Saskatchewan Real Estate Forum Agriculture, Saskatchewans - - PowerPoint PPT Presentation

Saskatchewan Real Estate Forum

Agriculture, Saskatchewan’s competitive advantage

5/2/2017 1

CULTIVATING EXCELLENCE

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

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Agriculture: Sort Of A Big Deal

3

1 in 8 Canadian jobs are related to agriculture Agriculture employs over 2.2 million Canadians Canada is the world’s 5th largest exporter of agricultural foods Annual export sales of $30B Agriculture accounts for 7%

• f Canada’s GDP

Ag contributes $100B to Canada’s annual GDP

9.7BN

The expected world population in 2050 will require global crop production to grow by over 50%

33% increase

The importance of agriculture is only increasing…

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The Farmer

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Grain crop pricing and trends

(2005 to present)

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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

2 4 6 8 10 12 14 16 18 20 USD/Bu Corn Soybean Wheat Recent peak pricing Soybean ~$18.25/Bu Wheat ~$9.00/Bu Corn ~$8.50/Bu

___________________________ Source: AGU internal database

Prices stagnating at ~50% of peak

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The Canadian (and Saskatchewan) farmer advantage

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Canada and U.S. Net Cash Income (nominal)

___________________________ Source: 1. USDA, Statistics Canada, Agriculture and Agri-Food Canada 2. 2016 FCC Farmland Values Report

Annual % change in farmland values

Canadian growers have been able to financially

• utperform their U.S. peers

 Weakness in the CAD has bolstered sales made in USD  Increasing amounts of crop diversity have allowed farmers to outperform geographies more dependent

• n grain prices

Over the last 10 years, Saskatchewan farmland values have increased an average of 14.5% compared to 12.4% across Canada  Long-term, Sask. has outperformed other geographies

• Property purchase restrictions favor local land
• wnership but have also restricted foreign investment

hindering recent growth

Saskatchewan farmers continue to outperform their peers due to a variety of macroeconomic factors

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Fertilizer producers

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Global fertilizer pricing and trends (2012 – present)

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150 350 550 750 950 1,150 1,350 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) 150 200 250 300 350 400 450 500 550 600 1/2/2012 1/14/2013 1/20/2014 1/26/2015 2/26/2016 3/3/2017 DAP (NOLA) Potash (Cornbelt) Potash (Sask)

Nitrogen Potash & Phosphate Significant downward pressure on P & K fertilizer prices for the last five years Significant downward pressure on N fertilizer prices for the last five years

___________________________ Source: Green markets database 1. Prices are in local currencies

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Potash production costs in Saskatchewan

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• 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

25 50 75 100 50 100 150 200 250 300 350 10 20 30 40 50 60 Quartile (%) Delivered Cost - CFR Brazil (US$/t) Cumulative Operational Capacity (millions mt) AGU Vanscoy Russia/Belarus

Potash Global Production Cost Curve

Saskatchewan is home to some of the best positioned operating assets in the Potash industry

___________________________ Source: CRU 1. Agrium assets based on internal estimates.

Mostly Saskatchewan Facilities

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Nitrogen production costs in Saskatchewan

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25 50 75 100 100 200 300 400 500 600 20 40 60 80 100 120 140

Quartile (%) Cost – FOB Plant (US$/t) Cumulative 2015 Production (millions mt)

Ammonia Global Production Cost Curve

• Saskatchewan has one ammonia production facility (Yara – Belle Plaine)
• The Belle Plaine facility operates in the top quartile on a cost to produce globally

Yara – Belle Plaine Agrium - Redwater Agrium – Carseland / Ft. Sask Agrium – Borger

Saskatchewan is home to one of the lowest-cost nitrogen production facilities in the world

___________________________ Source: CRU 1. Agrium assets based on internal estimates.