Mosaic Inc. is paying $12 billion cash for the phosphate
business owned by CF Industries Holdings Inc.
CF intends to use the cash to increase its nitrogen business
where it is already the producer in the United States.
Mosaic is already the world’s largest phosphates marketer and
this deal would increase its U.S. market share from 50 to 75 per cent.
And the Americans complain about supply management in Canada's dairy and poultry industries? That's nothing compared with this concentration of power that spans the entire cropping spectrum and reaches far beyond the U.S. into global markets.
Mosaic gets the South Pasture phosphate mine in Florida
which produces about 1.8 million tonnes per year. Mosaic’s existing mines yield
about 8.2 million tonnes per year.
CF will also supply Mosaic with about one million tonnes of
ammonia per year; it’s used to make phosphate products.
Mosaic will shelve its plans to spend $1.3 billion to build
its own ammonia plant at Faustina, La. It is also canceling plans for a
$1-billion phosphate processing plant in Florida.
Earlier this year Mosaic signed a deal with a company in
Saudi Arabia to invest $1 billion on phosphate mining.
Mosaic is strategically reducing its reliance on potash.
CF Industries is investing $3.8 billion to expand its
nitrogen production in Louisiana and Iowa.
While there are concerns that the government might take a
dim view of the concentration of power, this deal would leave concentration for
phosphates and nitrogen lower than the concentration for potash.
Saskatchewan is the focus of the potash industry and
Canpotex, a joint venture by Potash Corp. of Saskatchewan, Mosaic and Agrium,
has a monopoly on potash exports.
Russia and Belarus had a similar joint venture monopoly on
potash from mines there, but the Russian company broke away this year and began
cutting prices and increasing production.
That has already had a huge impact on share prices for
Potash Corp., but so far only a modest impact on North American prices for
potash fertilizer.
There has been a flurry of activity in nitrogen production,
fuelled by farmers’ concerns about the sharp increase in prices in the last
five years and by the increasing availability of plentiful supplies of natural
gas being developed by fracking. Natural gas is used to make nitrogen
fertilizers.
