PotashCorp - Market Analysis Report - Q3 2012


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  • The drought in the US will go down as one of the most severe in the US over the past century. As of September 19, 2,130 counties were designated as natural disaster areas – covering 38 states – with almost two-thirds of the continental US facing moderate to exceptional drought conditions. The impact on crop yields has been significant, with corn yields projected to fall to under 123 bushels per acre, 25 percent below the previous record. This third straight year of below-trend yields highlights the challenges in trying for constant improvement.
  • The failure to produce a large US corn crop means a significant demand reduction is needed in all major use categories. Projected demand is expected to be 2.5 billion bushels lower than the USDA estimate in May and this number could move lower as we expect harvest area and potentially yields will be lowered in future USDA reports. This is driving record corn prices and projections for a record low stocks-to-use ratio.
  • South America Unlikely to Make up US Deficit; Importers Will Feel the Pinch Corn production challenges in the Northern Hemisphere were not confined to the US in 2012. Production issues due to less-than-ideal weather were experienced in parts of Europe and the former Soviet Union (FSU). This has provided an opportunity for corn from South America but its exportable surplus is not large enough to prevent a shrinkage in global corn trade. Should moisture return in a meaningful way to the Northern Hemisphere for the 2013 corn planting season, we anticipate that demand for fertilizer will be strong.
  • Refiners currently use 10 percent ethanol to provide the necessary octane level for all CBOB gasoline. When the octane content and four-cent renewable fuel credit (RIN value) are factored in, there is an approximately 70-cents-per-gallon incentive to blend ethanol with gasoline. This incentive translates into the ability to pay the equivalent of almost $2 per bushel over current corn prices. Therefore, at the moment, refiner-blenders could tolerate corn at approximately $10 per bushel. This example shows that waiving the ethanol mandate would potentially have a limited impact on domestic ethanol use as long as the economics of blending ethanol remain favorable.
  • Meat prices have not kept pace with the increase in feed costs. Livestock producers had some opportunities during the year for prices that provided a profit but this has become increasingly difficult in the current market. Meat prices haven’t been able to increase because some producers began to sell animals rather than purchase feed, which, in the short run, keeps the supply of meat elevated. Poultry and hog producers can respond appropriately and relatively quickly to periods of over- or under-supply but beef producers cannot. The structural decline in the overall breeding herd could lead to lower feed demand in the US in the medium term.
  • When the global corn crop suffers, the market looks to other cereal-producing regions to supply the demand for grain. Wheat and other coarse grain production is recovering in the FSU since the collapse of the Soviet Union in the early 1990s, allowing countries like Russia to become significant wheat exporters during good crop years. However, less-than-ideal growing conditions during 2012 reduced the crop and exports from this region will be constrained. Russian exports could effectively be shut down by the government policy by late October. While the region’s wheat yields are about a third higher than those of late 1990s, we believe they remain substantially below the levels possible with use of proper fertilization. The low fertilization level for this crop makes it vulnerable in years with adverse weather.
  • Several major wheat-producing regions experienced production challenges in 2012. USDA now forecasts that global production will be down by more than 5 percent from last year. This has tightened ending stocks and lowered exports. Global exports are forecast to be down by approximately 13 percent because of declines in the FSU due to weather challenges, the current dryness developing in Australia and lower production from Argentina. A decent wheat crop in India this past year and the expectation of good yields from Canada could help the wheat trade but nevertheless, 2012 has turned out to be another year of failure to rebuild global grain stocks.
  • The September USDA report cut the forecast for US soybean production by more than was expected, to 2,634 million bushels. Yield expectations were lowered from 36.1 bushels per acre to 35.3. The US soybean stocks‐to‐use ratio was forecast at 4.3 percent, the fourth lowest on record. The recent demand forecast for US exports and crush would represent the largest year-over-year decline on record, down 22 percent and 12 percent respectively. This forces the market to put significant reliance on the upcoming South American crop.
  • South America to Offset Lower US Exports, But Not Until New Crop in 2013 With the short soybean crop in South America followed by the drought in the US, the cost for importers has risen dramatically. Despite these higher costs, China has continued on a record import pace and will account for nearly two-thirds of global trade. The cost of China’s soybean imports is projected at approximately US$35 billion in 2012. We expect farmers in South America will increase acreage and fertilizer application rates to take advantage of the opportunity afforded by higher commodity prices. We anticipate record fertilizer consumption in Brazil this year and heavy shipments to this market over the next few months.
  • The recent USDA farm income forecast projected net cash farm income could increase by $4.6 billion in 2012 to a record $139.3 billion. The increase is driven by higher projected crop revenues and large expected insurance payments, which more than offset the impact of reduced returns for livestock producers. As illustrated in the crop insurance revenue example, many producers with the harvest price option will benefit greatly from the rise in crop prices this summer despite significantly lower yields. We expect farmers will be in a strong cash flow position to purchase the crop inputs necessary to plant next season’s crop.
  • The failure to produce a large global crop in 2012 has dramatically increased the financial incentive to plant a crop in 2013. For the upcoming planting season, assuming a return to more normal moisture conditions and yields for corn and soybeans, the revenue potential has improved 24 percent and 16 percent, respectively, since the beginning of June. Farmers have the potential today to lock in a portion of their 2013 corn crop at prices close to $6.50 per bushel, which we believe will provide a strong incentive to address the agronomic needs of their crop.
  • Monsoon rains are critical if India is to produce a large enough crop for a growing population with improving economic well-being. Rainfall shortages through July and August could have an impact on production of Kharif crops such as rice, cotton and sugar. Rainfall has improved in recent weeks which should be beneficial for the upcoming Rabi crop. This should give farmers the confidence to invest in fertilizer for the coming planting season. However, long-term issues of adequate and balanced fertility need to be addressed to help sustain crop production beyond this season.
  • Rising food consumption will continue to be a major challenge for China’s government and its millions of farmers. Over the past decade, while total production has risen significantly, the increase has been unable to keep pace with demand. Over the past few years, China has significantly increased its corn imports to meet its immediate needs due to strong growth in consumption, inadequate domestic production and reduced stocks. As indicated on the graph, Chinese domestic consultants are estimating a significantly tighter ending stock situation in China compared to USDA’s estimates. We believe this more accurately illustrates the tightness of corn supplies in China and a major reason its domestic prices continue to trade above world levels.
  • Multiple production deficits over the past decade have pulled grain inventories well below their historical average. We believe this situation is not sustainable and provides little margin for error in meeting the expected rising world demand for grain. Growth in crop production must nearly double the historical average in the 2013/14 crop year just to keep inventories at their current low levels – and must triple that average to start increasing grain supplies to levels closer to the long-term average.
  • Ammonia imports slowed in the past few months in the wake of logistical and production issues. Globally, planned capacity in the Middle East and Africa has been slow to come on stream, which has supported strong prices. The 25 percent Trinidad gas curtailments, FSU turnarounds, Mississippi river logistics issues related to low water levels and Hurricane Isaac also contributed to the tight market. A steady pace of imports will be required to ensure adequate nitrogen supplies, given the expected strong demand and supportive crop economics.
  • Urea imports have increased in recent months following a slow start to the year, which was a primary driver of the volatile market in the first half. We believe dealers will attempt to build more adequate inventories as the calendar year closes in an attempt to avoid a situation similar to this past spring. If water levels on the Mississippi river remain low, there could be challenges in delivering product from NOLA to the end markets in the midwest as the majority of US gulf imported product moves by barge. This could create the potential for wider than usual pricing spreads between the NOLA market and internal locations.
  • The former Soviet Union, Middle East and Trinidad are the primary ammonia-exporting regions due to their relatively low delivered costs and limited domestic consumption. Trinidad, the largest exporting country, accounts for nearly 25 percent of global trade. FSU and Middle East exports have declined considerably in 2012 largely attributed to plant outages and reduced demand at the beginning of the year. Exports from Trinidad is expected to decline in 2012 primarily due to the gas curtailments, which have further tightened the global ammonia market.
  • We anticipate that world DAP and MAP trade will be down this year compared to 2011 levels. India’s DAP imports are expected to decline due to changes in government subsidy levels, a weakened rupee and the resulting higher retail phosphate prices. As Ma’aden increases DAP production in 2012, we anticipate its exports could rise to approximately 1.5 million tonnes, still well below it’s stated capacity. China’s exports are expected to decline due to increased supply in the international market and government policies designed to limit exports in order to ensure domestic supplies. Low US phosphate inventories could limit availability for the export market.
  • Higher dealer inventory levels in the US at the end of 2011 resulted in slow shipments in the first quarter of 2012. However, increased supply was required in Q2 to meet spring application demand, and further we believe distributor inventory was reduced to a relatively low level. An early harvest and supportive crop economics are together driving the expectation for a strong fall application season and the need for significant producer shipments. This is illustrated by strong domestic shipments in July and August that were up 32 percent and 10 percent respectively compared to 2011 levels.
  • Positive crop fundamentals in Brazil have led to increased fertilizer demand over the past few years. Soybean acreage is expected to reach 27.5 million hectares in this crop year, a 10 percent increase from last year, while corn acreage could grow by 5 percent. Although Brazil is expanding domestic fertilizer production, shipments from offshore suppliers have increased in recent months to meet record projected consumption this year.
  • North American potash sales were slow in the first half of 2012 as dealers relied on inventory to meet famers’ demand and we believe ended the spring season with extremely low inventory levels. These reduced inventory levels combined with the strength in corn and soybean prices has restored demand for potash in the third quarter in advance of the fall application season. Following a record year for offshore imports in 2011, which was one of the factors contributing to higher carryover into 2012, shipments from offshore suppliers have fallen significantly this year. As of the end of July, offshore imports were down 50 percent or 690,000 tonnes from the previous year.
  • Brazilian potash imports have reached record levels in recent months and are expected to remain relatively strong for the remainder of the year. We expect imports for the year will total approximately 7 million tonnes, down slightly from the record of 7.4 million tonnes set last year. Port congestion and logistical issues remain the key constraint in meeting this record second half demand with delays reported as much as 65 days over the past few months causing huge demurrage costs for importers. In our view, these issues should support a move to more even shipments throughout the year in the future compared to concentrated shipments this year during the second and third quarters.
  • Global potash shipments for 2012 are forecast at approximately 53 million tonnes, down from over 55 million tones in 2011, primarily due to the reduction in distributor inventories carried over from last year and lower Indian demand. We expect Indian imports will be down by approximately 3 million tonnes from its record level achieved in 2010. Demand in North America has been impacted by cautious purchasing behavior and a reduction in inventory levels during the first half of the year. Inventory in other key spot markets such as Brazil, Indonesia and Malaysia are expected to be below levels at the start of the year.
  • Potash shipments to India declined drastically in 2012 primarily due to its fertilizer subsidy changes, which are leading to higher retail prices and reducing demand in the short term. We expect demand in India will rebound in 2013 driven by agronomic needs, while the magnitude of the increase will be influenced by government policy. China’s potash consumption has been strong in 2012 and is expected to increase in 2013, primarily driven by supportive fruit and vegetable prices as well as higher prices for key grains. Demand in Latin American and other Asian countries is expected to remain robust in 2013 sustained by the significant nutrient requirements for a wide range of its potash-intensive crops and the excellent returns for these crops. Shipments to the North American market slowed down in the first half of 2012 as dealers worked down inventories and purchased only to meet the immediate needs of farmers. However, we expect demand will rebound in the fall application season and remain strong in 2013 supported by record high crop prices, farm income and the need to address the potassium requirements of the soil.
  • India is the world’s second largest producer of rice, sugar, wheat, fruits and vegetables. Although it exports rice and sugar, most of its crops are consumed domestically. India’s soils are under considerable strain, the result of natural nutrient deficiencies, intense farming practices and diverse crop requirements. As a result, it is the world’s second largest consumer of fertilizer, accounting for approximately 16 percent of total consumption.
  • India is the world’s second most populous country. It has added more than 500 million people over the past three decades and is expected to surpass China in population by 2025. Not only is India’s population growing, the growth is most rapid among people aged 15-64, who tend to need and buy more food. This is an important shift that is expected to drive growth in food consumption for years to come.
  • Since the mid-1980s, India has been self-sufficient for food grains and often a net exporter. However, daily caloric intake per capita has risen more slowly than in many developing countries and remains significantly below the norm in developed countries. To meet its growing population’s demand for food, India’s food grain production must continue to rise.
  • Even with its currently low per capita consumption, growth in India’s demand for food is driving food price inflation at a rapid pace, and creating major concerns. It is reported that the food inflation rate had risen to 12 percent in the year to August , and the below-normal monsoon could put additional pressure on this country. India’s crop yields are well below those of other countries in Asia, and are also more variable. Proper fertilization is extremely important to increase yields and reduce variability, particularly potash during years of greater crop stress.
  • Rice and wheat, India’s two major crops, together account for well over one-third of the country’s planted area and 48 percent of its fertilizer consumption. Over the last 30 years, fruit and vegetable production has more than tripled and now accounts for 10 percent of fertilizer use. The Indian cropping season is classified into two main seasons – Kharif and Rabi – based on the monsoon. In general, nutrient consumption is almost evenly split between the two seasons.
  • India relies completely on imports to meet its growing potash demand. Indian Potash Limited (IPL) – a large government importing organization – typically imports around 60 percent of the country’s potash needs and private buyers the remainder. Although it has significant domestic DAP capacity, India must import the raw materials required to make this downstream product. It has become the world’s largest importer of phosphate products, including rock, phosphoric acid and, more recently, DAP. Historically, India has been relatively self-sufficient in nitrogen, but as demand has grown, the limited availability of natural gas has constrained domestic production and required more imports of nitrogen.
  • With limited phosphate rock reserves, India imports most of the raw materials it needs to produce upgraded phosphate products. Its phosphate processing facilities are located along the coast to facilitate these imports. For the DAP plants importing raw material, approximately 49 percent of the capacity relies on imported acid, 34 percent on imported rock and the rest on either rock or acid. India is the world’s second largest nitrogen producer with approximately 22 million tonnes of urea produced each year, mainly in the north-central area near the major consuming regions.
  • India’s largest potash-consuming region is in the southern half of the country, close to the primary ports and major rice-producing states. Despite significant grain production in the northern states, potash consumption there is limited by the lack of infrastructure needed to move the nutrient from port to the region. As infrastructure develops, there is significant opportunity to increase potash consumption to meet the needs of the potassium-deficient soils in these regions.
  • Potash imports to India were around 4.3 million tonnes in the 2011/12 fertilizer year. Belaruskali Potash Company (BPC) was the largest supplier with nearly half of the market share. Israel and Canada were also key suppliers in this market. There are only a few large compound NPK producers in India, with the biggest being farmers’ co-operative IFFCO. IFFCO is also the largest shareholder in IPL, the biggest importer of potash. Typically, about one quarter of the MOP consumed in the country is used in the manufacture of compound NPK fertilizers with the remainder used for direct application.
  • India’s total fertilizer subsidy bill rose dramatically over the past decade due to increased domestic fertilizer demand and higher international prices. In an effort to reduce the subsidy burden the government instituted a number of changes to the fertilizer subsidy system, primarily the decontrol of prices for potash and phosphate fertilizer. In 2012, the subsidies for DAP and MOP were reduced, while the urea subsidy was increased. As this situation is counter to the government’s stated intention to move closer to balanced fertilization, we believe further changes will be made over time.
  • The change in subsidies, along with a sharp decline in the value of the rupee, has resulted in potash and phosphate retail prices at the farm level nearly tripling over the past two years. Application has declined significantly as a result. India’s nitrogen-to-potash consumption ratio is now approaching 7:1 and its phosphate to potash ratio has risen to 3:1, which is not sustainable in the long term.
  • Urea prices are unchanged and, as a result, Indian farmers are buying more of this heavily subsidized nutrient. Although the government has made proposals to gradually increase urea retail prices to reduce the disparity between nitrogen and other fertilizer nutrients, no changes have been made to date. As a result, urea prices remain at close to US$100 per tonne to the Indian farmer. Nitrogen payments now account for around 70 percent of the total fertilizer subsidy bill. A modest redistribution of funds away from nitrogen could have a major impact on retail prices for phosphate and potash. For example, a $25 per tonne reduction in urea subsidies could reduce potash retail prices by $125 per tonne at 6 million tonnes of potash consumption.
  • Balanced fertilization is critical for any crop to achieve its full yield potential. Long-term trials illustrate the significant yield benefit from applying recommended levels of potash in conjunction with nitrogen and phosphate. In the case of rice and wheat in India, applying optimal amounts of potash would increase yields by approximately 15 percent based on IPNI data. While the return on applying potash is down from the heavily subsidized level in 2010, the return on applying potash remains very strong at today’s prices.
  • We believe India’s long-term food production requirements will support a move to more balanced fertilization practices. While government policy decisions remain a key factor in determining the pace of growth, we expect a rebound on potash demand in 2013 and strong growth in the following years driven by agronomic needs and rising food consumption.
  • PotashCorp - Market Analysis Report - Q3 2012

    1. 1. Q3 2012 MarketAnalysis ReportMarket UpdateSeptember 21, 2012 PotashCorp.com
    2. 2. Forward-looking StatementsThis presentation contains forward-looking statements or forward-looking information (forward-looking statements). Thesestatements can be identified by expressions of belief, expectation or intention, as well as those statements that are nothistorical fact. These statements are based on certain factors and assumptions including with respect to foreign exchangerates, expected growth, results of operations, performance, business prospects and opportunities and effective tax rates.While the company considers these factors and assumptions to be reasonable based on information currently available,they may prove to be incorrect. Several factors could cause actual results to differ materially from those expressed in theforward-looking statements, including, but not limited to: variations from our assumptions with respect to foreign exchangerates, expected growth, results of operations, performance, business prospects and opportunities, and effective tax rates;fluctuations in supply and demand in the fertilizer, sulfur, transportation and petrochemical markets; costs and availability oftransportation and distribution for our raw materials and products, including railcars and ocean freight; changes incompetitive pressures, including pricing pressures; adverse or uncertain economic conditions and changes in credit andfinancial markets; the results of sales contract negotiations with major markets; the European sovereign debt crisis and therecent downgrade of US sovereign debt and political concerns over budgetary matters; timing and impact of capitalexpenditures; risks associated with natural gas and other hedging activities; changes in capital markets and correspondingeffects on the company’s investments; unexpected or adverse weather conditions; changes in currency and exchangerates; unexpected geological or environmental conditions, including water inflows; imprecision in reserve estimates;adverse developments in new and pending legal proceedings or government investigations; acquisitions we mayundertake; strikes or other forms of work stoppage or slowdowns; changes in and the effects of, government policies andregulations; security risks related to our information technology systems; and earnings, exchange rates and the decisionsof taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in ourForm 10-K for the fiscal year ended December 31, 2011 under the captions “Forward-Looking Statements” and “Item 1A –Risk Factors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincialsecurities commissions. Forward-looking statements are given only as at the date of this presentation and the companydisclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, futureevents or otherwise, except as required by law.
    3. 3. Presentation Overview• Agriculture Market Update• N, P, K Market Overview• India Market Overview
    4. 4. Agriculture Overview
    5. 5. US Corn YieldProjected Yield Would Be the Lowest in 17 Years – Demand Rationing Required Corn Yield – Bushels per Acre 2012F refers to the 2012/13 crop year. Source: USDA
    6. 6. US Corn Use and Ending StocksReduction in All Uses Necessary to Balance Market; Domestic and International Use - Billion Bushels Stocks - Billion Bushels ~2.5 billion bushels 2012F refers to the 2012/13 crop year. Source: USDA
    7. 7. World Corn Trade ProfileSouth America Unlikely to Make up US Deficit; Importers Will Feel the PinchExports Import ShareExports – Million Tonnes US Share – Percent Japan Other North Africa Middle SE Asia East South Mexico Korea 2012F refers to the 2012/13 crop year. Source: USDA
    8. 8. US Ethanol Producer and Blender MarginsEthanol Economics Remain Intact Despite Higher Corn PricesIowa Plant Ethanol Margins – Cents per Gallon Blender Margins – Cents per Gallon Source: PIRA, ProExporter, PotashCorp
    9. 9. US Livestock SituationLivestock Margins Squeezed by Higher Feed Costs and Lower Market Prices Return Over Variable Cost - US$/head Source: Iowa State University, USDA, PotashCorp
    10. 10. FSU Domestic Grain ProfileFSU Experiencing Production Challenges, Lowering Exportable Surplus Million Tonnes 2012F refers to the 2012/13 crop year. FSU refers to Kazakhstan, Russia & Ukraine Source: USDA, PotashCorp
    11. 11. World Wheat ProfileUS, Canada and India to Increase Export Share as Demand Remains StableExports Global Wheat UseExports – Million Tonnes Million Tonnes 2012F refers to the 2012/13 crop year. Source: USDA
    12. 12. US Soybean SituationReduced US Supply Further Tightens Global Oilseeds MarketSoybean Yield – Bushels per Acre Use - Billion Bushels Stocks-to-use Ratio 2012F refers to the 2012/13 crop year. Source: USDA
    13. 13. World Soybean Trade ProfileSouth America to Offset Lower US Exports, But Not Until New Crop in 2013Exports Import ShareExports - Million Tonnes US Share – Percent Other SE Asia EU-27 China 2012F refers to the 2012/13 crop year. Source: USDA
    14. 14. US Net Cash Farm IncomeHigher Crop Prices and Insurance Payments Support Record Farm Income 2012 US Corn Revenue Scenario US Net Cash Farm Income US$/Acre US$ Billion *Assumes: Revenue Assurance with Harvest Payment Option, APH yield of 160bu/ac, actual yield of 95bu/ac. Source: USDA, ProExporter, PotashCorp
    15. 15. US Crop PricesPrices Have Moved Sharply Higher in Response to Global Production Issues Corn Soybeans US$/bushel US$/bushel 2013 Economics (Sept 20 vs June 1) 2013 Economics (Sept 20 vs June 1) $1.25/bu x 160 bu/acre $1.86/bu x 43 bu/acre = $200/acre = $80/acre Source: Bloomberg, PotashCorp
    16. 16. Indian Monsoon SituationMonsoon Recovering But Not In Every StatePercentage of Normal Monsoon Rain (June to Sept) Source: India Meteorological Department
    17. 17. China Corn Supply and DemandStrong Domestic Consumption Tightened StocksProduction - Million Tonnes Stocks-to-Use - Percent Source: USDA, China Grain Consultant
    18. 18. World Grain Stocks-to-Use RatioConsecutive Years of High Growth in Production Required to Replenish Stocks Percent Annual Production Growth Rate Scenarios 6% (~3X Historical Rate) 4% (~ 2X Historical Rate) 2% (~ Historical Rate) 2012F refers to the 2012/13 crop year. Assumes demand growth of 2 percent. Previous 10-year growth in production/consumption averaged approximately 2 percent annually. Source: USDA, PotashCorp
    19. 19. Nutrient Market Update
    20. 20. US Ammonia ImportsProduction and Logistical Hurdles Slow Imports Short Tons - Thousands Cumulative Short Tons - Thousand Source: USDOC
    21. 21. US Urea ImportsExpected Strong Import Volumes to Meet Projected Demand Short Tons - Thousands Cumulative Short Tons - Thousands Source: USDOC
    22. 22. World Ammonia Trade Shipments from Key Export Regions Global Ammonia Export Profile Cumulative Ammonia Exports Others Trinidad EuropeAsiaAfrica FSU Middle East Global Ammonia Trade 2011E: 19.6 Million Tonnes Source: Fertecon, CRU
    23. 23. Global Phosphate Trade ProfileGlobal Trade Is Expected to Decline Slightly in 2012 Change in MAP/DAP Imports (2012F vs. 2011) Change in MAP/DAP Exports (2012F vs. 2011) 2012F Trade MAP/DAP 21 mmt. Source: CRU, PotashCorp
    24. 24. US MAP/DAP ShipmentsShipments are Needed to Restock for Fall Application Cumulative – Short Tons Short Tons Source: TFI, USDOC
    25. 25. Brazil DAP/MAP ProfileExpanding Crop Acreage Expected to Keep Imports Robust Production ImportsThousand Tonnes Thousand Tonnes Source: ANDA, Potafertz, PotashCorp
    26. 26. North America Potash Shipments Low Distributor Inventory and Agronomic Need is Expected to Drive Demand Domestic Producer Shipments Offshore ImportsMillion Tonnes KCl Million Tonnes KCl Source: USDOC, TFI, PotashCorp
    27. 27. Brazil Potash Monthly ImportsStrong Crop Economics Are Driving Expected Demand Million Tonnes KCl Million Tonnes - KCl Source: ANDA, Potafertz
    28. 28. World Potash DemandInventory Destocking and Lower Indian Imports Affect Demand in 2012 Million Tonnes KCl * Excluding India Source: Fertecon, CRU, Industry Publications, PotashCorp
    29. 29. World Potash ShipmentsExpect Strong Rebound in 2013 Million Tonnes KCl Source: Fertecon, CRU, Industry Publications, PotashCorp
    30. 30. Indian Market Overview
    31. 31. India Crop Production and Fertilizer ConsumptionMajor Producer of Key Crops Percentage of World Crop Production Percentage of World Fertilizer Consumption Source: FAO, USDA, Fertecon
    32. 32. India’s Population GrowthRapid Growth in Major Consuming Demographic Population – Billions of People Source: United Nations
    33. 33. India Food Grain Production and ConsumptionPer-Capita Consumption Lags Other Developing CountriesMillion Tonnes Kcal/capita/day Source: FAO, USDA
    34. 34. India Food SituationHigh Food Inflation Drives Need for Productivity ImprovementsFood Price Index: 2004/05 Equals 100 Rice Yield – MT/HA Source: Government of India, USDA
    35. 35. India Fertilizer Consumption Rice and Wheat Largest Consumers of Fertilizer Fertilizer Consumption by Crop Fertilizer Consumption by Season* All Other Crops Rice Rice Corn Sorghum Kharif Pulses Wheat SoybeansSugar Barley Cotton RabiCrops Oats Pulses Oilseeds Cotton Wheat Fruits & Vegetables * Kharif crop season normally runs from April through September and the Rabi season is from October to March. Source: IFA, FAI
    36. 36. Indian Fertilizer Consumption ProfileIndia Reliant on Potash Import to Meet Rising DemandNitrogen Phosphate Potash Million Tonnes N Million Tonnes P2O5 Million Tonnes K2O Source: Fertecon, PotashCorp
    37. 37. Major Fertilizer Production LocationsPhosphate Production Located Near Major Ports Source: FAI 37
    38. 38. India Potash Consumption by StateOpportunity to Increase Potash Use Through Improved Distribution Source: FAI 38
    39. 39. Indian Potash Imports and Major PortsFSU, Canada and Israel Are Major Suppliers to IndiaIndia MOP Imports by Supplier (FY 2011/12) IFFCO Tata PPL RCF CFL Zuari Major Ports Total Imports: 4.3 million tonnes Major NPK Compound Factories Source: CRU
    40. 40. Indian Fertilizer SubsidiesGovernment Is Attempting to Reduce Total Subsidy BillIndia’s Total Fertilizer Subsidy Bill, US$ Billions US$ Subsidy per product tonne DAP Potash Urea Note: Rupee to US$ conversion is at the rate of 46 Rupees per US$ for 2010-11 and 50 for 2012. Source: Government of India
    41. 41. India Potash and Phosphate SituationChanges to India’s Subsidy System Have Impacted Potash and Phosphate DemandRs/tonne of MOP Thousand Tonnes of MOP Rs/tonne of DAP Thousand Tonnes of DAP Source: Fertecon, CRU, FAI, PotashCorp
    42. 42. India Urea SituationStrong Domestic Demand Expected to Support Imports Rs/tonne of Urea Thousand Tonnes of Urea Source: Fertecon, CRU, FAI, PotashCorp
    43. 43. India Fertilizer Market SituationOpportunity to Improve Yields Through Balanced FertilizationPercentage Yield Increase from Potash* Return on Potash Fertilizer * Based on IPNI yield trials. Yield increase from optimal N,P,K application vs N & P application only. Potash return calculation based on minimum crop support prices and IPNI yield response data. Source: Fertecon, IPNI
    44. 44. India Potash Demand Growth PotentialNeed for Balanced Nutrient Application Drives Demand Growth Million Tonnes KCl Equivalent Source: Fertecon, PotashCorp
    45. 45. Thank youThere’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter