FNA Fertilizer

[farmaholic]

What are peoples thoughts on this topic?
They quote some pretty good margins for
the wholesale and retail fertilizer
businesses.

From Viterra website:

Agri-Products

"Fundamentals for the Agri-Products
segment are expected to remain strong in
the last quarter of fiscal 2012 due to
relatively strong commodity prices that
should continue to drive solid returns
for producers and their demand for crop
inputs. Viterra is increasing its
fertilizer margin guidance to $140 to
$160 per tonne for fiscal 2012 from its
previous guidance range of $120 to $140
per tonne. Strong agri-commodity
pricing, increased seeded acreage in
Western Canada and higher nutrient
requirements from excess moisture in the
last two years have supported strong
fertilizer demand in fiscal 2012."

Obviously it is no longer the cost of
production that is determining the price
of fert but it's relation to the
commodities it's used to produce. What
ever the market will bear.

FNA has done some pretty good work
lowering prices of some products. How
much of a differnce do you think they
can have?

[countryguy]

I think it is important to remember that this project is not about being competition and bringing the price of fertilizer down because that will never happen. In simple terms it is farmers/shareholders making their own and using it.

[farmaholic]

I think they tried to make that point at the meetings. But aren't we supposed to be getting it at wholesale prices? Which they claim would be a substantial saving?

[oneoff]

In the case of Viterra, the "middleman" wants $140.00 to $160 per tonne. That amount, (as a minimum margin they are aiming for) will turn out to be whatever they can squeeze from the customers, all depending on what they can get, and any other factors that allow beneficial price changes.

We need all the competition we can get. Too bad the flare gas from oil production in SE Sask for example wasn't required to be used for productive purposes. If it were not allowed to be wastefully burned, or shut in or required to be given to anyone who would make full use of this reource......then we might see innovative entrepreneurs step forward to produce some valuable, worthwhile end products.

[Rareearth]

Your comment is right on the mark oneoff.

FNA wants a 50% operating partner, and 50 %
farmers. Any one that thinks the operating
partner will sell to farmers at cost, or cost plus, or
at a discount, or .... Is out of touch with reality or
worse. They will sell at market prices and the
farmers might get a dividend return for their
investment dollars. It is that simple. Now, if it
was 100 % farmer owned, hire the design build
contractor, hire management and labour it would
truly be a opportunity. This approach isn't
workable why, dumb farmers.

[fjlip]

Business rarely bothers with risk/low/variable returns like farmers experience.

[hobbyfrmr]

Agree with fjlip. Profit is the only recipe for success.
I have been hearing around Ft. Mcmurray, there are independant processors who have built their own micro oil extractor/porcessors and sell it to pipeline. They are long time experienced operators up there who have struck out on their own and doing small, yet profitable batches. Why cant this be a spinoff from oneoff's idea. Farmers can choose from a massive N factory, or several small micro N fertilizer factories attached to a wasting/burn off site. When that site is depleted move the micro factory over to the next capped/burning waste site. Kind of the opposite of the farmer bigger is better theory. Sometimes smarter and more agile is better. Just a thought.

[dave4441]

Interesting comment hobby

[TOM4CWB]

Hobby,

There are Urea plants that could be built that produce using feedstock from plant residues instead of Natural Gas. This would be an example of a specialty fert. that would be a grower opportunity to work up the other side of our production input chain.

[bucket]

Enbridge has put turbines at various sites that they can co-gen power into the grid.

Its this kind of thinking that will be more successful than the multi-billion dollar plants. Quick to become operational, quicker payback.

The technology enbridge used, is from Egypt, I think.

One would think there is technology to built little plants as required. An increase in production just means twinning or tripling the plant.

[Hopperbin]

The best scenario in my books is that the price of fertilizer is not affected much at all and just enough to keep the farmers involved committed, the 50 percent profit then goes back to the investor. I would like that to play the part of investor and is not that the intention to make profit for us investors? , out and why would there not be enough interest from farmers to take higher stake of investment. BMO capital is running the show, word is land is purchased and Nateral gas is secured, but have my doubts as to that. FNA is only working on selling the seed stock shares, BMO capital will take over pretty soon, am I not correct? If the farmers don't want the investment profit I am sure someone else will take the opportunity. Farmer investors should try to stay in as investors only and not get too caught up in driving fertilizer prices down, and let the opperating partner run the show and to make the most profit for the investors should be the way it should be run. In my opinion.

[Hopperbin]

Think about it, for a cost of 1000 dollars per ton to build a million ton equivelent plant, total 1 billion. If one could have the opportunity to take a profit of 300 per 1000 dollar investment by keeping the price of 46 actually the same. In this case the N will still be 300 dollars less cause your making it on the investment side. Does that make any sense? If the price of N is driven down then all farmers share in the investment of a few. Not really what we should want to do here. Then as the major manufacturers scramble to keep their share prices up they may put on hold their own expansion plans as it may not be in their best interest to expand. Isn't there a similar N plant being planned in the USA to do the same thing?

[dave4441]

But is a profit from fertilizer production of $300/MT long term possible?? I think that if profit for fert production remained at that level everyone would build a plant.

[farmaholic]

I think they said something about not driving down the price of Fert because they would simply get crushed or squeezed out by the "Giants". The goal appeared to be providing fert at wholesale prices to those who bought in, not at cost of production but wholesale. Their profits would be the same whether they sold to a retailer or the Farmer. It was the retail level they are claiming to eliminate.

[Hopperbin]

Think about it the major manufacturers do not want to take a share price cut. By building it your joining not fighting.