Fertilizer Weekly February 7 th, 2017

Size: px

Start display at page:

Download "Fertilizer Weekly February 7 th, 2017"

Marvin Whitehead
6 years ago
Views:

Fábio Rezende fabio.rezende@intlfcstone.com inteligencia@intlfcstone.

totaled 34.083 million tonnes in 2016, surpassing the previous record (2014) by 5.8%, and the volume of the previous year by 12.9%.

soybean and corn; in addition to the combination of late deliveries from the 2016 safrinha (mid-term crop) and the early 2017 crop.

1 Fábio Rezende Fertilizer Weekly February 7 th, 2017 Translated from its original source in Portuguese Fertilizer demand ought to increase in 2017 SUMMARY Fertilizer deliveries to end users in Brazil have totaled million tonnes in 2016, surpassing the previous record (2014) by 5.8%, and the volume of the previous year by 12.9%. The strong recovery outperformed market expectations, including the most optimistic of agents, and which was related to the excellent exchange ratio between fertilizers and commodities, especially soybean and corn; in addition to the combination of late deliveries from the 2016 safrinha (mid-term crop) and the early 2017 crop. Our expectations are that fertilizer deliveries will continue to increase throughout 2017, and we estimate an increase of about 2.9% compared with last year. Among the main reasons for believing in the early consumption of fertilizers, we list the main points as follows: 1) the good result expected for the current soybean crop; 2) expansion of the winter corn crop; 3) excellent exchange ratios of commodity such as sugar, coffee and cotton with fertilizers (which together accounts for around 23% of Brazilian fertilizer demand), and 4) expectations of a slight economic recovery, which may result in the increased presence of private companies in the financing of agriculture costs. Fertilizer deliveries to end users in Brazil FCStone do Brasil Consultoria em Futuros e Commodities Av. José Bonifácio Coutinho Nogueira, 150 Ala Oeste Sala 203 Jd. Madalena CEP: Campinas-SP Source: ANDA. Projection: INTL FCStone. 1 Commodities trading involves risks and FCStone is not to be held responsible for the use of any information herein for such purpose. All information contained herein was obtained from sources deemed reliable, but there is no guarantee of accuracy. The information and opinions expressed herein do not constitute a

2 Fábio Rezende Some factors, however, may act in an inverse way, and could limit the purchases of fertilizers in Brazil in Among them, they are: 1) the early purchases for the winter corn crop at the end of 2016; (2) possible cuts or delays in the release of rural credit by the federal government; and (3) the possible widening of the soybean exchange ratios by fertilizers (a crop that accounts for 41% of Brazilian fertilizer demand). Production and Importation According to ANDA (National Association for Fertilizer Distribution) data, Brazilian fertilizer production in 2016 fell by 1.3% relative to the previous year, to around 9.0 million tonnes, or 60% of the installed capacity of the industry. Imports rose 16.1% to 24.5 million tonnes. Among the nutrients, N production fell 3.9% to 758,000 tonnes; P2O5 fell by 1.9% to 1,983 million tonnes, and K2O increased by 3.9% to 290,000 tonnes. In relation to imports, those of N have increased 32.9% to 3,799 million tonnes; P2O5 increased 14.4% to 3,022 million tonnes, and K2O, 6.0% to million tonnes. NITROGENOUS: In a week of low activity in the fertilizer market due to the Chinese New Year festivities, nitrogenous prices have shown volatile behavior amidst various uncertainties regarding supply and demand over the short term. Despite the volatility, average prices on the physical market were similar to those seen the week previous. The main uncertainty in the market refers to the consumption and production of the US. Until now, American purchases have been delayed, with several agents waiting on the entry of product from the two new nitrogenous plants in the state of Iowa. Despite already having being completed, these new units are still not operating on a commercial scale, so more imports will be required to meet early fertilizer demand for the spring in the US. A large number of agents however, believe that product from the Wever and Port Neal plants will already be on the market from March or April, and may still be able to meet part of the remaining demand for spring fertilizers, and provide price relief for those months. The global nitrogenous supply is also a topic of discussion in the market. Declining European demand has increased product supply in North Africa, but on the other hand, supply remains restricted in Eastern European countries, where problems relating to the supply of natural gas and ammonia are limiting nitrogenous production. Therefore, ammonium nitrate (NAM), whose world production is more concentrated in Eastern Europe than other nitrogenous fertilizers, is the product which recorded the highest price increase during the week. Expectations of market players for the short term are quite diverse, but they have been moving towards a more bearish view. Even though US de- 2 Commodities trading involves risks and FCStone is not to be held responsible for the use of any information herein for such purpose. All information contained herein was obtained from sources deemed reliable, but there is no guarantee of accuracy. The information and opinions expressed herein do not constitute a

mand tends to support prices in the US, it is common at this time of year that a spread opens up between the country and the other demand trading posts.

3 mand tends to support prices in the US, it is common at this time of year that a spread opens up between the country and the other demand trading posts. After a large part of the early purchases were made for safrinha (mid-term crop) corn over the past few months, Brazilian demand for nitrogenous has slowed. Following the strong volume of shipments in January, the line up of ships at ports indicates that there is 53% less urea scheduled for unloading now than at the same time last year. In the case of SAM and NAM, the year-on-year reduction in the lineup is 21% and 16% respectively. The decline in Brazilian demand for urea has resulted in a 0.9% reduction in the CIF Paranaguá fertilizer price index to USD 284/T, the first decline since the beginning of December last year. The price for SAM has also declined 1.8% to USD 139/T, while NAM has followed international quotes and has increased 2.3% to USD 225/T. reached an agreement, which should reestablish the flow of that ammonia. However, even with the resolution of the impasse in Eastern Europe, there may be a delay until the market returns to stability, as a few more weeks of a rally are still possible until resistance is arrived at. Still on the supply side are production cuts, mainly in the countries of Trinidad and Ukraine due to the lack of natural gas, which may still support prices for the short term. Meanwhile, demand should remain strong over the coming months with the opening of the third expansion of OCP's DAP and MAP plant in Morocco, which is expected for March. AMMONIA Ammonia prices had another strong rally on the international market this week, still reflecting the shortage of product. The main limitation for supply this week was the continuing impasse between Russian company TogliattiAzot, the world's largest producer of ammonia and the Ukrainian company Transammiak, operator of the pipeline that transports the Russian product to the Black Sea port of Yuzhny. On Friday however, news surfaced that both parties had PHOSPHATES Strong international demand for phosphate fertilizers continues to outpace its supply constraints, resulting in further rallies in their prices internationally. Since mid-december, when they reached their lowest levels since 2009, international prices of DAP and MAP had already recovered by 6.7% and are expected to continue increasing until at least the end of March. China, which is the main exporter of phosphate fertilizers, is out of the market due to the New Year s festivities. Even after the holiday, Chinese producers will continue to focus their sales on the domestic market. The country should only become a significant surplus exporter again from mid-april. This does not prevent the country from exporting cargoes during this time however, as this depends on the price 3

4 differential between the domestic and international markets. For the time being, this differential encourages domestic sales, however with export tariffs abolished, the foreign market may become more attractive, even during this period of strong domestic demand. In the US, which is another major exporter, producers are balancing domestic sales with international ones. The low supply, and the above-average demand for this time of year both on the domestic market and in Latin America (the main destination for their exports), has allowed them to broaden their price ideas for both markets. will participate in the world market over the coming weeks, given its large inventories and low usage rate (due to the reduced operating rates of phosphate fertilizer industries). Middle East producers have reported their official selling prices for February, giving little or no variation over the previous month, which was expected with the scenario of apparent balance in supply and demand. In Qatar and the United Arab Emirates, producers Tasweeq and Adnoc have maintained their official price at USD 88/T and USD 92/T respectively. In Saudi Arabia, Aramco reduced their sales price by USD 2 to USD 88/T. The Brazilian demand for phosphates is relatively strong for a period in which it generally reaches its annual lows. Importers, the industry, and some end users are taking advantage of the current exchange ratios between fertilizers and soybeans to make early purchases for the next crop, resulting in higher than expected demand. The volume of phosphates in the lineup is about 125% higher than during the same period last year. As a result of the higher demand and the external scenario, the MAP CIF Paranaguá price index has increased 2.2% during the week to USD 358/T. Since the beginning of the year, this index had already increased 7.7% and reached the highs of March of SULFUR POTASSIUM With China out of the market for the holiday, international potash purchases on the market were concentrated in the US. Demand there continues to grow, which is boosting domestic prices. Even with that, end-users are still able to obtain volumes at discount from suppliers who make early purchases, while international prices for chloride still remain low. Chinese producers are expected to return to the market next week following the Chinese New Year. The country's production however, even with the addition of existing stocks and the scheduled arrival of the remainder of the 2016 contract, would not be enough to meet the expected demand for spring applications. As in the previous week, the international sulfur market has been relatively flat, due to the Chinese New Year. Even after the holiday, it is not expected that the world's largest importer of sulfur This should contribute to the early 2017 contract negotiations between international producers and the Chinese import consortium, and provide more bargaining power to suppliers. It is hoped that such 4

5 negotiations would begin as early as the second half of February. In Brazil, supply remains very restricted, with important suppliers such as Conpotex and BPC saying they are depleted until next month, providing space for others to expand their price proposals. The CIF Paranaguá price index is valued at USD 245/T, up 2.1% during the week and its highest in 12 months. WEEKLY FREIGHT INDICATORS Source: Reuters INDICATORS OF DOMESTIC PRICES - Paranaguá Prices CFR (USD) DDP¹ (USD) DDP¹ (BRL) Var (%) Urea Granular ,8% Am. Sulphate ,1% Am. Nitrate ,9% MAP ,6% MOP ,7% Average freight Paranaguá-Rondonópolis: R$ 162,69 Source: INTL FCStone Internalized price, with tariffs and logistical costs paid. 5

INTERNATIONAL PRICES BY TERMINAL - 2/3/2017 - USD/T *Urea - US$/ton short FOB; Ammonia - US$/ton CIF **DAP - US$/ton short FOB ***TSP - US$/ton short FOB; Sulphur - US$/ton CIF TRENDS FOR THE

this report was issued. 6 Commodities trading involves risks and FCStone is not to be held responsible for the use of any information herein for such purpose.

6 INTERNATIONAL PRICES BY TERMINAL - 2/3/ USD/T *Urea - US$/ton short FOB; Ammonia - US$/ton CIF **DAP - US$/ton short FOB ***TSP - US$/ton short FOB; Sulphur - US$/ton CIF TRENDS FOR THE FERTILIZER MARKET Fertilizer Supply Demand Conjuncture Urea Short-Term Trend Long-Term Trend AN & AS Ammonia Phosphates Potash Sulphur The long-term trend is for six months ahead of the month when this report was issued. 6 Commodities trading involves risks and FCStone is not to be held responsible for the use of any information herein for such purpose. All information contained herein was obtained from sources deemed reliable, but there is no guarantee of accuracy. The information and opinions expressed herein do not constitute a solicitation to buy or sell futures or options on futures, or any derivative. The partial or full reproduction of this port without FCStone's written permission is

7 The INTL FCStone Inc. group of companies conducts a global full-service, integrated commodities, futures, investment banking, derivatives trading and risk-management business. Our research department may provide research, market commentary and general or specific analyses as may be requested from time to time by our clients, which may reflect opinions that are contrary to the illustrations in this presentation. INTL FC Stone Inc. has adopted policies designed to preserve the independence of our research analysts. These policies prohibit non-research personnel from influencing research personnel to issue favorable research or offer to change a research rating or price target as consideration for an inducement to obtain business or other compensation. The INTL FCStone proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the materials in this document. INTL FCStone Inc. and its affiliates, officers, directors, and employees, will from time to time have long or short positions in, act as principal in, and buy or sell instruments the derivatives that are identical or economically related to the derivatives referred to in this document. This presentation is not an offer to sell or a solicitation of an offer to buy any derivative or security and is not a commitment to enter into any derivative or other transaction, and does not create a binding obligation on INTL FCStone Inc. or any of its affiliates. This presentation does not constitute investment research or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients or recipients of this material. You are directed to seek professional and tax advice. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Risks presented by commodities, futures (and options thereon), swaps and other OTC products ( derivatives ) depend upon the terms of the transaction and your circumstances. Options are not suitable for all investors. Option buyers may lose their entire investment. Option sellers may have an unlimited loss. Certain derivative contracts contain a variety of selling prices, knock out prices and accumulation periods and require an understanding of the contract s specific pricing mechanisms before you enter into such contracts. Derivatives generally involve credit risk, market risk, liquidity risk, funding risk, operational risk, legal and documentation risk, regulatory and tax risk. You should refrain from entering into derivatives unless you fully understand the risks, including the extent of your potential loss. In evaluating risk, you should consider that an OTC derivative transaction may be modified or terminated only by mutual consent of the original parties and subject to agreement on individually negotiated terms. Accordingly, it may not be possible for you to modify, terminate or offset your obligations or your exposure to the risk associated with a transaction prior to its scheduled termination date. In addition to the general risks associated with derivatives, highly customized derivative transactions may increase liquidity risk and introduce other significant risks. Leveraged transactions may create exposure to substantial gains or losses in response to relatively small market fluctuations. INTL FCStone Inc. and its affiliates may from time to time take proprietary positions and make a market in instruments identical or economically related to derivative transactions entered into with you, or may have an investment banking or other commercial relationship with and access to information from the issuer(s) of securities, financial instruments or other interests underlying derivative transactions entered into with you. INTL FCStone Inc. and its affiliates may choose to hedge their obligations by trading in derivatives. The costs associated with hedging activity could affect the market value of, or the price at which we would be willing to enter into a transaction. Further, we may internalize and match order flow or route it externally for execution. If we choose to match orders internally, our compensation is greater than if we execute the order externally. INTL FCStone Inc. and its affiliates make no representation, warranty or guarantee as to, and shall not be responsible for, the accuracy or completeness of the information contained in this presentation and have no obligation to update the information. Any illustrations provided are strictly hypothetical and no representation is being made that any person will, or is likely to achieve profits or losses similar to those examples. You are advised to undertake an independent review of the potential legal, tax, regulatory and accounting implications of any derivatives transaction to determine whether derivatives or any particular structure would be suitable for you, and if necessary seek professional advice. Derivatives give rise to substantial risk and are not suitable for all recipients of this presentation. This presentation has been prepared solely for private informational purposes for the pre-qualified eligible contract participants to whom it was distributed. The INTL FC Stone Inc. group of companies act solely in the capacity of an arm s length counterparty and not in the capacity of your financial adviser or fiduciary. Prior to undertaking any transaction, you should discuss with your tax or other adviser how a particular transaction may affect you. Any opinions expressed are subject to change without notice and certain information is based upon information from third party sources which we have not independently verified. No part of this presentation may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of INTL FCStone Inc. 7

2Q08 Results. Dalton Carlos Heringer CEO and Member of the Board of Directors Jaime Rebelo CFO and IRO. August 14, 2008

2Q08 Results. Dalton Carlos Heringer CEO and Member of the Board of Directors Jaime Rebelo CFO and IRO. August 14, 2008 2Q08 Results Dalton Carlos Heringer CEO and Member of the Board of Directors Jaime Rebelo CFO and IRO August 14, 2008 Disclaimer and IFRS This presentation may include forward-looking statements about