1. The Fertilizer Situation MO-AG Winter Convention & Legislative Conference Lake Ozark, MO January 7, 2009 Ford B. West TFI President

2. Average Monthly Wholesale Prices. Source: Green Markets, published by Pike and Fischer.

3. Average Monthly Wholesale Prices. Source: Green Markets, published by Pike and Fischer.

5. Average Monthly Wholesale Prices. Source: Green Markets, published by Pike and Fischer.

6. Average Monthly Wholesale Prices. Source: Green Markets, published by Pike and Fischer.

7. Index of Corn and Fertilizer Prices

8. Recap: Factors Resulting in Higher Fertilizer Prices Dramatic Increase in World Nutrient Demand More Recently, Rise in U.S. Nutrient Demand Decline In Domestic N Supply – Natural Gas Ps! Which resulted in Increased U.S. Imports of Nitrogen Rising Energy Ps => Higher Production Costs Rising Raw Material Ps => Higher Production Costs Tighter supplies of all nutrients! Increased Shipping/Distribution Costs (ocean freight; rail; barge; truck) Falling Value of the U.S. Dollar Curb on food and fertilizer exports by selected countries

9. Whats Changed? High Fert Ps and Lower crop Ps => Demand Destruction Some recovery in the value of the US Dollar Changing Shipping and Distribution Costs: 1.Ocean freight rates have very recently collapsed; 2.Gasoline and diesel fuel prices have declined; but 3.Rail rates to move ammonia remain high and are expected to continue to climb. The Ps of some raw material have declined – ammonia & sulfur We see some of the curbs on food and fertilizer exports by selected countries slowly being removed

10. Industry Structure * Cost of greenfield in Saskatchewan ** Estimated costs exclude infrastructure outside plant gates (rail, road networks, utility systems, port facilities, etc.) *** Ammonia/urea complex Potash (KCl) Nitrogen (NH 3 ) Phosphate (P 2 O 5 ) Availability of Raw MaterialsVery LimitedRelatively AbundantLimited # of Producing Countries12~ 60~ 40 % Govt Control19%57%47% Industry Operating Rate91%86% 5- Year Demand Growth5.6%3.7% Time for Greenfield5-7 years3 years3-4 years Cost for Greenfield*$US 2.8 billion** 2 million tonnes $US 1 billion*** 1 million tonnes NH 3 $US 1.5 billion 1 million tonnes P 2 O 5 Source: Fertecon, British Sulphur, and PotashCorp.

11. NH 3

14. Phosphate Source: Mosaic

17. Source: Pentasul ADNOC – Abu Dhabi National Oil Company – Monthly Posted Price Vancouver - Contract Price Updated November 7th, 2008 International Sulphur Prices July 1, 2008 - $820/tonne Aug 1, 2008 - $770/tonne Sept.1, 2008 - $580/tonne Oct.1, 2008 - $200/tonne Nov.1, 2008 - $40 ?

18. Potash Source: Mosaic.

20. Over 80% of production exported compared to 12.5% for world grains

22. Top Fertilizer Importing Countries Share ofShare of FY05/06WorldCountry Rank Country Imports Consumption (5) France 4.2 % 79 % (4) India 8.0 % 26 % (3) Brazil 9.0 % 68 % (2) China 11.4 % 16 % (1) United States 16.1 % 56 % Top 5 48.8 % Source: International Fertilizer Industry Association.

23. Production is not keeping up with demand growth –Production has fallen short of use in 7 of the last 9 years –Even with a big increase in production in 2008, stocks are tight –Deficit since 2000 is 220 million metric tons Demand growth will probably accelerate –More grain used for biofuels production –Income growth leads to improving diets in key developing countries Especially India and China World grain stocks have dropped to historically low levels –Stocks are the lowest since the early 1980s –Stocks-to-use ratios are even tighter Production will need to continue to increase! Some Observations About the World Grain Market Source: Doane Advisory Services.

24. Computed from data reported in WASDE, USDA.

25. Product Stewardship Efforts

27. Right Product, Time, Rate and Place Paradigm Right Place Right Product Right Rate Right Time

28. Right Nutrients Select appropriate nutrients and on farm nutrient sources for the cropping system. Soil Testing N, P, K and micro-nutrient data Enhanced fertilizer efficiency Nutrient management planning

29. Right Time Application Timing Controlled Release Technologies Inhibitors Fertilizer Product Choice

30. Right Place Application method Incorporation of fertilizer Buffer strips Conservation tillage Cover cropping

31. Right Rate Soil testing Yield goal analysis Crop removal balance Nutrient management planning Plant tissue analysis Record keeping Variable rate technologies Site-specific management

32. P: 106% K: 85% Improvement: % Corn Yield: 52% N: 42% Source: USDA-NASS; PPI

33. What is Nutrient Use Efficiency? %Crop Recovery Efficiency (RE) = Increase in uptake by the plant per unit nutrient added usually expressed as % Example:Example: –N uptake when no N applied = 30 lb/A –N uptake when 100 lb applied = 90 lb/A 60% recovery –(90-30)/100 = 60% recovery System Recovery Efficiency (RE) = output of nutrient in harvested crop as % of inputs 90% recovery90/100 = 90% recovery Short- versus long-term?Short- versus long-term?

34. Conclusions Ecological intensification is required to increase yields and reduce environmental losses from existing farmland and preserve/protect pristine lands, forests Increased utilization of nutrient management and conservation practices is possible Increased demand for all commodities, including biofuels and fertilizer, requires that the products be used as efficiently as possible Increases in nutrient use efficiency means higher plant uptake, higher yields, less loss to the environment Risk-reward ratio(s) in current farming practices are very high

35. 1980 2005 Change Bil. Bushels % U.S. corn production 6.40 11.11 + 74 Nutrient Use on Corn Mil. S. Tons % Nitrogen 5.2 5.4 + 3 Phosphate 2.4 2.9 - 20 Potash 2.9 2.2 - 24 Total 10.6 9.6 - 10

39. USA 1.00 : 0.35 : 0.39 China 1.00 : 0.39 : 0.20 India 1.00 : 0.41 : 0.19

40. Producers Responding to Lower Demand in Short Run Capital Costs Remain High Capital More Difficult to Get Due to Economic Meltdown Plant and Mine Expansions Delayed and/or Scrapped! Fertilizer Production Cutbacks and Shutdowns: –Nitrogen: Trinidad, Canada, Russia, Ukraine, Italy, Romania, Estonia, Libya, Turkey, Hungary, Poland, and Germany –Phosphate: Morocco, Russia, Tunisia, Lithuania, and USA –Potash: Russia, Germany and Canada

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