60
2.80
3.00
3.20
3.40
3.60
19
851
986
19
871
988
19
891
990
19
911
992
19
931
994
19
951
996
19
971
998
19
992
000
20
012
002
20
032
004
20
052
006
20
072
008
20
092
010
20
112
012
20
132
014
Yie
ld (
Ton
ne
s p
er
he
cta
re)
Global Grain Yield (t/ha)
80
90
100
110
120
130
140
150
160
170
180
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Yie
ld (
Ton
nes
per
bu
/acr
e)
U.S. Corn Yield (bu/acre)
1988 Drought
2012 Drought
2009 Record
* Source: USDA
• Pressure on crop prices driven by record global yields • Crop yields and in turn global supply/demand balances often swing from year-to-year
Consecutive Years of Record Global Crop Yields
• Growth in nutrient demand is critical in order to meet global food consumption • P and K demand growth are below historical trend over the past 4-5 years • 2007-2013 demand trend is unsustainable (too slow)
Historical Nutrient Demand
0
20
40
60
80
100
120
2000
2001
2002
20
03
20
04
20
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
Mil
lio
n t
on
ne
s N
Nitrogen
0
5
10
15
20
25
30
35
40
45
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Mill
ion
tonn
es P
2O5
Phosphate
0
5
10
15
20
25
30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Mill
ion
to
nn
es
K2O
Potash
Represents Fertilizer Year Data Source: IFA, Agrium
Demand Growth Rate: 2000-07: 3.0% 2007-12: 1.5%
2012-18f: 2.5%
Demand Growth Rate: 2000-07: 2.5% 2007-12: 1.1%
2012-18f: 3.0%
Demand Growth Rate: 2000-07: 4.0% 2007-12: 0.1%
2012-18f: 4.2%
5
6
Barriers to growth in the world?
Logistics?
Knowledge?
Nutrient Applications vs. Yield in Corn
Source: USDA, IFA, Agrium
• Balanced and adequate nutrient applications are important for crop yields
0
2
4
6
8
10
12
0
50
100
150
200
250
300
U.S. EU-28 China India Brazil
Co
rn Y
ield
(to
nn
es/h
a)
Nu
trie
nt
Ap
plic
atio
ns
(kg
/ha
)
Nitrogen Phosphate Potash Yield
7
Ther
e is
ap
pro
x. 8
9.2
lbs.
/a in
100
Kg/
ha
Ther
e ar
e ap
pro
x. 1
6 b
u /
a in
1 t
on
nes
/h
a
* Include: Soybean, Corn, Wheat, Rice, Peanut 1ª harvest; Peanut 2ª harvest; Oatmeal; Cotton; Barley; Castor Beans; Rye; Sorghum; Sunflower; Triticale; Bean 1ª harvest; Bean 2ª harvest; Bean 3ª harvest.
30 31 34 39 40 39 37 37 37 37 38 38 39 42 43
99 98
121 120 116123
133146
136150
164 168
189 195
211
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
Planted area (million ha) Production (million ton)
Area: +2.6%
Yield: +2.8%
Production: +5.5%
Source: Conab. Elaboration: Agroconsult
61.7%
38.3%
Yield Area
Most part of the Brazilian success can be explained by the relevant growth in grain
production, which occurred both through better yields performance and area expansion.
8
Agribusiness Evolution: Production and Area
Grains* (1/2)
Grains: Evolution in Planted Area, Total Production and Yields
Source: Conab. Elaboration: Agroconsult
5 6 6 6 6 7 7 8 8 8 9 10 10 10 10
258293
321359
385 387426
494
571605
624
560589
654635
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
Planted area (million ha) Production (million ton)
Area: +5.1%
Yield: +1.5%
Production: +6.7%31.6%
68.4%
Yield Area
9
Agribusiness Evolution: Production and Area
Sugarcane
Sugarcane has also benefited from productivity gains, as total production grew at a
higher rate than the planted area.
Sugarcane: Evolution in Planted Area, Total Production and Yields
Source: Conab. Elaboration: Agroconsult
2,32,4
2,4
2,6
2,52,5 2,5 2,5 2,5
2,4 2,4 2,4 2,4 2,42,3
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
Planted area (million ha)
1,92,1
3,1
2,0
2,6
2,2
2,8
2,3
3,1
2,6
3,12,8
3,1 3,0 2,9
Production (million ton)
Yield: +3.1%
Production: +3.1%
Area: +0.0%
100.0%
Yield Area
10
Agribusiness Evolution: Production and Area
Coffee
Coffee: Evolution in Planted Area, Total Production and Yields
For coffee, productivity gains were even more essential for production increase, which
occurred even with a drop in cultivated area.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
0
500
1,000
1,500
2,000
2,500
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15F
2015
/16
Sto
cks/
Use
Rat
io (
%)
End
ing
Sto
cks
(mill
ion
bu
)
Corn Ending Stocks and Stocks/Use
Ending stocks Stocks/use ratio, percent
Decline in Ending Stocks From
Projections @ Harvest
Cu
rren
t U
SDA
11 * Source: USDA, FactSet, Agrium
AGRICULTURE MARKET UPDATE
Corn Prices are Highly Sensitive to Yield Changes
● U.S. corn supply/demand balance has tightened through the year in the past 2 crop years
$3.68/bu
$3.55/bu
$5.18/bu
$6.22/bu $6.89/bu
$4.46/bu
Which Were driving fertilizer pricing
AGRICULTURE MARKET UPDATE
Long 2015 Fall Season to Support Nutrient Use
• NPK fall applications in Q4 will be supported by a season that started significantly earlier than last year and assuming a more normal close to the season, compared to the early close in 2014
12 Source: NOAA, USDA, Agrium
*The proxy fall season length is the number of days between U.S. corn harvest reaching 75% complete and U.S. continental snowfall coverage reaching 50%. For 2015, the long-term average date of continental snowfall reaching 50% was used.
39
50
38
49
40 35
14
49
41
74
33
10
48
0
10
20
30
40
50
60
70
80
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F
Proxy Fall Application Season Length (# of days)*
Avg. = 40
13
Green Markets 11-2-2015
David Coppess, executive vice president, sales and marketing, for Heartland Co-op; growers have no confidence in fertilizer prices going forward and want to end the fall application season with empty bins. Coppess also reported a lot of interest in specialty fertilizer products at the retail level as growers seek to optimize nutrient uptake and reduce reliance on traditional fertilizers.
there will be a shift to more spring-applied urea and UAN over anhydrous ammonia, particularly as growers face increasing regulatory and environmental pressures.
Green Markets 11-23-2015
Weather was not the only difference a year makes, as most
commodity fertilizer prices were lower in November 2015
versus November 2014 (see pp. 4-5), though specialty
fertilizers appeared to be holding their own.
Fertilizer Usage: Farmers’ Expectation
Fertilizer Dosage for the Next Season
(2Q 2015 Results) - %
Source: ICAgro FIESP/OCB.
No answer
Higher
Lower
Same
Are you going to decrease Fertilizer
Dosage for the Next Season?
(Previous Results) - %
According to ICAgro survey, farmers were willing to maintain fertilizer dosage for
the 2015/16 Crop Season.
Global Nitrogen Capacity & Demand Growth
15
• Most of the increased global capacity is expected in 2016 and 2017 • Chinese capacity expansions are projected to slow after 2016
Source: CRU, Fertecon, IFA, Agrium
Other Other
Other
Other Other Egypt
Egypt
Egypt Egypt
Algeria
Algeria
Algeria
Algeria Algeria
Indonesia
Indonesia Indonesia
Russia
Russia
Russia
Russia
N.A.
N.A. N.A.
N.A.
0
2
4
6
8
10
12
14
16
2015 2016 2017 2018 2019
Global Nitrogen Capacity Additions excl. China (mmt N)
Demand Growth
16
Global UAN Capacity Additions
17
Romania Romania Romania
China
China China China
U.S.A. U.S.A. U.S.A.
33
34
35
36
37
2014 2015 2016 2017 2018
Global UAN Capacity Additions (mmt Product)
Source: CRU, Fertecon, IFA, Agrium
Other costs include other cash production costs, and freight to port and export taxes where applicable. Ocean freight is excluded. Source: Fertecon, CRU, Agrium
$0
$100
$200
$300
$400
$500
W. Canada U.S. Gulf W. Europe Hub W. EuropeFormula
China Soft Coal Ukraine ChinaAnthracite
China Gas
$8.25 MMBtu
$80 tonne
$140 Tonne
Current NOLA Urea Price
Urea Cost & Price Comparison USD/tonne
Urea
$2.25 MMBtu
Gas cost Other costs
Global urea cost floor has been driven by the cost of anthracite-coal based production in China
$1.75 MMBtu
$6.00 MMBtu
$7.00 MMBtu
$7.00 MMBtu
Current PNW Urea Price
Current Urea Prices Near Cost-Based Floor
18
4.01.5
6.9
4.6
2.9
2.0
1.0
0
3
6
9
12
15
Ammonia Urea UAN/AN Total DEF Growth CapacityAdditions*
U.S. Nitrogen Offshore Imports
19
Source: U.S. Dept. of Commerce, Zepol, Integer, Agrium *Includes Agrium Borger, CF Donaldsonville, CF Port Neal, Dyno, Yara/BASF, OCI, Koch, Dakota Gas, Simplot and some other minor projects
Mill
ion
Pro
du
ct T
on
ne
s
• U.S. offshore imports accounted for over 50% of U.S. nitrogen consumption in 2014 • Probable U.S. nitrogen projects lower the import proportion to ~25% • Another ~$15B of investment required to meet the remaining import gap • ~27% of U.S. nitrogen production located in the US Gulf, helps sustain premiums in interior
major growing regions
Remaining Minimum Import Gap (excluding demand growth)
20
Source: Integer Nitrogen 10-year Outlook Service
Global Nitrogen Capacity Utilization
21 Source: CRU, Fertecon, IFA, Agrium
• Higher capacity additions than demand growth drive lower capacity utilization in 2016, but by 2018 demand growth exceeds supply growth
• Chinese capacity utilization was higher than global average in 2014/2015, but expected to decline to global equivalent levels in 2016-forward
• Urea capacity utilization dips lower than overall N due to urea upgrade projects
75%
76%
77%
78%
79%
80%
81%
82%
83%
84%
85%
2013 2014 2015 2016 2017 2018 2019
Global Nitrogen Capacity Utilization (excl. China)
Global Potash Capacity & Demand Growth
22
Source: Fertecon, Agrium, (Total KCl global capacity of ~ 74 mmt at 100% of capacity in 2015, 67 mmt of operational capability in 2015.)
Other
Other
Other Other Other
Canada
Canada
Canada
Canada Canada
Russia
Russia
-3
2
7
12
17
2015 2016 2017 2018 2019
Cumulative Global Capacity Additions & Demand Growth (mmt KCl)
Russian Mine Flood (2.3 mmt)
Russian Capacity
Expansions
Demand Growth Operational Capacity
Potash Capacity Utilization
23
65%
70%
75%
80%
85%
201
3
201
4
201
5
201
6
201
7
201
8
201
9
Global Potash Capacity Utilization Rates
Source: Fertecon, Agrium
• The supply/demand outlook has improved since last year • Stronger than expected 2014 and 2015 demand and improved demand outlook • Flooding of Uralkali mine reduced supply
• Capacity utilization now projected to bottom out in 2018/2019 at similar levels to 2013
Global Phosphate Capacity & Demand Growth
24
Other Other Other Other Morocco
Morocco Morocco
Morocco Morocco
Saudi Arabia
Saudi Arabia
Saudi Arabia
Brazil
Brazil
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2015 2016 2017 2018 2019
Global Phosphate Capacity Additions & Demand Growth (mmt P2O5)
Source: CRU, Agrium
• Ma’aden project in Saudi Arabia has experienced delays in the past year • China has balanced the market over the past year, but some expect capacity in China to
decline over the medium term • Indian demand has been robust in 2015, but weakened rupee is a risk
Demand Growth
25
26
27
Phosphoric Acid Production
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
US Morocco FSU Mid East Europe Other
2015
Prev 5 yr Max
Excludes China Plant problems/closures are balancing market
US Phosphate Usage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
US Dap/Map Liquid Imports Specialty Phosphates
2010
2015 Forcast
• Nitrogen-is fairly in balance with projected growth and projected
demand
• Phosphates-have transitions, but are coming in line with projected
demand
• Potash-production will exceed demand after “fixes” and upgrades
into 2019. Expected to improve after that.
With supply and demand in balance what will drive pricing?
Where are there challenges/opportunities?
29
Overall
32
33
35
North America revenue by product, 2012-2022
(USD)
36
Crops using Micro Irrigation
From This
To this!
Commodity Crops (Corn, Alfalfa, Cotton) are still in the
infancy of development.
• The cost of Sub-Surface Drip Systems and ROI are barriers to growth in these
markets.
• Having said that…Cotton in West Texas is a well penetrated market.
“So what?”
42
Netafim Notes
Perfect marriage
• Ability to immediately respond to a crops water and nutrient needs is extremely valuable.
• Gives opportunity to match crop nutrient uptake curves.
• Helps avoid losses of water and nutrients beyond the root zone.
43
Drip and Fertigation
44
46
Projected growth of Drip (world)
0
500
1000
1500
2000
2500
3000
3500
4000
2015E 2020P
NA
RoW
Europe
Asia
Source-MarketsandMarkets Analysis
Mar
ket
Shar
e M
$
47
Drip Irrigation Market US projected through 2020
0
0.5
1
1.5
2
2.5
3
3.5
4
2013 2014 2015P 2016 2017 2018 2019 2020
B$
B$
MarketsandMarkets
0
100
200
300
400
500
600
700
2013 2014 2015P 2016 2017 2018 2019 2020
Million Dollars
Millions
Linear (Millions)
North America Water Soluble Projected Growth
0
2
4
6
8
10
12
2013 2014 2015P 2016 2017 2018 2019 2020
Global WaterSoluble Sales
Water Sol N
Drip irrigationmarket
Billion US Dollar
As the efficiencies of the technology improve………
50
Volume by Nutrient Global
Nitrogen , 68.4
Phosphate , 12.9
Potassium , 15.1
Others , 3.6
Nitrogen , 67.7
Phosphate , 12.6
Potassium , 15.9
Others , 3.8
2012 2019 P
51
Projected NA growth by nutrient
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1000.0
2012 2013 2014 2015 2016 2017 2018 2019
Nitrogen
Phosphate
Potassium
Others
Yara
CF Industries
Agrium
PotashCorp
ICL
LOTS of Others •EuroChem, UralChem OJSC, K+S
AG, Haifa Chemicals, Aries Agro Ltd., Sinofert, SQM and Coromandel
52
Some of the Major Players?
Up significantly in the next several years US too!
25%-30% is used as a Foliar application
70%-75% is used in Fertigation
Nitrogen is most popular and will show substantial growth
Potassium is very attractive, and will grow at a little faster rate
Phosphate is the least attractive due to low solubility/acidity issues
Secondary and Micro nutrients will be big sellers
Water and soil conditioners will have opportunities as well
53
Water Soluble Trends
Valid sample base: 78 respondents
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Disponibilidadede crédito
Condições depagamento
Serviços e prazode entrega
Assistênciatécnica
Reputação damarca
Qualidade doproduto
Preço
Relevant factors when buying fertilizer (Multiple Choice %)
mais importante importante menos importante
Credit availability
Payment terms
Service and delivery time
Technical assistance
Brand reputation
Product Quality
Price
More Important
Less Important
Important
Critical Success Factors in Latin America
