August 2021 - Market Update
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
August 2021 – Market Update
Forward Looking Statements This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, statements about proposed or pending future transactions or strategic plans and other statements about future financial and operating results. Such statements are based upon the current beliefs and expectations of The Mosaic Company’s management and are subject to significant risks and uncertainties. These risks and uncertainties include, but are not limited to: the economic impact and operating impacts of the coronavirus (Covid-19) pandemic, the potential drop in oil demand/production and its impact on the availability and price of sulfur, political and economic instability and changes in government policies in Brazil and other countries in which we have operations; the predictability and volatility of, and customer expectations about, agriculture, fertilizer, raw material, energy and transportation markets that are subject to competitive and other pressures and economic and credit market conditions; the level of inventories in the distribution channels for crop nutrients; the effect of future product innovations or development of new technologies on demand for our products; changes in foreign currency and exchange rates; international trade risks and other risks associated with Mosaic’s international operations and those of joint ventures in which Mosaic participates, including the performance of the Wa’ad Al Shamal Phosphate Company (also known as MWSPC), the timely development and commencement of operations of production facilities in the Kingdom of Saudi Arabia, and the future success of current plans for MWSPC and any future changes in those plans; difficulties with realization of the benefits of our long term natural gas based pricing ammonia supply agreement with CF Industries, Inc., including the risk that the cost savings initially anticipated from the agreement may not be fully realized over its term or that the price of natural gas or ammonia during the term are at levels at which the pricing is disadvantageous to Mosaic; customer defaults; the effects of Mosaic’s decisions to exit business operations or locations; changes in government policy; changes in environmental and other governmental regulation, including expansion of the types and extent of water resources regulated under federal law, carbon taxes or other greenhouse gas regulation, implementation of numeric water quality standards for the discharge of nutrients into Florida waterways or efforts to reduce the flow of excess nutrients into the Mississippi River basin, the Gulf of Mexico or elsewhere; further developments in judicial or administrative proceedings, or complaints that Mosaic’s operations are adversely impacting nearby farms, business operations or properties; difficulties or delays in receiving, increased costs of or challenges to necessary governmental permits or approvals or increased financial assurance requirements; resolution of global tax audit activity; the effectiveness of Mosaic’s processes for managing its strategic priorities; adverse weather conditions affecting operations in Central Florida, the Mississippi River basin, the Gulf Coast of the United States, Canada or Brazil, and including potential hurricanes, excess heat, cold, snow, rainfall or drought; actual costs of various items differing from management’s current estimates, including, among others, asset retirement, environmental remediation, reclamation or other environmental regulation, Canadian resources taxes and royalties, or the costs of the MWSPC; reduction of Mosaic’s available cash and liquidity, and increased leverage, due to its use of cash and/or available debt capacity to fund financial assurance requirements and strategic investments; brine inflows at Mosaic’s potash mines; other accidents and disruptions involving Mosaic’s operations, including potential mine fires, floods, explosions, seismic events, sinkholes or releases of hazardous or volatile chemicals; and risks associated with cyber security, including reputational loss; as well as other risks and uncertainties reported from time to time in The Mosaic Company’s reports filed with the Securities and Exchange Commission. Actual results may differ from those set forth in the forward-looking statements.
Agriculture prices remain elevated on tight S/D;
Robust fertilizer demand persists despite higher prices
Commodity Prices Plant Nutrient Affordability
2018=100
Indexed Daily Close of Front Month Contract Plant Nutrient Price Index / Crop Price Index
225 1.10
Corn Soy Palm Oil Affordability Metric Average 2010-present
1.00
200
Less Affordable
0.90
175
0.80
150
0.70
125
0.60
100 More Affordable
0.50
Source: CME; MDEX Sources: Weekly Price Publications, CME, USDA, AAPFCO, Mosaic
75 0.40
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 10 11 12 13 14 15 16 17 18 19 20 21
Commodity Current Price YTD Y-o-Y Corn/bean prices have slipped from their peaks while fertilizer
Corn $5.58/bu +15% +77% prices have continued to rise, swinging the affordability index
Soybean $14.34/bu +9% +61% above average recently (but at a level that historically has not
resulted in meaningful demand destruction).
Palm Oil MYR4,673/t +18% +71%
Data through July 29, 2021 Data through July 29, 2021 3
Strong demand combined with supply disruptions
have accelerated positive pricing momentum in Q2
$ per tonne Global DAP/MAP Benchmark Prices $ per tonne Published MOP Prices
Published Spot Prices
800 800
Source: Argus; Green Markets Source: Argus; Green Markets
700 700
DAP fob NOLA DAP c&f India
c&f SE Asia delivered Corn Belt c&f Brazil
MAP fob NOLA MAP c&f Brazil
600 600
500 500
400 400
300 300
200 200
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Phosphate prices in 2021: Potash prices in 2021:
• NOLA DAP + $240 / tonne; MAP + $234 / tonne • Brazil + $430 / tonne
• Brazil MAP + $335 / tonne • U.S. Midwest + $303 / tonne
• India DAP + $259 / tonne • SE Asia + $215 / tonne
*weekly average reported spot pricing for prompt delivery
Data through July 29, 2021 4Phosphate: Industry margins resumed their ascent
in Q2
$ per Tonne
High-Analysis Phosphate Global Net Price
Calculated from Published Weekly Spot Prices
500
• Phosphate industry margins –
450
using the global net price as a
proxy – slid early in Q2 as fertilizer
400 prices stalled and raw material
prices rose.
350 • Fertilizer prices then moved higher
on strong seasonal demand and
300 large/early summer fill interest.
• Most of this rise in phosphate
250 prices passed through to higher
benchmark margins due to raw
200 material benchmarks rising at a
slower pace.
Source: Argus, Mosaic
150
Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21
Data through July 29, 2021
Global net price averages several global price benchmarks for finished phosphates and raw materials. It does not include any
handling, storage, transportation or conversion costs. 5Raw material prices up sharply y-o-y, but relief
expected in H2 2021 on increased supply
Ammonia Weekly Raw Materials Prices Sulphur U.S. Gulf Coast Utilization of Refinery
Percent
$/MT c&f Tampa $/LT Operable Capacity
800 200 110
Average (2015-2019)
Ammonia Sulphur 100
600 150 90
80
Covid-19
400 100 70
Hurricane
60 Harvey
200 50 50
Deep Freeze
40
Source: EIA
Source: Argus
0 0 30
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan '15 Jan '16 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21
• Sulphur price (Q3) up $138/LT or 239% y-o-y • Lower demand for fuels during the height of COVID-19,
then the havoc caused by cold Q1 weather, pushed
• Ammonia price (August) up $420/MT or 205% y-o-y
refinery rates (and hence sulphur production) lower in
• Raw material prices are expected to moderate later in 2020 and H1 2021, but has rebounded to ~92%
the year on increased supply utilization, its pre-COVID average.
Data through July 29, 2021 Data through July 23, 2021 62021 H1 Regional Phosphate Roundup
U.S. H1 Imports China H1 Exports
Mil Tonnes DAP/MAP/NPS/TSP Mil Tonnes DAP/MAP/TSP
2.5 7.0 Strong incentives
2.1 5.9
U.S. imports from 6.0 boosted exports from
2.0 4.7
1.6 offshore sources 5.0 Chinese ports
1.4 3.8
1.5 continued to trend 4.0 (particularly strong in
1.0 higher in Q2. H1 3.0 May/June). H1 exports
imports were up 53% 2.0 were up 55% or almost
0.5
or over 720kt y-o-y. 1.0 2.1mmt y-o-y.
0.0 0.0
2019 2020 2021 2019 2020 2021
India H1 Imports Brazil H1 Imports
Mil Tonnes DAP Mil Tonnes DAP/MAP/NPS/TSP
3.5 Indian DAP imports 5.0 Imports already reached
3.0
2.9
picked up in Q2 thanks
4.1 a record high level in H1
4.0 3.6
2.5 2.2 to sizable shipments 3.1
before heading into the
2.0 1.6 from Saudi Arabia and 3.0 peak import season.
1.5 China. However, H1 Brazilian phosphate
2.0
1.0 arrivals still lagged imports were up 489kt or
0.5 24% or 526kt y-o-y.
1.0 14% y-o-y.
0.0 0.0
2019 2020 2021 2019 2020 2021
Source: FAI, India Department of Fertilizer, Genscape, China Customs, Siaesp, Mosaic
7U.S. phosphate fertilizer imports surge in H1 on strong
on farm demand (i.e. without a channel inventory build)
Mil Tonnes U.S. Offshore Phosphate Imports
(DAP/MAP/NPS/TSP)
1.2 • Trade flows continued to
adjust in H1 2021.
Other
1.0 • Strong demand in the U.S.
Lithuania attracted products from a
0.8 Jordan
more diversified supply
base.
Mexico
0.6 • On the basis of the strong
Saudi demand and low channel
inventories to start the year,
0.4 Israel imports are estimated to be
over 50% higher y-o-y
Russia
0.2 through H1.
Morocco • Our estimates of channel
0.0 inventories continue to point
Q1 Q2 Q3 Q4 Q1 Q2 towards below average
2020 2021
Source: Genscape; market publications, Mosaic
levels.
• Includes small volumes from Morocco for bonded shipment to Canada via the U.S.
• Other origins include Australia, Egypt, Lebanon, Senegal, Tunisia.
8Global Phosphate Demand
Mil Tonnes Global Phosphate Shipments YoY Changes of Phosphate Shipments
DAP/MAP/NPS/TSP (Mil Tonnes DAP/MAP/NPs/TSP)
80 77 - 79
4.5
China
75 76 3.5 1.0
74 India
73 72
70 0.2 0.2
71 2.5 0.1 0.3
70 70 Other Asia
1.2
67 67 1.2
65 66 1.5
Brazil
0.7 0.0
0.1
60 61 0.5 0.6 0.9
Other L Amer
0.0
-0.5 -0.7
55 Europe+FSU
50 -1.5 North America
10 11 12 13 14 15 16 17 18 19 20 21F 2020 2021F
* NPS products included in this analysis are those with a combined N and P2O5 nutrient content of 45 units or greater.
• After global shipments grew by over 5% y-o-y in 2020, we continue to expect more modest demand growth
of nearly 3% in 2021.
• Tight supplies from the producer level through the distribution pipeline continue and are expected to keep
the market snug.
9Global Phosphate Shipment Forecasts by Region
August 2021
DAP/MAP/NPS*/TSP Low High Source: IFA, CRU and Mosaic
2019 2020E Comments (regional figures may not sum to total due to rounding)
Mil Tonnes 2021F 2021F
We continue to expect domestic phosphate shipments to grow modestly in 2021 in the face of positive ag fundamentals and strong incentives to
boost yields. CPFIA reported DAP/MAP production was up 17% from last year’s COVID-impacted level (through May), allowing an opportunity
for increased exports, which also rebounded on the strength of global demand and significantly higher prices. H1 exports of 5.9mmt were up
China 17.8 18.8 18.9 19.2 55% y-o-y. Tight supply domestically prompted some producers to voluntarily restrict exports to ensure domestic supply (and more formal
restrictions are possible, though we have assumed none in our forecast). We believe exports will scale back substantially in H2 despite high
production levels being maintained, high international prices and strong demand, though due to the strength of H1 volumes we have lifted our
full-year export forecast to 9.6-10.0mmt (vs 9.3mmt in 2020). There is downside risk to those volumes if formal export restrictions are imposed.
India phosphate shipments are forecast to drop 7% in 2021, with H1 DAP sales and imports down 13% and 24% y-o-y, respectively. Shipments
are being constrained by available international supply to what is one of the lowest netback markets, as well as importer economics that are
loss-making without an adjustment to MRP and/or subsidy levels. While domestic DAP fabrication is expected to ramp-up during H2, we remain
India 11.2 11.5 10.5 10.8 cautious about the nation’s ability to secure all of their desired imports (~2.5mmt in Q3) due to tight international supply. Regarding farmer
demand, fertilizer sales picked-up in June and are expected ramp up with more rainfall in the forecast and accelerated sowing for the Kharif
crop (which was several percentage points below average through July). Channel inventories are expected to stay low throughout 2021.
Favorable weather patterns in the region and strong farmer economics support demand growth this year, and preliminary trade data shows
multiple importing nations (Thailand, Philippines, etc.) in the region registered double-digit import growth y-o-y through May. Pakistan imports
Other Asia/Oceania 9.4 9.5 9.7 10.0 could reach ~1.6mmt by the end of the year. We have assumed a slowdown in total regional imports from the strong H1 pace, believing that
prevailing prices may cause some deferral into 2022. Also impacting our 2021 forecast was a rebasing of 2020 shipments lower.
The expectation of typical fall demand in Europe coupled with steady expansion in the FSU should support some growth in the region. Rapid
Europe and FSU 6.6 7.2 7.2 7.4 increases of fertilizer prices may lead to some cautious H2 buying in Europe, offsetting some of the strong pace seen earlier this year, while
Russian shipment growth seems more secure given steps taken to ensure supply and stabilize prices.
Our forecast of total phosphate shipments in Brazil has been revised higher and now shows volume surging to nearly 11mmt this year.
Phosphate imports were up 14% or almost 0.5mmt in H1, and record-high imports are expected to arrive in Brazil in Q3 in the face of strong
Brazil 8.4 9.6 10.7 11.0 demand and slow domestic production. While some market participants have shown concerns on huge import arrivals due to potential logistical
constraints, the nation needs to step up with imports to prevent stocks from dropping to dangerously low levels in H2.
We expect demand to remain broadly flat in 2021. Ag fundamentals remain solid, but we remain cautious on buyer appetites in H2 in the face of
Other Latin America 4.1 4.8 4.7 4.9 higher import prices.
Strong ag commodity prices and high planted acreage had driven on-farm demand sharply higher during spring (after following a strong fall).
Imports in H1 surged over 50% y-o-y as wholesalers/retailers looked to source products from a wider range of origins to serve the strong
North America 9.6 9.6 10.3 10.6 demand. Big shipments into North America (from imports and domestic suppliers) do not appear to be replenishing channel inventories given
the strong demand pull. We continue to project the market to range 10.3-10.6mmt this year (only the 2nd year on record to exceed 10mmt).
Other 5.0 5.0 5.0 5.2 We remain optimistic that demand could post modest gains in 2021, though we have trimmed our forecast based on affordability concerns.
We continue to expect global shipments to increase nearly 3% (~2mmt) to 78.0mmt and maintain our forecast range of 77-79mmt. Depleted
Total 72.1 75.9 77.0 79.0 producer and channel inventories are expected to keep the market tight in 2021, which bodes well for shipment expectations in 2022.
* NPS products included in this analysis are NP and NPS products with a combined N and P2O5 nutrient content of 45 units or greater. 102021F Major Phosphate Market Demand Summary
North America China
Mil Tonnes DAP/MAP/NPS/TSP Mil Tonnes DAP/MAP/NPS/TSP
12 20
Strong on-farm demand We estimated phosphate
10 18.8 19.0
10.5 and low channel 15
17.8 shipments to increase
9.6 9.6
8 inventories have resulted ~1.0mmt last year. Demand
6 in a surge of imports this 10 in China is expected to inch
4 year. Total North higher this year in the face
2
America shipments are 5 of good farmer economics.
forecast to grow almost
0 0
19 20 21F
10% in 2021. 19 20 21F
India Brazil
Mil Tonnes DAP/MAP/NPS/TSP
Supportive MSPs and Mil Tonnes DAP/MAP/NPS/TSP
After a 14% surge in 2020,
12 12
prospects of a normal very strong ag fundamentals
11.2 11.5
10 10.7 monsoon support demand 10 10.8 are forecast to drive Brazil
8 in India, but lower supply 9.6 phosphate fertilizer
8
8.4
6 availability is forecast to 6 shipments up another 13%
4 drag total shipments down in 2021. Phosphate imports
4
by ~7% from last year’s are forecast to jump 16%
2 2
relatively high level. this year.
0 0
19 20 21F 19 20 21F
11
Source: CRU and MosaicPhosphate S/D: We continue to anticipate a more
balanced (though still tightening) market in 2021
Phosphate Supply / Demand Forecast
(Incremental Y-o-Y Change)
Mil Tonnes DAP/MAP/NPS/TSP 2020E 2021F Comments
Projected Shipment Changes 3.80 2.14 Moderate demand growth forecast, as higher prices may curb strong growth seen in
2020 (through a depleted channel will act as an offset)
Percent Change 5.3% 2.8%
Potential Supply Changes 0.17 1.89
Base Case China Export Change -0.81 0.54 Strong incentives attract higher export volume in 2021.
OCP Line F Ramp-Up and Debottlenecking 1.50 0.05 Commissioning likely delayed to end-'21; Line F reachees full capacity end-'22.
MWSPC Ramp-Up -0.11 0.34 Production recovers to ~2.4mmt DAP-equivalent after setback in 2020.
GCT M'dilla Commissioning / Ramp-up 0.00 0.09 Reports of higher downstream output this year, but labor unrest remains an issue.
Turkey/Egypt Greenfields 0.27 0.18 We assume both projects achieve full utilization in 2021.
Russian Expansions 0.00 0.15 Incremental volumes from PhosAgro Volkhov.
Other Ramp-Ups / Closures -0.13 0.09 NTR Redwater resid. ('20); CIL-India expansion ('20/21); Philphos restart ('21).
Misc. Known Operational Changes 0.55 -0.35 e.g. IPL-Australia rebound ('20); Misc outages in H1 '21 (U.S./S. Africa/Tunisia).
COVID-19 Curtailments '20 / Recovery '21 -1.10 0.80 Production recovery of ~2/3's of volume lost in 2020.
S/D Surplus (+) / Deficit (-) -3.63 -0.25
Source: Mosaic
The large “deficit” in 2020 was offset by a Closer to balance in 2021, but still a deficit,
correspondingly large drawdown in producer despite assuming demand growth roughly halves
inventories (to historically low levels); channel and production jumps ~1.7mmt y-o-y; note that
inventories were also pulled lower (though not these estimates necessarily do not allow for
addressed in the above analysis). inventory restocking (producer or channel).
12Phosphate: Inventories at both producer and channel
levels significantly lower y-o-y
Mil Tonnes India DAP Inventory Mil Tonnes China DAP/MAP Producers Inventory
7.0 3.5
Trade Company MAP DAP Source: CPFIA
6.0 3.0
5.0 2.5
4.0 2.0
3.0 1.5
2.0 1.0
1.0 0.5
0.0 0.0
Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
Channel Inventory: India inventory figures provide a proxy Producer Inventory: China producers inventory figures
for how global channel inventories have evolved: provide a proxy for how global producer inventories have
• Trade inventories in late-July of 1.3mmt are 45% lower evolved:
y-o-y. • Inventory as of the end of May of 1.3mmt were 13% or
• Company inventories in late-July of 1.1mmt are 36% 0.2mmt lower y-o-y.
lower y-o-y.
• Total inventories in late-July are 1.7mmt lower y-o-y.
Source: India Department of Fertilizer and CPFIA
13Brazil Phosphates
Mil Tonnes Brazil Phosphate Imports Mil Tonnes Brazil Phosphate Imports
(DAP/MAP/TSP/NPS)
3.5 10 9.2 – 9.5
9
3.0 2021 H1 14% or
489kt y-o-y 8
2.5 2020 4% or 7
43 kt y-o-y
2.0 6
5
1.5 4
1.0 3
2019: 6.8
2 2020: 8.0
0.5
1 2021F: 9.3
0.0 0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=6.8mmt 2020=8mmt 2021=9.3mmt DAP TSP MAP/NPS Forecast Range
• Market sentiment is positive and farm economics for most nutrient-intensive crops remain healthy in Brazil. The consensus view
points to another record-breaking year with total fertilizer shipments exceeding 43mmt (up from 40.6mmt in 2020).
• Estimated in-country phosphate inventories at end-June were below 1.6mmt, down 23% or 480kt y-o-y.
• Our team in Brazil revised their import expectation higher for the second-half of the year citing significant additional volume
needed to prevent stocks from dropping to dangerously low levels.
Source: ANDA, Siacesp, Mosaic
14India DAP
Mil Tonnes India DAP Imports Mil Tonnes India DAP Imports
3.0 8.0
2021 H1 24% or 7.0
2.5 526kt y-o-y 5.6 - 6.0
6.0
2.0
5.0
1.5 4.0
3.0
1.0
2.0 2019: 5.6
0.5 2020: 6.3
1.0
2021F: 5.7
0.0 0.0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=5.6mmt 2020=6.3mmt 2021=5.7mmt Actual Forecast Range
• DAP fabrication returned to the 400kt level (first time since December 2019) in June. While DAP output is still down 473kt (or -
23%) y-o-y, we expect the industry to play catch-up and could end the year in the 3.8-4.0mmt range (versus 4.1mmt in 2020).
• Better supply from domestic producers has yet to improve the tight situation in India and DAP inventories remain precariously
low – down 41% y-o-y as of late-July.
• Monsoon revival, after a patchy start, will boost Kharif sowing and fertilizer sales. Product availability remains a critical concern.
• We have trimmed our import forecast modestly due to currently-unworkable importer economics and H1 volumes
being down over 0.5mmt y-o-y.
Source: FAI, India Department of Fertilizer, Mosaic 15China Phosphates
Mil Tonnes China Phosphate Exports Mil Tonnes China Phosphate Exports
5.0 12
9.6 – 10.0
2021 H1 55% or 10
4.0
2.1 MMT y-o-y
8
3.0
6
2.0
4
2019: 10.1
1.0 2020: 9.3
2
2021F: 9.8
0.0 0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=10.1mmt 2020=9.3mmt 2021=9.8mmt TSP MAP DAP Forecast Range
• Phosphate exports ballooned to over 4.0mmt in Q2, boosting total exports to a record-high of 5.9mmt in H1, up 55% y-o-y.
• High export demand, solid domestic buying, improved margins/netbacks and higher capability (in the absence of COVID-19
interruptions in 2020) stimulated a supply response. CPFIA reported DAP/MAP production were up 17% y-o-y through May
although monthly output has been trending slightly downward to below 2.3mmt per month (due to scheduled maintenance)
versus over 2.4mmt per month in Q1.
• We expect exports to scale back significantly in Q3 (and Q4) as priority is given to domestic requirements. Shipments to port
(and port stocks) have been reported to be shrinking. We have not assumed that strict, formal export restrictions will be
imposed (e.g. via an export tax and/or export window), though this remains a possibility.
Source: China Customs and Mosaic
16Phosphate Outlook: Even a modest demand growth
forecast is expected to offset new supply
Mil Tonnes Global Phosphate Shipments Utilization
DAP/MAP/NPS/TSP
85 97%
80 91%
75 85%
• We expect an increase in 2021
70 79% capacity utilization and expect the
industry to hold relatively stable at
65 73% this historically elevated rate unless
additional new projects are
60 67%
announced/commissioned later in
55 61% the forecast period.
~2.2% CAGR ~1.7% CAGR
50 55%
10 11 12 13 14 15 16 17 18 19 20 21F 22F 23F 24F 25F
Actual/Estimates Mosaic Forecast Ranges
CRU - April 2021 Capacity Utilization
Source: IFA, CRU and Mosaic
* NPS products included in this analysis are those with a combined N and P2O5 nutrient content of 45 units or greater.
17Potash: Prices surged quickly at the end of Q2 in
response to a sharp tightening of market conditions
$ per tonne Published MOP Prices
700
650
Source: Argus; Green Markets • Cornbelt granular prices are
600 already up over $300/mt since
550 January 2021.
500 • The tight market situation in Brazil
had pushed prices up to the $670-
450
$680 range in July, the highest level
400 in 12 years.
350 • Prices in SE Asia rose rapidly to
over $450/mt and products sold to
300
small markets have recently been
250 priced at even higher levels.
200
Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
c&f SE Asia delivered Corn Belt c&f Brazil
*weekly average reported spot pricing for prompt delivery
Data July 29, 2021
182021 H1 Regional Potash Roundup
U.S. H1 Imports China H1 Imports
Mil Tonnes KCl (offshore) Mil Tonnes KCl
1.8 1.6 6.0 5.5 Monthly China MOP
U.S. offshore imports
1.5 5.0 4.6 arrivals have continued
nearly reached last 3.9 to decline after peaking
1.2 1.0 year’s annual level in 4.0
0.8 in March. Nonetheless,
0.9 H1 2021. H1 imports 3.0
H1 imports were up
0.6 jumped 91% or over 2.0
18% or 700kt y-o-y
760kt from a year ago
0.3 1.0 from last year’s low
on very strong demand.
0.0 0.0 level.
2019 2020 2021 2019 2020 2021
India H1 Imports Brazil H1 Imports
Mil Tonnes KCl Mil Tonnes KCl
3.0 6.0
2.4
Despite a meaningful 5.1 The pace of Brazilian
2.5 4.7
2.0
jump to almost 400kt in 5.0 4.6 MOP imports remained
2.0 1.6 June, Indian imports 4.0 relatively high in Q2. H1
1.5 during the first half of 3.0 imports exceeded 5Mt
1.0 the year were down a 2.0
and were up almost 9%
whopping 17% or 346kt or 405kt y-o-y.
0.5 1.0
y-o-y.
0.0 0.0
2019 2020 2021 2019 2020 2021
Source: FAI, India Department of Fertilizer, Genscape, China Customs, Siaesp, TDM, Mosaic
19U.S. H1 MOP imports were just slightly below the full
year levels seen in the prior two years
Mil Tonnes U.S. Offshore MOP Imports
1.2
1.0 • Very large spring demand
Other
and depleted inventories to
0.8 Germany start the year has
Israel prompted strong H1 import
0.6 Belarus demand.
Russia • Uncertainty around
0.4 sanctions on Belarus may
motivate importers to
0.2
secure more product from
other sources.
0.0
Q1 Q2 Q3 Q4 Q1 Q2
2020 2021
Source: Genscape; USDOC, Mosaic
• Other includes Jordan
20Global Potash Demand
Mil Tonnes Global MOP Shipments YoY Changes of MOP Shipments
KCl (Mil Tonnes KCl)
75 7.0
69 - 71 6.0 China
70 0.7
5.0 India
69 1.1
67 4.0 0.3
65 67
Indonesia+
64 3.0 1.4 0.9
63 Malaysia
60 62 2.0 0.7 Latin America
61 1.2
1.0 0.9
0.6 0.3
55 56 0.5 0.5 North America
0.0
53 53 -1.2
-1.0 Europe+FSU
50 51
-2.0 -1.0
Other
45 -3.0
10 11 12 13 14 15 16 17 18 19 20 21F 2020 2021F
Source: IFA, CRU, TFI and Mosaic
• After growing by 9% y-o-y (nearly 6mmt) in 2020, the anticipated moderation of demand growth in 2021
appears to be occurring, though this is also partly a function of limited supply availability.
• We maintain a narrowed forecast range for global MOP shipments in 2021 of 69-71mmt, with upward revisions
in North America and SE Asia offsetting a more cautious stance on China and India.
21Global Potash Shipment Forecasts by Region
August 2021
Muriate of Potash Low High Source: IFA, CRU and Mosaic
2019 2020 Comments (numbers may not sum to total due to rounding)
Mil Tonnes KCl 2021F 2021F
Strong ag commodity prices have boosted on farm demand, while the combination of tight supply and healthy demand continued to drive ex-
port prices higher in China. MOP imports were up 18% y-o-y (from last year’s low level) and port inventories declined to ~2.3mmt by late-July.
China 15.8 16.4 15.2 15.6 As imports are forecast to potentially drop below 8.0mmt this year due to insufficient supplier participation at the relatively low contract price
agreed early in the year, we expect port inventories to draw down to quite low levels in H2, likely spurring an early negotiation for 2022
volumes at a significantly higher contract pricing level.
We continue to expect a sizable drop of MOP imports in India this year and vessel arrivals were already down 17% during H1. It is estimated
that India will need to import 1.3mmt in Q3 to meet seasonal demand, but availability remains a challenge, particularly at the current contract
India 4.0 5.1 3.8 4.1 price. Monsoon revival, after a patchy start, has renewed sentiment for the Kharif season. MOP channel inventories continued to decline and
were down 19% from a year-ago through late-July. We expect stocks to end the calendar year at a multi-year low.
Preliminary trade data show that MOP imports in Indonesia and Malaysia were up over 20% y-o-y through May. CPO prices remained volatile,
but at very high levels as production increases were smaller than expected and demand for both domestic and export markets stayed healthy.
Indonesia & Malaysia 3.9 4.1 4.9 5.1 We are cautiously optimistic that COVID-related travel restrictions will not have significant impacts on labor and product movements in 2H of
the year and have revised our forecast higher.
Supportive ag fundamentals and favorable weather resulted in healthy import demand, particularly in major rice-growing markets. We expect
Other Asia 4.3 4.7 5.0 5.3 broad-based demand growth in the region (South and other Southeast Asia) to a level similar to the previous record of over 5.1mmt.
Our forecast for West Europe is unchanged, with modest growth expected in 2021. Untimely rains and mild temperatures had hampered the
W. Europe 4.6 4.9 4.9 5.1 spring planting season, while industrial demand is overshadowed by the supply concerns resulting from the EU’s sanctions against Belarus.
E. Europe & FSU 5.7 5.9 6.1 6.3 Our view has not changed – we expect modest demand growth in the region.
Brazil remains the brightest spot in the global potash market. Total fertilizer shipments are now forecast to surge to a record of over 43mmt in
Brazil 10.5 11.3 11.9 12.2 2021, supported by favorable farmer economics, particularly on nutrient-intensive crops like soybean, corn and sugarcane. Potash purchases
have advanced quickly as H1 MOP imports were up almost 9% y-o-y and a very strong vessel lineup is projected for Q3.
We maintain our 2021 forecast for flat to slightly higher shipments on solid ag fundamentals, offset by higher prices potentially curbing marginal
Other L. America 2.5 3.1 3.1 3.3 demand. Preliminary trade statistics reinforce this thesis.
North America offshore imports surged to ~1.6mmt in H1 of 2021, a jump of ~91% y-o-y. Strong shipments by both domestic producers and
offshore suppliers prompted us to revise up our North America shipments forecast yet again – to over 11mmt this year (which would be the 2nd
North America 9.2 10.3 10.9 11.2 highest shipments on record). The next few weeks will be critical for assessing shipments prospects in Q4 as product movement at the
retailer/farmer levels will determine the need to replenish channel inventories after the Fall season.
Farmer economics are also positive in Australia and grain production there is set for a second consecutive large harvest (after two years of
Other 2.8 2.9 3.0 3.2 drought). Demand in the Middle East and Africa are expected to stay relatively flat as high fertilizer prices (across N, P & K) may limit upside.
We continue to expect global shipments to increase at a more modest 1.5% in 2021, though this is more so a function of a lack of available
Total 63.3 69.0 69.0 71.4 supplies than a signal of weak demand. We forecast demand to range between 69-71mmt this year and that pipeline inventories in several key
22
geographies will end 2021 lower than a year ago.2021F Major Potash Market Summary
North America Brazil
Mil Tonnes KCl Mil Tonnes KCl
14 Elevated offshore 14 Strong fundamentals
12 imports were 12 continue to fuel ag
10 11.2 supported by strong 10 11.3
12.0 expansions in Brazil.
10.3 10.5
8 9.2 on-farm demand in 8 We continue to expect
6 North America. Total 6 another step-up of MOP
4 MOP shipments could 4 shipments to circa
2 exceed 11.0mmt this 2 12.0mmt in 2021.
0 year. 0
19 20 21F 19 20 21F
India Malaysia and Indonesia
Mil Tonnes KCl Mil Tonnes KCl
6.0 Growing concerns of 6.0
Favorable weather and
supply availability
Malaysia Indonesia
elevated CPO prices
5.1 remains a significant 3.3 underpin strong potash
4.0
4.0 risk factor in India.
4.0
2.9 demand in Malaysia
3.9 2.8
Imports are forecast to and Indonesia. Total
2.0 drop to 3.9mmt and 2.0 MOP imports are
India will likely end the forecast to recover to
1.7
year with minimal 1.1 1.2 over 5.0mmt in 2021.
0.0 0.0
19 20 21F channel inventories. 19 20 21F
Source: CRU and Mosaic
23Supply struggles appear to be the main limiting factor
to 2021 shipment growth
Projected MOP Supply/Demand Changes
Mil Tonnes KCl 2020 2021F Comments
Projected Shipment Changes 5.73 1.01 Moderate demand growth forecast after big upturn in 2020.
Percent Change 9.1% 1.5%
Projected Supply Changes 3.99 0.84
SQM Production Adjustments 0.22 0.10 Incremental increases in 2020 and 2021 (less likely in 2022).
K+S Bethune Ramp-Up 0.33 0.10 Pond production to slowly ramp up.
Eurochem Usolskiy Ramp-Up 1.08 0.03 Phase 1 capacity: 2.3mmt in '20; Phase 1.1 capacity: 0.5mmt ramping from
Eurochem Volgakaliy Ramp-Up 0.04 0.04 Limited test production in '20-'21; Phase 1 capacity of 2.3mmt achieved in
Uralkali Production / Ramp-Ups 0.20 0.10 Incremental increases from existing sites and S-3 expansion.
Ramp-up of 1.5mmt mine (first trial MOP production in August '20), but ramp
Belaruskali Petrikovsky 0.15 0.45
up seems precarious in current environment.
Other Changes 0.54 0.03 Includes ramp-up at ICL Dead Sea/Suria in '20/21; lower output from QSL.
Currently assumes reduced MOS production from early closure of K1/K2 is
Other Existing Utilization 1.43 0.00 offset by increased production at NTR Vanscoy.
S/D Surplus (+) / Deficit (-) -1.74 -0.17
The large “deficit” in 2020 was offset by The “deficit” projected in 2021 will need
drawdowns of producer inventories; to be covered by continued strong
channel inventories were also believed supply response from existing
to kept circa average levels. producers.
24Potash: China and India inventories continue to fall
Mil Tonnes China Weekly MOP Port Inventory Mil Tonnes India Month-end MOP Inventory
5.0 3.0
Min/Max Range (16-20) 2021 2020 2019
Trade Company
4.0
2.0
3.0
2.0
1.0
1.0
0.0 0.0
Jan Feb Mar Apr May Jul Aug Sep Oct Nov Dec Mar-19 Sep-19 Mar-20 Sep-20 Mar-21
Port Inventory: China MOP port inventories fell to roughly Channel Inventory: total inventories in India slipped below
2.3mmt in late-July, down 35% or 1.2mmt y-o-y. 1.3mmt in late-July, down 23% or 368kt y-o-y.
Source: India Department of Fertilizer, Mosaic China
25Brazil Potash
Mil Tonnes Brazil MOP Imports Mil Tonnes Brazil MOP Imports
11.3 – 11.6
4.0 12
2021 H1 9% or
405kt y-o-y 10
3.0
8
2.0 6
4
1.0 2019: 10.2
2 2020: 10.9
2021F: 11.4
0.0 0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=10.2mmt 2020=10.9mmt 2021=11.4mmt Actual Forecast Range
• Demand prospects in Brazil remain very positive and MOP shipments are expected to rise to a record of over 12.0mmt in
2021.
• Brazilian H1 MOP imports reached a record high of 5.1mmt.
• With imports reaching their typical seasonal peak in Q3 (much of the volume is already committed), we project total imports
to top 11.4mmt, up another 4% y-o-y from the record level of 10.9mmt in 2020.
Source: ANDA, Siacep and Mosaic
26India Potash
Mil Tonnes India MOP Imports Mil Tonnes India MOP Imports
2.0 6.0
2021 H1 17% or
346kt y-o-y
5.0
1.5 3.8 – 4.1
4.0
1.0 3.0
2.0
2019: 4.1
0.5
2020: 5.1
1.0 2021F: 3.9
0.0 0.0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=4.1mmt 2020=5.1mmt 2021=3.9mmt Actual Forecast Range
• Extremely slow imports in Q2 drag channel stocks down another ~440kt to 1.2mmt by late July (vs 1.7mmt end-March).
• The India contract price ($280/t announced in April) does not provide enough incentive to key international producers to
significantly increase supply, while healthy demand and higher netbacks elsewhere are attracting more supplier attention.
• Even with a decent recovery in H2, we expect total imports to fall to circa 3.9mmt, leaving the country with very low carryout
stocks by year-end.
Source: FAI, India Department of Fertilizer, Mosaic
27China Potash
Mil Tonnes China MOP Imports Mil Tonnes China MOP Imports
3.5 10
2021 H1 18% or
700kt y-o-y 7.8 – 8.2
3.0
8
2.5
2.0 6
1.5 4
1.0 2019: 9.1
2 2020: 8.8
0.5 2021F: 8.0
0.0 0
Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F
2019=9.1mmt 2020=8.8mmt 2021=8mmt Actual Forecast Range
• MOP imports exceeded expectations in H1 and were up 18% y-o-y. However, solid in-country demand continued to push port
inventories lower through late July (dropping ~700kt since the beginning of January or down ~35% y-o-y).
• Firm demand and tight supply (from domestic and offshore suppliers) resulted in sharp price increases recently.
• Low imports are expected to push port inventories lower through the rest of the year.
Source: China Customs and Mosaic
28Potash Outlook: New supply expected to slightly trail
demand, leading to higher industry operating rates
Mil Tonnes Global MOP Shipments Utilization
KCl
85 100%
• We have not changed our medium-term
80 95% view.
75
90%
• We continued to expect a gradual,
modest increase in global capacity
70
85% utilization over the next couple of years
65 based on steady demand growth rates
80% and continued ramp-up of existing
60 brownfield and greenfield projects.
75%
55 • Other new greenfield projects (Talitsky
~2.6% CAGR ~2.2% CAGR and potentially Jansen) may only offer
50 70%
meaningful tonnage well beyond 2025.
45 65%
10 11 12 13 14 15 16 17 18 19 20 21F 22F 23F 24F 25F
Actual/Estimates Mosaic Forecast Ranges
CRU - February 2021 Capacity Utilization
Source: IFA, CRU and Mosaic
29Strong economic rebound from COVID-low and tight
ag fundamentals
World G&O Demand vs. World Real GDP
% Mil Tonnes World Less China Grain and Oilseed Stocks Percent
(y-o-y % change)
8.0 475 23%
Source: USDA
450 22%
6.0 425 21%
400 20%
4.0
375 19%
350 18%
2.0
325 17%
0.0
300 16%
275 15%
-2.0 250 14%
Source: USDA; World Bank (June 2021 forecast); Mosaic 225 13%
-4.0 200 12%
00 02 04 06 08 10 12 14 16 18 20E 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
World GDP Growth (%) World G&O Demand Growth (%) Stocks Percent of Use
• Global G&O balance sheets are snug – S:U ratio dropping to 15.2% in 2020/21 (below that seen in 2007/08).
• USDA’s forecast calls for the stocks-to-use ratio remaining low in 2021/22, even in the face of a projected ~4% jump in global
harvest.
• But remember, with today’s technology, a season or two of conducive weather plus higher acreage and better input
management can swing S:U quickly (as happened in 2008/09).
30China’s record-breaking imports across a wide range
of ag commodities continues to drive ag markets
Mil Tonnes China Corn Imports China Ag Commodity Imports
(cumulative) 2015: 4.7 Chg (%) 2021 H1 YTD Y-o-Y Changes
20 2016: 3.2 400%
y-o-y change 2017: 2.8
2018: 3.5 Corn
16 300% 319%
319% 2019: 4.8
2020: 11.3
Barley
12 323% 200%
131%
Pork
8 301% 100%
438% Poultry 8% Wheat
3% 67%
414% Soybean
4 0% Beef
356% 9%
14%
0 -100%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
10-yr Range 2020 2021 Chg (mil tonnes)
Source: China Customs
• China’s May/June corn imports averaged over 3.3mmt, pushing the H1 total to a record 15.3mmt (+319% y-o-y).
• China’s soybean imports slowed slightly in Q2, but H1 imports still set a record at almost 49mmt (+9% y-o-y).
• Major meat imports (Pork + Beef + Poultry) also grew at a slower pace in Q2, but H1 totals were still up 9% y-o-y.
31USDA: China needs more corn and soybeans
Mil Tonnes China Cumulative Corn Imports Mil Tonnes China Cumulative Soybean Imports
(Marketing Year ending September) (Marketing Year ending September) 98.0mmt
30 100
26.0mmt
2019/20 90 2019/20
25
80
2020/21 2020/21
20 70
USDA July Fcst USDA July Fcst
60
15 50
40
10
30
5 20
10
0 0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Source: China Customs and USDA
• Despite recent market nervousness around a slowdown in Chinese corn purchasing, we believe this is just a pause.
• High domestic corn prices and a tight S/D are stimulating a supply response. Corn planting is expected to increase by over
1 million hectares and USDA forecasts Chinese corn harvest to increase by over 7mmt to 268mmt in 2021/22 (but the risk to
that forecast seems asymmetric to the downside given recent weather headwinds (e.g. flooding).
• Given the estimated demand and projected supply-demand imbalance in China, the USDA expects Chinese corn and
soybean imports to remain at very high levels during the 2021/22 crop year (corn: 26mmt; soybeans: 102mmt).
32U.S. corn demand supported by recovering ethanol
grind and elevated export demand
Mil Gallons
U.S. Weekly Fuel Ethanol Mil Gal/Day Bil Bu U.S. Corn Use Source: USDA
Stocks Production 2017-19 Avg Feed & Residual Ethanol Other FSI Exports
1,200 50 18
1,100 45 15
2.4 2.1 2.8 2.5
1.8
1,000 40 12 1.5 1.4 1.4 1.4 1.4
900 35 9
5.6 5.4 4.9 5.1 5.2
800 30 6
700 25 3 5.3 5.4 5.9 5.7 5.7
Source: EIA
600 20 0
Jan '15 Jan '16 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21 17/18 18/19 19/20 20/21F 21/22F
Data through July 23, 2021
• Ethanol production has recently recovered to near its pre-COVID level.
• USDA projects ethanol grind to rebound to 5.05 bbu in 20/21 and 5.20 bbu in 21/22, but many analysts believe their forecast to be light.
• U.S. corn use is now expected to rebound to a record high of over 15.0 bbu by the end of this crop year. We see strong export demand
(upside risk to latest USDA expectation) to continue into the 21/22 crop year and could keep corn use at a similar level next year.
• U.S. corn stocks-to-use ratio is forecast to drop to 7.2% in 2020/21, the lowest since 1995/96.
33Farm economics are robust on a global basis
$/bu U.S. and China Corn Price $/bu Ringgits/MT Malaysian Palm Oil
Daily Close of Front Month Contract Daily Close of Front Month Contract
8.00 12.00 5,500
CME - USA (left axis)
7.00
DCE - China (right axis) 10.00 4,500
6.00
5.00 8.00 3,500
4.00
6.00 2,500
3.00
Source: CME; DCE Source: CRB
2.00 4.00 1,500
Jan '17 Jan '18 Jan '19 Jan '20 Jan '21 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21
India MSP Rates for Key Crops Reais/Bu
Brazil Soybean Prices USD/Bu
2020/21 % Change Reais/Bu USD/Bu
7% 90 20.0
Source: CEPEA, CRB (FX)
80 17.5
6%
70
5% 15.0
60
4% 12.5
50
Rapeseed &
3%
10.0
Mustard
40
Soybeans
2%
7.5
Cotton
Lentils
Wheat
30
Maize
Rice
1%
20 5.0
0% Jan '17 Jan '18 Jan '19 Jan '20 Jan '21
Source: Government of India; Ministry of Agriculture & Farmers Welfare
Data through July 29, 2021 34Nearby contracts (corn/beans) have retreated, but new
crop prices are still strong
$/bu Corn Price $/bu Soybean Price $/bu Wheat Price
New Crop (Dec' 21 Contract) Nearby New Crop (Nov' 21 Contract) Nearby New Crop (Jul '22 Contract) Nearby
8.0 17 7.5
7.5
16
7.0
7.0
15 Need final update
6.5
6.5
14
6.0
5.5 13 6.0
5.0
12
5.5
4.5
11
4.0
5.0
10
3.5
3.0 9 4.5
Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21
Source: CME
Data through July 29, 2021
35Only rather optimistic acreage and yield scenarios in the
U.S. could rebuild stocks to comfortable levels in 2021
21/22F Scenarios
Mil Acres
U.S. Planted Acreage Corn
10-year
20/21F
Average Higher High Area
2007/08 - 2021/22F USDA
Area Low Yield
100
Planted Acreage
93-94 91.4 90.8 92.7 94.0 94.0
(mil acres)
97.3
95 95.4
Yield (bu/acre) 161.5 172.0 179.5 179.5 175.0
94.0
93.5
90 88-89
91.9
Use (bil bu) 13.5 14.8 14.8 14.9 14.8
90.8
90.6
90.2
90.2
89.7
89.2
88.9 Exports (bil bu) 1.8 2.7 2.5 2.6 2.5
88.2
88.0
85
86.4
86.0
Carryout (bil bu) 1.6 1.1 1.4 1.5 1.3
83.5
83.3
83.1
82.7
80 Stocks-to-use ratio 11.8% 7.2% 9.6% 10.3% 8.6%
21/22F Scenarios
77.5
77.4
75
77.2
10-year
76.8
76.1
Soybean 20/21F
75.7
Higher High Area
75.0
Average USDA
Area Low Yield
70
Planted Acreage
81.1 83.1 87.6 88.5 88.5
(mil acres)
65
Yield (bu/acre) 46.4 50.2 50.8 50.8 49.5
64.7
60 Use (bil bu) 3.7 4.5 4.4 4.4 4.4
‘16-17
‘18-19
‘20-21
‘16-17
‘18-19
‘20-21
’08-09
’10-11
’12-13
’14-15
’08-09
’10-11
’12-13
’14-15
Exports (bil bu) 1.7 2.3 2.1 2.1 2.1
Carryout (mil bu) 318 135 155 238 147
Stocks-to-use ratio 8.3% 3.0% 3.5% 5.4% 3.3%
Source: USDA & Mosaic
Source: USDA & Mosaic
10-year average = average 2010/11 – 2019/20
36U.S. weather watch: Corn/bean condition ratings continue to
struggle; wide disparity between eastern and NW Cornbelt
% U.S. Corn Good to Excellent
85 Week Ending July 25, 2021
76
75 72
68
65 64 64 65
64
65 65
55
Source: USDA
45
May Jun Jul Aug Sep Oct Nov
2021 Previous Year 5 Year Avg
% U.S. Soybean Good to Excellent
85 Week Ending July 25, 2021
75
62
65 67
60 59 59
60 60 58
55
Source: USDA
45
Jun Jul Aug Sep Oct Nov
2021 Previous Year 5 Year Avg
37India weather watch: After a patchy start, monsoon
revival renews sentiment for Kharif
Source: India IMD
Cumulative rainfall thru July 30, 2021
Cumulative actual (thru 7/30): 438.1mm
Cumulative normal (1961-2010 thru 7/30): 443.3mm
Cumulative % departure from normal: -1%
• Uneven rains and long gap between has impacted pace of Kharif
sowing (-4.7% y-o-y as of late-July).
• Widespread precipitation recently had pulled cumulative rainfall so
far this season back to “normal” levels.
• Monsoon recovery is expected to boost sowing and fertilizer sales.
38Positive demand developments overshadow
potential supply recovery in the palm oil market
Mil Tonnes Malaysia Total Palm Oil Stocks Mil Tonnes Indonesia Total Palm Oil Stocks
(Crude Oil and Processed Oil) (Crude Oil and Processed Oil)
3.5 7.0
June 2021 MoM YTD YoY May 2021 MoM YTD YoY 2020 2021
3.0 CPO Output 2% -8% 6.0 CPO Output 6% 3%
PO Stocks 3% -15% PO Stocks -8% -18%
2.5 PO Exports 12% -9% 5.0 PO Exports 12% 8%
Source: IPOA
2.0 4.0
1.5 3.0
-24% -23% -15%
-17%
-25% -23%
1.0 2.0
y-o-y change Source: MPOB
0.5 1.0
Min/Max Range (16-20) 2020 2021
0.0 0.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
• Palm oil (PO) inventories in both Indonesia (thru May) and Malaysia (thru June) remained significantly lower than a year ago as
recent increases in monthly output were not sufficient to rebuild stocks in any meaningful way (Indonesian palm oil stocks actually
trended lower).
• Demand (especially exports) has been healthy and recent policy changes further improve export prospects.
• India removed restrictions on imports of refined palm oils and reduced import taxes.
• Indonesia cutting the ceiling rate for CPO export levies (on July 2).
• Indonesian domestic demand has also picked up - more than offsetting earlier declines in food and biodiesel uses.
39Sugar prices rebound from a 12-year low to a 4-year high;
remain supported by weather-related supply concerns
World Sugar Stocks Sugar
Mil Tonnes $/cwt Daily Close of Front Month Contract
60 20
Source: USDA
50 18
40 16
30 14
20 12
10 10
Source: NYMEX
0 8
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21
Data through July 29, 2021
• Global sugar stocks are forecast to decline again in 2021/22 despite a projected 3% (or 5.7mmt) increase in output worldwide.
• While higher production is expected in the EU, India and Thailand, adverse weather conditions, particularly in Brazil, are negatively
impacting the sugarcane crop as well as crushing levels.
• H1 2021 sugar production in Brazil’s Center-South region was down 14% y-o-y and sugar’s share of the sugarcane crush was also
lower than a year ago.
40Concerns of potential frost damage in Brazil have
also spooked the coffee market
Mil 60kg bags World Coffee Production $/cwt Coffee Prices
Daily Close of Front Month Contract
180 225
Source: USDA
Source: NYMEX
170
200
160
175
150
140 150
130
125
120
100
110
100 75
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21
Data through July 29, 2021
• USDA forecasts global coffee output in 2021/22 to decline 11.0 million bags (60kg bags) y-o-y due primarily to lower production
expectations for Brazil.
• The drop in supply will significantly tighten the S/D and result in a large drop in global inventories (~20% y-o-y), as consumption is
expected to continue to grow post-COVID-lockdowns, particularly in North America and Europe.
41You can also read
