Saskatchewan Real Estate Forum Agriculture, Saskatchewan’s competitive advantage 1 5/2/2017
Introduction Personal introduction • Andy Kelemen VP, Corporate Development, Agrium Inc. • Agrium introduction • Major manufacturer and retail supplier of agricultural products and services across the globe • Market cap: 13.3 billion USD Revenue: ~13.7 billion USD • • Operations in Canada, USA, Australia, South America, Europe & Egypt • Operates approximately 1,500 retail centers across the globe • Manufactures nitrogen, phosphate and potash fertilizers CULTIVATING EXCELLENCE 2 5/2/2017
Agriculture: Sort Of A Big Deal 1 in 8 Canadian jobs are Agriculture accounts for 7% Canada is the world’s 5 th related to agriculture of Canada’s GDP largest exporter of agricultural foods Agriculture employs over Ag contributes $100B to 2.2 million Canadians Canada’s annual GDP Annual export sales of $30B The importance of agriculture is only increasing… 9.7 BN The expected world population in 2050 will require global crop production to grow by over 50% 33% increase CULTIVATING EXCELLENCE 3
The Farmer CULTIVATING EXCELLENCE 4 5/2/2017
Grain crop pricing and trends (2005 to present) 20 Recent peak pricing Soybean ~$18.25/Bu 18 Wheat ~$9.00/Bu Prices stagnating at Corn ~$8.50/Bu ~50% of peak 16 14 12 USD/Bu 10 Corn Soybean 8 Wheat 6 4 2 0 Crop prices have remained at depressed levels for almost 2 years; This generally results in lower income for farmers and everyone in the ag supply chain ___________________________ CULTIVATING EXCELLENCE 5 5/2/2017 Source: AGU internal database
The Canadian (and Saskatchewan) farmer advantage Annual % change in farmland values Canada and U.S. Net Cash Income (nominal) Canadian growers have been able to financially Over the last 10 years, Saskatchewan farmland values outperform their U.S. peers have increased an average of 14.5% compared to 12.4% across Canada Weakness in the CAD has bolstered sales made in USD Long-term, Sask. has outperformed other geographies Increasing amounts of crop diversity have allowed farmers to outperform geographies more dependent • Property purchase restrictions favor local land on grain prices ownership but have also restricted foreign investment hindering recent growth Saskatchewan farmers continue to outperform their peers due to a variety of macroeconomic factors ___________________________ Source: CULTIVATING EXCELLENCE 1. USDA, Statistics Canada, Agriculture and Agri-Food Canada 6 5/2/2017 2. 2016 FCC Farmland Values Report
Fertilizer producers CULTIVATING EXCELLENCE 7 5/2/2017
Global fertilizer pricing and trends (2012 – present) Significant downward pressure on N 1,350 fertilizer prices for the last five years 1,150 950 750 Nitrogen 550 350 150 1/2/2012 1/14/2013 1/20/2014 1/26/2015 2/26/2016 3/3/2017 Ammonia (NOLA) Ammonia (Western Canada) Urea (NOLA) Urea (Western Canada) Significant downward pressure on P & K 600 fertilizer prices for the last five years 550 Potash & Phosphate 500 450 400 350 300 250 200 150 1/2/2012 1/14/2013 1/20/2014 1/26/2015 2/26/2016 3/3/2017 DAP (NOLA) Potash (Cornbelt) Potash (Sask) ___________________________ Source: Green markets database CULTIVATING EXCELLENCE 8 5/2/2017 1. Prices are in local currencies
Potash production costs in Saskatchewan Potash Global Production Cost Curve Quartile (%) 25 50 75 100 Mostly Saskatchewan 350 Facilities Delivered Cost - CFR Brazil (US$/t) 300 AGU Vanscoy 250 Russia/Belarus 200 150 100 50 0 0 10 20 30 40 50 60 Cumulative Operational Capacity (millions mt) Saskatchewan potash production costs are some of the lowest in the world • • Logistical efficiencies are critical in potash due to the distance to end markets • Weakened currencies in Russia & Belarus have aided their cost of production in recent years Saskatchewan is home to some of the best positioned operating assets in the Potash industry ___________________________ Source: CRU CULTIVATING EXCELLENCE 9 5/2/2017 1. Agrium assets based on internal estimates.
Nitrogen production costs in Saskatchewan Ammonia Global Production Cost Curve 25 50 75 100 Quartile (%) 600 Agrium – Carseland / Ft. Sask 500 Cost – FOB Plant (US$/t) Agrium – Borger 400 Agrium - Redwater Yara – Belle Plaine 300 200 100 0 20 40 60 80 100 120 140 Cumulative 2015 Production (millions mt) Saskatchewan has one ammonia production facility (Yara – Belle Plaine) • • The Belle Plaine facility operates in the top quartile on a cost to produce globally Saskatchewan is home to one of the lowest-cost nitrogen production facilities in the world ___________________________ Source: CRU CULTIVATING EXCELLENCE 10 5/2/2017 1. Agrium assets based on internal estimates.
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