Farming Message Board - Msg: 27665911

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Non-Tech : Farming

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From: Dennis Roth	9/28/2011 8:34:38 AM
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Agrium Inc (AGU) Company Update Retail Tour and Grower Dinner Takeaways – Expect Strong Fall and Spring Fertilizer Application 28 September 2011 ¦ 11 pages citigroupgeo.com Fall Fertilizer Application Could Surpass 2010 – We recently toured two of AGU’s large retail facilities in the heart of the cornbelt, met with local management and hosted a dinner with the head of a central Illinois co-op who farms over 10,000 acres. Our conversations confirmed our view that this year’s fall fertilizer application could be very strong, and if the weather cooperates, application could surpass last year’s exceptional fall season. According to AGU and growers, a majority of fall and spring nitrogen demand has been purchased. However, farmers in the region have only purchased 25- 30% of their spring potash needs and 10% of their spring phosphate requirements, which we believe could leave room for further price increases. Farmers Ramp Up Spending on Other Key Inputs – Approximately 60% of the sales at the sites we visited were chemicals (30% of total sales) and seeds/services. Seed sales are progressing well. AGU sells its own in-house brand (DynaGro) and MON (Pioneer does not distribute through farm centers in the cornbelt). DynaGro uses MON’s genetics and traits and margins are nearly double compared to MON sales. There has been very little customer pushback regarding proposed seed price increases (~5-10% for MON) while MON’s more customer-focused strategy is starting the erase farmer frustration due to the aggressive pricing in 2008/09. New Supply Agreement Clarifies Phosphate Opportunities – The recently announced agreement between AGU and OCP provides long-term phosphate rock supply certainty as increasing iron content reduces economical reserves at AGU’s Kapuskasing mine (scheduled to close in 2013). The agreement calls for AGU to purchase ~1mmt of rock with pricing based on an index of phosphate prices. We believe the agreement will provide positive returns for AGU except in circumstances when MAP prices are extremely low. The OCP rock will allow production at AGU’s Redwater, Alberta facility to continue uninterrupted (~50% AGU’s MAP capacity), which is important for phosphate segment profitability as it has access to advantaged ammonia and sulfur feedstock. The agreement could also provide enough rock for brownfield expansion of up to 50k metric tons. AGU will invest ~$65mm to build a phosphate rock import terminal. For additional takeaways please see page 3.

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