February 2021 - Market Update
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Phosphate: Price rally continues $ per tonne NOLA and Brazil MAP Published Spot Prices 650 600 NOLA prices are up ~$350/mt since the low in May (to a $54/mt premium 550 to Brazil MAP) • Global prices are rising rapidly in the face of healthy demand 500 prospects and tight supply. 450 • U.S. prices shifted to a premium to international benchmarks following 400 the filing of the CVD petition. 350 300 NOLA vs. Brazil MAP 250 average discount in 2019: $19/mt 200 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 MAP fob NOLA MAP c&f Brazil Source: Argus, Green Markets *weekly average reported spot pricing for prompt delivery Data thru February 11, 2021 2
Phosphate: Industry health has improved markedly $ per Tonne High-Analysis Phosphate Global Net Price Calculated from Published Weekly Spot Prices 450 400 • Phosphate industry margins have risen rapidly in the face of healthy 350 demand prospects and post-CVD petition impacts. • Such a rapid change in benchmark 300 margins has multiple precedents from the past dozen years. 250 200 Source: Argus, Mosaic 150 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Data thru February 11, 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. 3
2020 Regional Phosphate Roundup U.S. Offshore Imports U.S. imports from China Exports Mil Tonnes DAP/MAP/NPS/TSP Mil Tonnes DAP/MAP/TSP Annual Annual offshore sources 3.5 3.3 3.1 12 11.0 H1 Chinese exports in H2 H1 remained subdued 10.1 3.0 10 9.3 did not offset the y-o-y 2.5 2.3 during H2 despite a decline in H1 and 8 2.0 marked uptick of non- ended 2020 down 8% Moroccan/Russian 6 1.5 (783kt) y-o-y, in-line 1.0 origin shipments in Q4. 4 with expectations. 0.5 2020 imports were 2 0.0 down 25% (or almost 0 2018 2019 2020 800kt) y-o-y. 2018 2019 2020 India Imports Annual Brazil Imports Mil Tonnes DAP H1 Mil Tonnes DAP/MAP/NPS/TSP 7.8 7.0 6.2 6.3 8.0 Annual H1 DAP arrivals 6.8 6.0 5.6 6.2 With Q4 imports rebounded sharply in 6.0 stronger than expected, 5.0 H2. Total India DAP Brazilian phosphate 4.0 imports exceeded 4.0 imports were up 991kt 3.0 6.3mmt (+12% or or 15% y-o-y. 2.0 2.0 680kt y-o-y) in 2020. 1.0 0.0 0.0 2018 2019 2020 2018 2019 2020 Source: FAI, India Department of Fertilizer, Genscape, China Customs, Siaesp, Mosaic 4
U.S. Phosphate Fertilizer Imports 1,000 tonnes U.S. Offshore Phosphate Imports Morocco/Russia (DAP/MAP/NPS/TSP) % of Total 1,000 100% Morocco* 800 80% Russia • Trade flows are adjusting Saudi Arabia as the CVD petition 600 60% progresses. Mexico 400 40% Australia • Expect a new normal to develop subsequent to the 200 20% Other final determination from MOR/RUS % the ITC in March. 0 0% of Total Q1 Q2 Q3 Q4 Source: Genscape; Mosaic ► Petitions filed with DOC & ITC to request * Estimated volume from Morocco in Q4 w as for initiation of CVD investigations on June 26th bonded shipment to Canada via the U.S. ► Affirmative decision received from ITC on August 7th ► Affirmative decision received from DOC on November 23rd ► DOC issues final affirmative countervailing duty determination on February 9th, 2021 5
Global Phosphate Demand Mil Tonnes Global Phosphate Shipments YoY Changes of Phosphate Shipments DAP/MAP/NPS/TSP (Mil Tonnes DAP/MAP/NPS/TSP) 80 76 - 78 3.5 China 3.0 0.4 75 76 0.2 2.5 India 74 0.4 72 72 70 71 2.0 70 70 Other Asia 0.3 67 1.5 1.3 65 67 66 0.5 Brazil 1.0 0.0 0.2 60 0.5 0.5 0.3 Other L 61 0.3 0.4 America 0.0 55 -0.4 Europe+FSU -0.5 North America 50 -1.0 10 11 12 13 14 15 16 17 18 19 20E 21F 2020F 2021F * NPS products included in this analysis are those w ith a combined N and P2O5 nutrient content of 45 units or greater. • We revised up our estimate of global phosphate shipments in 2020. The revision also included updates to historical estimates of NP/NPS products. After very strong shipment growth in 2020, we forecast global demand to increase at more moderate rate of 1.0-2.0 million tonnes in 2021. • Demand growth is supported by continued constructive agricultural fundamentals, while rising fertilizer prices could curb demand in certain regions. We’ve thus taken a conservative stance versus the growth seen last year, despite channel inventories estimated to be well below average. 6
Global Phosphate Shipment Forecasts by Region February 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 Domestic phosphate shipments in 2020 increased for the first time in five years, and higher ag commodity prices are expected to spur further grow th in 2021. This reversal removes the largest headw ind to global phosphate shipments. Domestic DAP/MAP production in 2020 declined by nearly 0.4mmt (as per CPFIA data), illustrating the continued structural changes taking place in their industry, w hile CPFIA’s producer China 17.8 18.3 18.4 18.6 DAP/MAP inventory figures showed a drop of nearly 1.1mmt y-o-y at the end of December. DAP/MAP/TSP exports in 2020 w ere nearly 0.8mmt low er y-o-y. Despite the rally in international prices, w e expect 2021 export volume to remain constrained, driven in part by a further modest increase in domestic demand. 2020 shipments w ere revised higher on solid Q4 imports (as w ell as being rebased higher to include additional NP products). DAP imports ended the year up by nearly 700kt to 6.3mmt, w hile production fell by over 600kt to 4.1mmt. This, along w ith a strong domestic sales pace India 11.3 11.4 10.8 11.2 pushed total DAP inventories dow n by ~1.3mmt y-o-y. Looking ahead to 2021, higher international prices and the potential for limited additional subsidy could see MRPs increase sharply and curb demand, and w e have low ered our shipment and import forecasts to reflect this. We continue to look for further guidance on the subsidy, w hile farm economics and the monsoon outlook continue to look favorable. Farm economics continue to be conducive to a more meaningful rebound in demand, particularly given the strength of ag commodity prices and Other Asia/Oceania 9.4 9.7 10.2 10.4 generally benign w eather. Fertilizer demand, how ever, continues to lag due to continued issues w ith labor movement restrictions, and w e have pared back our demand grow th expectations to reflect this. Shipments in Europe/FSU are expected to continue to see moderate y-o-y growth in 2021, led by grow th in Russia, w hile demand in the EU is Europe and FSU 6.6 7.0 7.1 7.3 expected to be stable. Dry conditions continue to be monitored in Germany/Poland. Strong imports in Q4 have resulted in a further upward revision to our 2020 shipment estimate. DAP/MAP/NPS/TSP imports w ere nearly 1mmt higher y-o-y, while channel stocks were little-changed (i.e. higher imports w ere a demand-pull paradigm). The ag sector continues to be lifted by Brazil 8.4 9.7 9.9 10.2 higher prices and still-w eak FX, and purchasing activity continues to run ahead of historical norms. We expect this robust demand pattern to persist through 2021. Similar to Brazil, favorable farm economics resulted in strong grow th in 2020 (note the rebased figures include additional NP products). Our Other Latin America 3.9 4.5 4.5 4.8 forecast for 2021 continues to show a slow er, yet still robust demand grow th across most countries. Normal spring and fall w eather, increased acreage, lower imports (down ~25% y -o-y) and improved farmer balance sheets (in part due to improving crop prices) led to a recovery of on-farm demand in 2020. This strong demand allow ed channel inventories to clear and put North America 9.8 9.8 10.0 10.3 availability in the spotlight as the market turned to 2021. The recent rally in ag commodity prices portends strong on-farm demand in 2021 and w ith a depleted channel is expected to necessitate an increase in shipments y -o-y. We have revised our 2020 estimate higher due to the inclusion of additional NP products. Demand grow th is expected to be constrained in Other 5.2 5.2 5.1 5.3 2021 due to higher prices curbing demand, most notably in Africa. Rebased global shipments are estimated to have increased 3.0mmt or 4.2% in 2020, to 75.5mmt. Our forecast range for 2021 is rebased and Total 72.5 75.5 76.0 78.0 revised higher to 76-78mmt w ith a point estimate of 77.3mmt. This represents demand grow th of 2.4% y-o-y. * NPS products included in this analysis are NP and NPS products with a combined N and P 2O5 nutrient content of 45 units or greater. 7
2020E & 2021F Major Phosphate Market Summary North America Despite lower imports, China Mil Tonnes DAP/MAP/NPS/TSP Mil Tonnes DAP/MAP/NPS/TSP The historic trend of declining 12 NA phosphate shipments 20 phosphate demand in China 10 were largely unchanged 18.3 18.5 reversed in 2020, with 17.8 9.8 9.8 10.2 in 2020. Positive acreage 15 shipments up 2% y-o-y. The 8 prospects next year and 2021 baseline forecast is up 6 10 strong farm economics another 1% y-o-y due to 4 are expected to result in favorable farm economics and 5 2 healthy demand. The higher acreage; this could keep 0 2021 baseline forecast is 0 more supply home and 19 20E 21F up 4% y-o-y. 19 20E 21F constrict exports. India Brazil Mil Tonnes DAP/MAP/NPS/TSP India’s ag sector grew in Mil Tonnes DAP/MAP/NPS/TSP Brazil phosphate fertilizer 12 2020 and DAP/NPS 12 shipments are estimated to have 10 11.3 11.4 11.0 shipments were up 2%. 10 grown an astounding 15% in 10.1 8 However, the baseline 8 9.7 2020 due to favorable farm 8.4 6 2021 forecast is down 4% 6 economics, supported by a weak y-o-y based on upwardly- currency. This trend is expected 4 4 revised MRP expectations to continue (moderated) in 2021, 2 2 amid a potentially lower though our forecast could prove 0 (preliminary) P subsidy. 0 19 20E 21F 19 20E 21F conservative. Source: CRU and Mosaic 8
Phosphate S/D: More balanced market as we move through 2021 (but risk appears asymmetric to further tightness) Phosphate Supply / Demand Forecast • We revised our estimate (Incremental Y-o-Y Change) of global phosphate Mil Tonnes DAP/MAP/NPS/TSP 2020E 2021F Comments shipments in 2020 higher, Projected Shipment Changes 3.06 1.78 Moderate demand growth forecast, as higher prices may curb strong growth seen in including rebasing / Percent Change 4.2% 2.4% 2020 (through a depleted channel will act as an offset) updates to historical estimates of NP/NPS Potential Supply Changes 0.19 1.97 products. Base Case China Export Change -0.81 0.01 Broadly flat exports despite higher margins (constrained by strong domestic demand) • After very strong shipment OCP Line F Ramp-Up and Debottlenecking 1.50 0.30 Line F full capacity in 2022 growth in 2020, we MWSPC Ramp-Up -0.11 0.34 Production recovers to ~2.4mmt DAP-equivalent after setback in 2020. forecast global demand to GCT M'dilla Commissioning / Ramp-up 0.00 0.09 Notable uncertainty if this will occur. increase a more moderate Turkey/Egypt Greenfields 0.28 0.19 Both projects achieve full utilization in 2021. 1.5-2.0 million tonnes in FSU Expansions 0.00 0.15 Incremental volumes from PhosAgro Volkhov. 2021. Other Ramp-Ups / Closures -0.13 0.09 NTR Redwater resid. ('20); CIL-India expansion ('20/21); Philphos restart ('21) • Growth is supported by Misc. Known Operational Changes 0.55 0.00 Primarily the production rebound at IPL-Australia ('20) continued constructive Curtailments (COVID-19 & Voluntary) -1.10 0.80 Production recovery of ~2/3's of volume lost in 2020. agricultural fundamentals, S/D Surplus (+) / Deficit (-) -2.88 0.19 while rising prices could curb demand in certain regions. We’ve thus taken a conservative stance The large “deficit” in 2020 was offset by a The generally balanced market depicted in versus the growth seen correspondingly large drawdown in producer 2021 is achieved if demand growth moderates last year, despite channel inventories estimated to inventories (to historically low levels); channel y-o-y and production increases are achieved; be well below average. inventories were also pulled lower (though not note that these estimates do not allow for addressed in the table above) inventory restocking (producer or channel) 9
Inventory at both producer and channel levels has declined: India and China examples Mil Tonnes India DAP Inventory Mil Tonnes China DAP/MAP Producers Inventory 7.0 3.5 Thousands Trade Company MAP DAP 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 Source: India Department of Fertilizer and CPFIA Channel Inventory: India inventory figures provide a Producer Inventory: China producers inventory proxy for how global channel inventories have evolved: figures provide a proxy for how global producer • Trade inventories in mid-February of 1.4mmt are inventories have evolved: 25% lower y-o-y. • Inventory as of the end of December of 1.1mmt were • Company inventories in mid-February of 0.9mmt are 58% lower y-o-y (-1.6mmt). 57% lower y-o-y. • Total inventories in mid-Feb are 1.7mmt lower y-o-y. 10
India DAP Mil Tonnes India DAP Imports Mil Tonnes India DAP Imports 3.0 8.0 2020 12% or 7.0 2.5 5.7 - 6.1 680kt y-o-y 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: 5.9 0.0 0.0 Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F 2018=6.2mmt 2019=5.6mmt 2020=6.3mmt Actual Forecast Range Source: FAI, India Department of Fertilizer, Mosaic • We expect DAP imports to range 5.7-6.1mmt in 2021, assuming normal monsoon developments. • DAP pipeline inventories continue to decline, as expected, in the face of strong demand pull and low imports. • Subsidy policy changes remain a key factor as retail prices are expected to rise due to higher international prices and a proposed cut to the P subsidy. 11
Brazil Phosphates Mil Tonnes Brazil Phosphate Imports Mil Tonnes Brazil Phosphate Imports (DAP/MAP/TSP/NPS) 3.0 9.0 8.1 - 8.4 2020 15% or 8.0 2.5 991kt y-o-y 7.0 2020 4% or 2.0 43 kt y-o-y 6.0 5.0 1.5 4.0 1.0 3.0 2.0 2019: 6.8 0.5 2020: 7.8 1.0 2021F: 8.2 0.0 0.0 Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F 2018=6.2mmt 2019=6.8mmt 2020=7.8mmt DAP TSP MAP/NPS Forecast Range Source: ANDA, Siacesp, Mosaic • The Brazilian fertilizer market is estimated to have grown ~4% to 37.8mmt in 2020, driven by favorable farm economics. Phosphate imports surged 15% to 7.8mmt last year. • Positive prospects on corn prices and corn exports incentivize farmers to increase safrinha planting. • Phosphate import volumes are expected to stay at elevated levels well into 2021. 12
China Phosphates Mil Tonnes China Phosphate Exports Mil Tonnes China Phosphate Exports 4.0 12 2020 8% or 10 9.1 - 9.5 3.0 783kt y-o-y 8 2.0 6 4 1.0 2 2019: 10.1 2020: 9.3 2021F: 9.3 0.0 0 Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F 2018=11mmt 2019=10.1mmt 2020=9.3mmt TSP MAP DAP Forecast Range Source: China Customs and Mosaic • After declining for 2 consecutive years, we expect Chinese phosphate exports to remain flat at ~9.3mmt in 2021. • The Chinese market remained tight entering into Chinese New Year with low producer/channel inventories. • There is upside risk to China’s export capability in H1 as the export price premium is rising rapidly, but offset by what is anticipated to be a very strong domestic spring season. Questions remain as to whether China will be able to increase production to meet expected domestic demand growth in the face of continued industry restructuring, and therefore maintain (or potentially increase) exports. 13
Phosphate Outlook: Even our modest demand growth forecast is expected to fully offset new supply Mil Tonnes Global Phosphate Shipments Utilization DAP/MAP/NPS/TSP 85 97% 80 94% 75 91% • We expect an increase in 2021 70 88% capacity utilization, and expect the industry to hold relatively stable at 65 85% this historically elevated rate unless additional new projects are 60 82% announced/commissioned later in 55 79% the forecast period. ~2.2% CAGR ~1.5% CAGR 50 76% 10 11 12 13 14 15 16 17 18 19 20E 21F 22F 23F 24F 25F Actual/Estimates Mosaic Forecast Ranges CRU - January 2021 Capacity Utilization Source: IFA, CRU and Mosaic * NPS products included in this analysis are those with a combined N and P 2O5 nutrient content of 45 units or greater. 14
Raw materials prices are rising, providing a cost push to phosphate fertilizer prices Ammonia Weekly Raw Materials Prices Sulphur $/MT c&f Tampa $/LT 800 200 • Both sulphur and ammonia have Ammonia Sulphur upside price risk in H1 2021. • Some recovery of refining rates 600 150 should curb sulphur prices in H2. • Expect ammonia prices to ease in H2 2021 as well: 400 100 •Additional N capacity will be coming on line mid-year, •Current unexpected outages should return to normal production, 200 50 •While cost pressures should ease post-winter. Source: Argus 0 0 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Data thru February 11, 2021 15
Potash: The bull run on granular prices continues $ per tonne Published MOP Prices 400 • U.S. prices are rising rapidly in the Source: Argus; Green Markets face of healthy demand prospects and renewed concerns of spring 350 availability. • Cornbelt granular prices are up circa $140/mt since August 2020. 300 • Prices in SE Asia are up ~$15/mt since the beginning of the year, and Brazil prices are up ~$45/mt. 250 200 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 c&f SE Asia delivered Corn Belt c&f Brazil *weekly average reported spot pricing for prompt delivery Data February 11, 2021 16
2020 Regional Potash Roundup U.S. Offshore Imports China Net Imports Mil Tonnes KCl Mil Tonnes KCl Annual H1 Annual H1 2.0 10 8.9 1.7 1.7 U.S. offshore imports 8.6 Chinese MOP imports 1.5 surged in December 7.3 partially recovered in H1 1.5 8 and helped pull 2020 on a strong rebound of 6 1.0 annual volume up shipments from Belarus towards last year’s 4 and Russia. 2020 net 0.5 level. Volume was 2 imports were down 3% down 3% (-46kt) y-o-y. or 257kt y-o-y. 0.0 0 2018 2019 2020 2018 2019 2020 India Imports Brazil Imports Mil Tonnes KCl Mil Tonnes KCl Annual H1 Annual H1 6.0 12 10.9 5.1 A strong recovery of 10.0 10.2 5.0 4.6 Brazilian imports Indian import demand 9 4.1 remained above 4.0 in H2 resulted in a average in Q4. Total ~1.0mmt increase in 6 3.0 imports ended the year total imports in 2020 3 up 7% or 753kt y-o-y. 2.0 (+24% y-o-y). 1.0 0 2018 2019 2020 2018 2019 2020 Source: FAI, India Department of Fertilizer, Genscape, China Customs, Siaesp, TDM, Mosaic 17
Global Potash Demand Mil Tonnes Global MOP Shipments YoY Changes of MOP Shipments KCl (Mil Tonnes KCl) 68 - 70 70 4.0 3.5 0.4 China 68 65 67 66 3.0 India 1.0 64 64 2.5 0.2 Indonesia+ 60 61 2.0 60 Malaysia 1.5 1.0 0.4 Latin America 55 1.0 0.6 55 0.9 0.1 North America 0.5 0.2 53 53 0.2 50 0.0 Europe+FSU -0.4 50 -0.5 -0.1 Other 45 -1.0 10 11 12 13 14 15 16 17 18 19 20E 21F 2020E 2021F Source: IFA, CRU, TFI and Mosaic • 2020 global MOP shipments bested our expectations at well over 67mmt. • Our 2021 global forecast range is now 68-70mmt, as we continue to anticipate broad-based growth in most markets except India which could be a major drag on global K demand this year. 18
Global Potash Shipment Forecasts by Region February 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 KCl2. 2021F 2021F China MOP imports recovered in H2 2020 and ended the year dow n only 3% y-o-y, while port inventories declined meaningfully in Q4 (and w ere
2020 & 2021F Major Potash Market Summary North America Brazil Mil Tonnes KCl Mil Tonnes KCl 12 12 Favorable farm economics 11.4 11.9 in Brazil supported a ~1.0 10 10.1 10.2 Despite relatively 10 10.5 million tonne increase in 8 9.2 stable imports, total 8 potash demand in 2020. 6 NA MOP shipments 6 Demand growth is 4 were up 0.9 million expected to moderate in 4 tonnes in 2020. 2021, though that thesis 2 2 could prove to be too 0 0 19 20E 21F 19 20E 21F conservative. India India’s MOP imports Malaysia and Indonesia Mil Tonnes KCl Mil Tonnes KCl 6.0 increased >25% in 6.0 2020. Below-average Malaysia Indonesia Despite very healthy palm 5.1 year-end inventories oil prices, labor and 4.7 4.0 would be expected to 4.0 2.8 3.0 logistical challenges related 4.0 2.8 keep imports at a to Covid-19 limited the 2.0 relatively high pace in 2.0 upswing of Malaysia and H1 2021, but offset Indonesia MOP imports in 1.1 1.4 1.5 2020, but a more due to the announced 0.0 0.0 19 20E 21F cut to K subsidy. 19 20E 21F meaningful recovery is Source: CRU and Mosaic expected in 2021. 20
Limited new supply may struggle to meet expected demand growth in 2021 Projected MOP Supply/Demand Changes Mil Tonnes KCl 2020E 2021F Comments Projected Shipment Changes 3.70 1.46 Moderate demand growth forecast after big upturn in 2020 • We revised our estimate of global potash shipments in Percent Change 5.8% 2.2% 2020 sharply higher, with Projected Supply Changes 2.99 1.26 y-o-y growth of nearly 4 SQM Production Adjustments 0.29 0.10 Production returns to ~1.25mmt in 2020; incremental increase going forward million tonnes. K+S Bethune Ramp-Up 0.25 0.05 Production estimated at 1.8mmt in 2020; pond production to slowly ramp going forward Eurochem Usolskiy Ramp-Up 1.08 0.03 Phase 1 capacity of 2.3mmt in 2021; Phase 1.1 0.5mmt capacity ramping from 2023 • After very strong shipment growth in 2020, we Eurochem Volgakaliy Ramp-Up 0.04 0.06 Limited production in 2020-2021; Phase 1 capacity of 2.3mmt in 2025 forecast global demand Uralkali Production / Ramp-Ups -0.30 0.20 Incremental increases from existing sites and S-3 expansion growth to moderate to ~1.5 Belaruskali Petrikovsky 0.15 0.45 Commissioning of 1.5mmt mine in 2020 (first trial MOP production in August) million tonnes in 2021, but Other Changes 0.28 0.37 Includes ramp-up at ICL Dead Sea/Suria in 2020/21, closing down of ICL Sallent given the affordability of Other Existing Utilization 1.20 0.00 Primarily a rebound of Canadian production in 2020 MOP we may be S/D Surplus (+) / Deficit (-) -0.72 -0.20 conservative, particularly if Source: Mosaic there is a restocking of the channel in advance of further price increases. While the market appears more balanced for The moderate “deficit” in 2020 was offset by 2021, it is still in “deficit” with fewer drawdowns of producer inventories; channel opportunities globally to increase output from inventories were also believed to kept circa existing capacity (and without producer stocks average levels to draw upon). 21
India Potash Mil Tonnes India MOP Imports Mil Tonnes India MOP Imports 2.0 2020 24% or 6.0 996kt y-o-y 4.6 - 5.0 5.0 1.5 4.0 1.0 3.0 2.0 2019: 4.1 0.5 2020: 5.1 1.0 2021F: 4.8 0.0 0.0 Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F 2018=4.6mmt 2019=4.1mmt 2020=5.1mmt Actual Forecast Range Source: FAI, India Department of Fertilizer, Mosaic • Strong H2 demand, favorable domestic pricing and importer margins pulled total imports up by almost 1.0mmt to over 5.0mmt in 2020 without boosting year-end inventories. • MOP vessel arrivals are slightly ahead of last year’s low levels in January/February, partially due to the (correct) expectation that prices would be higher in the new fertilizer year. • The uncertainty around subsidy and MRP is a major swing factor in 2021. We now expect MOP imports to range 4.6-5.0mmt in 2021. 22
Brazil Potash Mil Tonnes Brazil MOP Imports Mil Tonnes Brazil MOP Imports 11.2 - 11.6 4.0 12 2020 7% or 10 3.0 753kt y-o-y 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 2018=10mmt 2019=10.2mmt 2020=10.9mmt Actual Forecast Range Source: ANDA, Siacep and Mosaic • The same positive agricultural fundamentals that drove up phosphate demand also had meaningful impacts on potash demand in 2020. • MOP arrivals were stronger than expected in Q4, pushing total imports to a record of 10.9mmt in 2020 (up 7% y-o-y), while the year-end 2020 stocks-to-use ratio of 14% fell from 16% in 2019. • MOP imports are forecast to increase again in 2021, though at a more moderate pace. 23
China Potash Mil Tonnes China MOP Imports Mil Tonnes China MOP Imports 3.0 2020 3% or 10 278kt y-o-y 8.3 - 8.8 8 2.0 6 4 1.0 2019: 9.1 2 2020: 8.8 2021F: 8.5 0.0 0 Q1 Q2 Q3 Q4 10 11 12 13 14 15 16 17 18 19 20 21F 2018=7.5mmt 2019=9.1mmt 2020=8.8mmt Actual Forecast Range Source: China Customs and Mosaic • MOP import arrivals in China leveled off, but were higher than expected in Q4 2020. This, coupled with a healthy pull from inland demand and maintenance turnaround at QSL, allowed port inventories to gradually decline to under 3.0mmt by end of January 2021. • Imports are expected to be flat to lower in 2021, as some suppliers may curtail volumes in light of the lower- than-desired contract price settled by BPC and Chinese buyers in February. This could push port stocks lower year-over-year at the end of 2021. 24
Potash Outlook: New supply expected to slightly trail demand, leading to higher industry operating rates Mil Tonnes KCl Global MOP Shipments Utilization 80 100% 75 95% 70 90% • We expect a gradual, modest 65 85% increase in global capacity utilization over the next couple of 60 80% years, though this will depend on the timing of the commissioning 55 75% and ramp-up of greenfield projects. 50 ~2.5% CAGR ~2.3% CAGR 70% 45 65% 10 11 12 13 14 15 16 17 18 19 20E 21F 22F 23F 24F 25F Actual/Estimates Mosaic Forecast Ranges CRU - January 2021 Capacity Utilization Source: IFA, CRU and Mosaic 25
Ag remains resilient during economic downturns & global balance sheets are snug World G&O Demand vs. World Real GDP MMT World (Less China) Grain and Oilseed Stocks % % (y-o-y % change) 475 23% World GDP Growth (%) World G&O Demand Growth (%) 450 Source: USDA 22% 5.0 425 21% 4.0 400 20% 3.0 375 19% 2.0 350 18% 1.0 325 17% 0.0 -1.0 300 16% -2.0 275 15% -3.0 250 14% -4.0 225 13% -5.0 200 12% '90 '95 '00 '05 '10 '15 '20F 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: USDA, World Bank (Jan 2021 – Global Economic Prospects) Stocks Percent of Use • World grain and oilseed demand has been relatively stable in 2020 despite the impacts of COVID-19 and the notable world economic downturn. • Global grain and oilseed balance sheets are snug – supporting farm economics. • Despite increased production in 2020, global stocks are estimated to have been pushed below their historical lower bound. • The global grain and oilseed stocks-to-use ratio is projected to drop to 15.5% in 2020/21, even below the low level seen in 2007/08. 26
Chinese appetite for ag commodity imports moved sharply higher in 2020 Mil Tonnes China Corn Imports Chg (%) China Ag Commodity Imports (cumulative) Calendar Year 2020 Y-o-Y Changes 12 2015: 4.7 y-o-y change 136% 200% Wheat 2016: 3.2 154% 10 123% 150% Pork 2017: 2.8 Poultry 116% Corn 2018: 3.5 97% 136% 8 100% 95% 2019: 4.8 73% 2020: 11.3 50% Beef Barley 6 50% 31% 28% 36% Soybean 18% 13% 4 16% 0% 30% 2 65% 27% -50% 16% 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 2019 2020 Chg (mil tonnes) Source: China Customs • 2020 China corn imports: record high of 11.3 MMT (+136% y-o-y). • 2020 Chinese soybean imports: record high of 100.3 MMT (+13% y-o-y). • Records set across the animal protein space. 27
USDA: Chinese corn and bean import demand expected to remain strong in 2021 Mil Tonnes China Cumulative Corn Imports Mil Tonnes China Cumulative Soybean Imports (Marketing Year ending September) (Marketing Year ending September) 100mmt 30 100 2018/19 24.5mmt 90 2018/19 25 2019/20 2019/20 80 2020/21 Actual 70 2020/21 Actual 20 USDA Feb Fcst 60 USDA Feb Fcst 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 • USDA is now projecting very strong Chinese corn import demand in 2021, but stagnation in soybean imports. We believe that there is upside to both figures (provided that global production/supply is available). 28
Ethanol recovery has plateaued at ~90% of pre-Covid; 20/21 corn demand from ethanol offset by ↑ exports Bil. Bu. U.S. Corn Use Source: USDA US Weekly Fuel Ethanol Mil Gallons Mil Gal/Day Feed & Residual Ethanol Other FSI Exports Stocks Production 15 1,200 50 Thousands 2.3 2.4 2.1 2.6 1.8 1,100 45 12 1.5 1.5 1.4 1.4 1.4 1,000 40 9 5.4 5.6 5.4 4.9 5.0 900 35 800 30 6 700 25 3 Source: EIA 5.5 5.3 5.4 5.9 5.6 600 20 Jan '15 Jan '16 Jan '17 Jan '18 Jan '19 Jan '20 Jan '21 0 Data through 2/5/2021 16/17 17/18 18/19 19/20 20/21F • After falling 52% in April, ethanol production has recovered and plateaued to around ~90% of 2019 levels. • USDA’s estimate for 19/20 corn grind for ethanol is 4.85 bbu (down 0.53 from 2018/19). They project 20/21 ethanol grind up slightly to 4.95 bbu (still down 0.43 from 2018/19). • However, this decline in 2020/21 corn grind for ethanol relative to pre-Covid is projected by USDA to be offset by a 534 million bushel increase in corn exports (relative to 2018/19). • Recent ethanol industry relief from Chinese ethanol imports. 29
U.S. farmer economics look strong Bil $ U.S. Farm Sector Net Cash Income Source: USDA & Mosaic 140 120 • 2020 U.S. farm income boosted by 100 additional government payments, while crop/livestock receipts also 80 recovered in H2. 60 • Government payments in 2021 are likely to be less than in 2020, but with 40 new CFAP3 and strong commodity prices, farm income is expected to 20 remain strong in 2021. 0 10 11 12 13 14 15 16 17 18 19 20E 21F CFAP & PPP Gov't Payments (excl. Covid aid) "Market" 30
Farm income elsewhere also quite robust US$/Bu China & US Corn Prices Ringgits/MT Malaysian Palm Oil Daily Close of Front Month Contract Dalian Nearby Corn CME Nearby Corn 4,500 12 10 4,000 8 3,500 6 3,000 4 2,500 2 2,000 Source: CRB Source: Dalian Commodity Exchange & CME 0 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% 80 20.0 Source: CEPEA, CRB (FX) 6% 70 17.5 5% 60 15.0 4% 50 12.5 Rapeseed & 3% 40 10.0 Mustard Soybeans 2% 30 7.5 Cotton Lentils Wheat 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 thru February 12, 2021 31
Grain price rally driven by nearby contracts, but new crop prices are also at healthy levels $/bu Corn Price $/bu Soybean Price $/bu Wheat Price 6.0 15 7.0 New Crop (Nov' 21 Contract) New Crop (Jul '21 Contract) Nearby Nearby 5.5 14 6.5 5.0 13 6.0 4.5 12 5.5 4.0 11 5.0 3.5 10 4.5 New Crop (Dec' 21 Contract) Nearby 3.0 9 4.0 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Source: CME Price data through February 12, 2021 • The key metric to watch is how the nearby prices migrate to the new crop price as contracts expire (i.e. will new crop rise to meet the nearby price, nearby fall to meet current new crop price or will they meet somewhere in the middle) 32
Still-preliminary view of 2021 acreage is supportive to fertilizer demand Mil Acres Planted Acreage 100 90-92 89-91 • 90.8 Corn and soy balance sheets are both 90.2 90.2 89.7 89.2 88.9 90 tight. 83.1 • They could tighten further if supply 17/18 76.1 80 concerns in S. America materialize (e.g. 18/19 dry conditions in Argentina and late- 70 planting of Brazil’s safrinha crop) and 19/20 China import demand could exceed 20/21 current USDA projections. 60 21/22 F • This will support prices throughout Spring 47.8 46.1 as corn and soy battle for acres. 45.2 50 44.3 ~45 • 2021 corn and soybean acreage could 40 both be above 90 million acres, with a bias Corn Soybeans Wheat towards higher corn acreage. Source: USDA & Mosaic 33
Positive Fertilizer Demand Driver: Affordable Nutrients Plant Nutrient Affordability Plant Nutrient Price Index / Crop Price Index 1.10 Source: Weekly Price Publications, CME, USDA, AAPFCO, Mosaic 1.00 Less Affordable 0.90 0.80 ▪ Fertilizer prices remain 0.70 low relative to crop prices. 0.60 0.50 More Affordable 0.40 10 11 12 13 14 15 16 17 18 19 20 21 Affordability Metric Average 2010-present Data through February 11, 2021 34
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