Despite the drought and other environmental factors reducing grain yields all over the world, Mosaic Company expects a strong market for crop nutrients over the long haul.
"The long-term outlook for crop nutrition is outstanding, and Mosaic is well positioned as the world's largest potash and phosphates producer," said Jim Prokopanko, president and chief executive officer of Mosaic. "Drought and other weather-related issues in several of the world's key agricultural regions severely impacted this year's corn, soybean and wheat crops and provided a vivid reminder of just how tenuous global food security is. Our products are essential in helping the world grow the food it needs."
Mosaic released its reports for the first quarter fiscal 2013 this week and provided a glimpse into the global forces impacting the market. Some of the highlights of progress from the report for Mosaic include:
- Potash expansion projects continue to be on time and on budget with expenditures of $158 million in the quarter.
- Mosaic ramped up production at South Fort Meade to full capacity, replenished phosphate rock inventory and plans to resume shipping rock to its facilities in Louisiana in the second fiscal quarter.
- The company has committed additional capital to continue the feasibility work to expand the company’s ammonia production capacity.
- Mosaic launched “Pursuit of 300: The Road to Higher Yields,” a program that uses farmers’ real-world experiences as a launch pad for agronomists, researchers, retailers and industry stakeholders to create the next generation of cropping systems.
Turning to the phosphate side of the business, Mosaic explained the market issues.
"The phosphate market continues to be tight, with low producer inventories and supply uncertainties," Prokopanko said. "During the quarter our production was impacted by longer annual maintenance shut-downs and challenges posed by hurricanes, and our sales were further impacted by low beginning inventories and low Mississippi River levels. As a result, demand for our products outpaced our ability to produce and deliver; we expect better execution in the quarters ahead."
Prokopanko went on to explain other impacts impacting worldwide fertilizer demand and consumption.
"While current sentiment is being affected by volatile markets and challenging weather conditions, farm economics remain compelling. Crop nutrients have never been more affordable, and farmers around the world continue to have strong incentives to use our products to increase crop yields. Our capital strength, global reach and unique asset base position us well to continue to help the world grow the food it needs while generating long-term shareholder value," said Prokopanko.
Waiting on China’s Potash Contract
Mosaic also announced this week that China may not sign its potash supply agreement with North America’s largest potash producers until next year. China appears to be holding out for lower prices than the ones paid in the first half.
China is “very determined” to pay less than the $470 a ton it negotiated for the first six months of 2012, Prokopanko said. The standoff is being exacerbated by the country increasing its rail imports from Belarus.
Prokopanko said China could wait through the rest of 2012 without purchasing more potash. They may even wait as long as into the first of 2013.
In the meantime, India is not expected to sign its potash supply agreement with North American producers until China settles its contract first. Imports into India have been cut due to a weaker rupee and budget cuts.