February 2023 - Market Update
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
February 2023 – Market Update
Forward Looking Statements This presentation 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 common dividends, special dividends, share repurchases, 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, 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 future success of current plans for MWSPC and any future changes in those plans; difficulties with realization of the benefits of our 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. The declarations and payment of future dividends and special dividends remain at the discretion of the Board of Directors.
Phosphate and Potash Prices
Prices have receded from their post-invasion spike and we are seeing signs of stabilization in some
geographies. While falling nitrogen may have some spillover near-term, upside potential exists for 2023.
$/MT Global DAP/MAP Benchmark Prices $/MT Potash Prices
Published Spot Prices Published Spot Prices
1,400 1,400
DAP fob NOLA DAP c&f India c&f Brazil c&f SE Asia
MAP fob NOLA MAP c&f Brazil fob NOLA delivered Cornbelt
1,200 1,200
1,000 1,000
800 800
600 600
400 400
200 200
0 0
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Source: Argus, Fertecon, CRU, ICIS, Green Markets, Mosaic
Data through February 16, 2023
3Ag Market Update
Still-Elevated Agriculture Prices
Ag commodities continue to be elevated from a historical standpoint, despite giving back war premium.
Indexed Daily Close of Front Month Contract Indexed Daily Close of Front Month Contract
400 400
Corn Soy Wheat Palm Oil Coffee Rice Sugar Cotton
350 350
300 300
2018=100
2018=100
250 250
200 200
150 150
100 100
50 50
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Commodity Current Price YTD Y-o-Y Commodity Current Price YTD Y-o-Y
Corn $6.78bu 0% +4% Coffee $1.89/lb +13% -33%
Soybean $15.27/bu +1% -4% Rice $17.52/cwt -3% +17%
Wheat (HRW) $9.07/bu +2% +10% Sugar $21.41/cwt +7% +17%
Palm Oil MYR 4,095/t -2% -31% Cotton $80.25/cwt -4% -34%
Source: CME, MDEX, NYMEX; Data through February 17, 2023
5Solid Agricultural Fundamentals
Slow down in yield growth in recent years has pushed our stocks-to-use ratio metric below 15%, a circa
25-year low (and unlikely to recover in a single season).
MMT Grain and Oilseed Stocks Percent
World Less China
475 22%
Stocks Percent of Use
450 21%
425 20%
400 19%
375 18%
350 17%
325 16%
300 15%
275 14%
250 13%
225 12%
200 11%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22F
Source: USDA February 2023
6Solid Agricultural Fundamentals
Lower benchmark fertilizer prices, coupled with still-elevated ag commodity prices has made fertilizers
more affordable and is expected to spur demand as the year progresses.
North America Plant Nutrient Affordability Brazil Soybean Barter Ratio
Ferts Price Index / Crop Price Index (bag/MT)
1.60 25
Less Affordable Fertilizers Less Affordable Fertilizers
1.40
20
1.20
1.00 15
0.80
10
0.60
0.40
5
0.20
More Affordable Fertilizers More Affordable Fertilizers
0.00 0
15 16 17 18 19 20 21 22 23 15 16 17 18 19 20 21 22 23
Affordability Metric Average (2010-present)
Source: Weekly Price Publications, CME, USDA, AAPFCO, Mosaic
Fertilizer prices as of February 16, 2023
7Phosphate Market Update
Global Phosphate Demand
Global shipments declined ~9% in 2022, necessitated by supply disruptions. Moderating prices to incent
demand and our forecast calls for a rebound to 72-75 MMT in 2023, depending on the supply recovery.
Mil Tonnes Global Phosphate Shipments
DAP/MAP/NPS/TSP
80
72-75
75
70
65
60
55
50
10 11 12 13 14 15 16 17 18 19 20 21 22E 23F
* NPS products included in this analysis are those with a combined N and P 2O5 nutrient content of 45 units or greater.
Source: CRU, MosaicPhosphate Inventories
Brazil phosphate inventories receded in Q4, ending the year toward the low end of the historical range.
India inventories ended the year up slightly year-over-year, but still at a critically low level.
MMT Brazil Phosphate Ending Stocks MMT India DAP Ending Stocks
(DAP/MAP/TSP/NPS)
3.0 7.0
Thousands
Thousands
6.0
2.5
5.0
2.0
4.0
1.5
3.0
1.0
2.0
0.5 1.0
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
Min/Max Range (17-21) 2022 2021 Min/Max Range (17-21) 2022 2021
Source: ANDA, India Department of Fertilizer, Mosaic
10Raw Material Costs
Ammonia prices are expected to continue to moderate on improved supplies, while sulphur prices are
expected to remain at the more moderate levels due to both improved supply and reduced demand
Ammonia Raw Material Prices Sulphur
$/MT c&f Tampa $/LT
1,700 800
Ammonia Sulphur
1,500 700
1,300 600
1,100 500
900 400
700 300
500 200
300 100
100 0
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Source: Argus
Data through February 16, 2023
11Potash Market Update
Global Potash Demand
A partial recovery of global shipments is expected in 2023, as Belarussian supply remains constrained
Mil Tonnes Global MOP Shipments
75
70
64-67
65
60
55
50
45
10 11 12 13 14 15 16 17 18 19 20 21 22E 23F
Source: CRU, MosaicPotash Inventories
Brazil potash inventories fell in Q4 2022 and ended the year in line with end-2021 level. With demand
expected to recover sharply from last year’s pullback, this bodes well for higher import demand.
Mil Tonnes Brazil MOP Ending Stocks
5.0
4.0
3.0
2.0
1.0
0.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2022 2021
Source: ANDA, Mosaic
14You can also read
