1 THE MOSAIC COMPANY | MARKET & STRATEGIC ANALYSIS GROUP | WEEKLY MARKET UPDATE 7/28/2017

Weather still in the driver’s seat

Weather patterns continue to dominate ag news headlines, and we’ve got another month to go before we can give the Weather Channel a rest. Needed rainfall fell across portions of the Corn Belt early this week, but the precip was spotty, and analysts have had a diffi-cult time assessing its impact on the crop. According to the Drought Monitor, recent rains appear to have had little impact on the drought situation across the country as the portion of the northern plains seeing “severe” or worse drought continues to expand. In fact, most of Iowa is now under at least “abnormally dry” conditions, and the state now has its first “severe drought” area. Don’t confuse the map below with a Grateful Dead t-shirt. Rather, it tells a tale of two Corn Belts with the east seeing well-above normal moisture during the month of July, while the west (including most of Iowa) has seen a fraction of normal rainfall. The outlook over the next ten days calls for below normal precip across the entire growing region, though some of the heat has been taken out of the forecast.

Dry soils, a softening dollar, and continued decent export sales provided some support for ag values starting around mid-week, but the top commodities couldn’t overcome early losses when the market was expecting a wetter forecast. Nov ‘17 soybeans closed the week down 9 cents to $10.13/bu, while Dec ‘17 fell 6 cents to $3.88/bu. Jul ‘18 HRW wheat was down 12 cents to $5.52/bu.

Agriculture News

U.S. Corn conditions continue to deteriorate, with the USDA again cutting the percent rated good/excellent (G/E) by two points early this week to 63% compared to 76% last year. Soybeans lost four points from the top ratings as 57% are now considered to be in G/E condition (vs. 71% last year).

Reinforcing fears of low yields due to drought, the Wheat Quality Council announced results of its three-day crop tour of North Dakota and adjacent sections of Minnesota and South Dakota. The Council is estimating hard red spring wheat crop yields at 38.1 bu/ac, down from 45.7 estimated during last year’s tour and 46.8 on average over the past five tours.

Between June 1 and July 25, the Indian monsoon has delivered 5% more rain across the country than the average, which has supported Kharif crop sowing (+2% y-o-y). This bodes well for fertilizer demand, though India still has significant volumes left to buy ahead of Rabi.

In ethanol news, Brazil's Chamber of Foreign Trade has postponed for 30 days a decision on whether to implement a tariff on imported ethanol to slow arrivals from the U.S. One option is to apply a tariff on imports above a specific quota. The quota proposal under debate would apply a 20% tariff on any volumes above and beyond 500,000 tonnes per year. Brazilian ethanol imports have reportedly quadrupled to 1.3 million cubic meters in the first half of 2017 compared to the same period a year prior. Most of the volume has come from the U.S.

In an effort to boost consumption of sugar-based ethanol, Brazil has raised its tax on unleaded gas to $0.25/liter compared to $0.04/liter for ethanol.

Though it’s a bit of an afterthought with the U.S. crop taking most headline space, AgRural is call-ing Brazil’s Safrinha corn harvest about half com-plete, slightly ahead of last year’s pace.

As a safeguard following rapid Q1 imports, Japan intends to raise the tariff on frozen beef imported from the U.S. and other countries that do not maintain economic partnership agreements with Japan. Tariffs will climb from 38.5% to 50.0%

Market Alert

Weekly Market Update July 28, 2017

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Jan Feb Mar Apr May Jun Jul

New CropPrices

Dec 17 Corn Jul 18 HRW WhtNov 17 Soybeans

Source: CME

$BuCorn/Wheat

$BuSbns

Past 30 Days Rainfall Deviation from Norm (%)

2 THE MOSAIC COMPANY | MARKET & STRATEGIC ANALYSIS GROUP | WEEKLY MARKET UPDATE 7/28/2017

through March of next year. The hike will certainly impact the U.S., which sent $1.5 billion in beef to Japan last year, roughly half of which was frozen. The move will further benefit top sup-plier Australia, which already paid a lower tariff.

June Chinese Fertilizer Trade Statistics

June DAP/MAP/TSP exports of 1.2 million tonnes represented the highest June total on record as Chinese producers finally moved significant volumes of DAP into India and continued to push sizable MAP volume into Brazil (lower-grades in particu-lar). YTD exports of 4.0mmt are now up 26% y-o-y, with MAP representing the largest increase (+65%).

China imported only 101,000mt of MOP in June (-71% y-o-y), but YTD arrivals are still up 16% from last year at 3.9mmt. MOP imports in 1H were the highest in a decade.

After another mediocre month, urea exports totaled 2.8mmt in Jan-Jun, down 45% from 2016.

June India Fertilizer Statistics

Indian DAP importers finally started to enter the market in June, but FYTD arrivals (Apr-Jun) of 1.1mmt are still down 30% from last year at this time. Buyers have been slow to ink deals as they hold for lower Chinese fob values, but higher FYTD pro-duction (+20% y-o-y) has made up for some of the lack of sup-ply. First quarter sales of 1.9mmt (+24%) remain a good story.

We’ve seen some positive developments on the MOP side, with FYTD imports of 1.3mmt more than double the prior year and shipments of nearly 800,000mt up 74% y-o-y.

Urea stocks remain elevated but are falling with good ship-ments (+10% y-o-y) and lower production (-2%) despite an up-tick in imports (+6%).

Market Alert

Weekly Market Update

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mil Tonnes China DAP/MAP/TSP Exports

Min/Max Range (12-16)

2017

7-Yr Olympic Average

Source: China Customs

Jan-May YTD

DAP 2,266 2,088 9% 1,054 115%

MAP 1,357 825 65% 378 259%

TSP 413 300 38% 417 -1%

DAP/M AP/TSP 4,035 3,213 26% 1,911 111%

MOP 140 112 25% 111 26%

Urea 2,753 5,050 -45% 2,550 8%

Source: China Customs

China Exports

YTD

2017

YTD

2016

% Chg

Prior Yr

7-Yr

Avg

% Chg

7-Yr

Avg1000 MT

Year-To-Date

MOP 3,914 3,383 16% 3,478 13%

Sulphur 5,491 6,567 -16% 5,385 2%

NPK 562 651 -14% 625 -10%

Source: China Customs

China Imports

YTD

2016

% Chg

Prior Yr

7-Yr

Avg

% Chg

7-Yr

Avg1000 MT

YTD

2017

0

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400

600

800

1,000

1,200

1,400

1,600

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

1000 Tonnes India DAP Imports

Min/Max Range (12/13-16/17)

17/18

7-Yr Olympic Average

Source: FAI

Year-To-Date (FY)

1000 MT

DAP 1,098 1,558 -30% 1,175 -7%

MOP 1,288 550 134% 761 69%

Urea 1,704 1,601 6% 1,351 26%

NPK 196 236 -17% N/A N/A

Source: FAI

India Imports

YTD

16/17

% Chg

Prior

Yr

7-Yr

Avg

% Chg

7-Yr

Avg

YTD

17/18

3 THE MOSAIC COMPANY | MARKET & STRATEGIC ANALYSIS GROUP | WEEKLY MARKET UPDATE 7/28/2017

Nitrogen finds some footing; India inks potash deal

Urea awards under MMTC’s (India) latest tender totaled 445,000mt, short of the 700,000mt expected, which suggests another tender may be held for September deliveries. But even with a smaller award total, the tender strengthened the overall tone of the market by absorbing available August volumes form Iran and other Arabian Gulf producers. Brazilian granular values were up $4 at the midpoint to $207-209/mt cfr, while NOLA granular urea held steady at around $180/st fob this week on thin trade. North America was more focused on UAN this week, with summer fill pricing announced. While East Asian spot ammonia saw a bit of strength this week, global contract values are still under pressure as evi-denced by a $50/mt reduction in the Tampa contract for August.

Indian DAP values have held broadly steady over the past couple of weeks, with the lowest offer in NFL’s 90,000-tonne July 25 tender coming in marginally higher than its July 7 tender. The low offers represent around $335/mt fob China, but with lower Chinese fob values seen in recent SE Asia and Latin American business ($330/mt fob and below), NFL was expecting lower prices and may scrap this tender in favor of one announced this week for the same tonnage. NO-LA DAP ticked a few dollars higher at the midpoint with a confirmed trade at $325/st fob (range of $317-325), while Bra-zil went the other direction and lost a couple ticks at the high end to $340-$353/mt cfr. Prices are also heard under pressure in nearby Argentina with adequate supply available.

Uralkali settled the first 2017 Indian potash contract with IPL at $240/mt cfr, up $13 from last year’s contract and up $10 from the headline Chinese price. Volumes were not disclosed, and deliveries are to take place between August and June. No additional Chinese contracts were signed this week. Elsewhere, SE Asian prices are still assessed with a midpoint near $250/mt cfr for standard product, but the range has narrowed as buyers seek lower prices in the wake of the $230/mt Chinese price. NOLA rose a couple dollars to $214-217/st on limited interest following summer fill, while Brazil remains stable again at $260-270/mt cfr.

N

P

K

Weekly Market Update

As a follow-up to last week’s top nitrogen story,

MMTC (India) is understood to have awarded

445,000mt under its July 20 urea tender, far short

of the 700,000mt expected around the indus-

try. MMTC had countered lowest west coast

($203/mt cfr) and east coast ($209) offers, which

were down ~$11 from the prior Indian tender.

U.S. nitrogen producer LSB In-

dustries announced it has ended

its attempt at a sale or merger,

having received no acceptable

offers as the “current outlook in

the nitrogen chemical industry is

adversely affecting any potential

transactions.”

Like PotashCorp an-

nounced a week prior, Mo-

saic settled Q3 sulphur

contracts at $74/lt delivered

to Tampa, up $4 from Q2.

Belarus’s BelTa reported that the

Slavkali potash project is planned

to be commissioned in 2022, two

years later than prior announce-

ments by Slavkali. Construction

of the mining and processing

plant is expected to be finished in

2020, but additional infrastructure

work will take a further two years.

After a strong June, cumula-

tive DAP demand in Pakistan

so far during Kharif (Apr-Jun)

of 277,000mt was up 9% y-o-

y. Imports have been strong

and now total 415,000mt for

Jan-Jun (+58% y-o-y), and

NFDC estimates July arrivals

have surged and will cover

almost half of the imports for

all of Kharif (Apr-Sep).

Mosaic settled August

ammonia contracts at

$190/mt Tampa cnf,

down $50 from July

and reflective of a

Venezuelan spot car-

go secured two

weeks ago at the

same level.

Turkmenhimiya’s urea and ammonia

plant in Garabogaz Turkmenistan

has entered start-up. The plant is

expected to maintain production

capacity of around 1.2mmt/y of urea

and 700,000mt/y of ammonia with

commercial production expected a

year from now.

PotashCorp reported Q2 potash sales of 2.4mmt, up from

2.1 million a year earlier, although North American sales

were down by 23% from a strong Q2 2016 (offshore ship-

ments were up 34%). Potash sales rose to 4.5mmt in the

first half from 3.9 million a year earlier. The company reit-

erated expectations for a Q3 PCS+Agrium merger close.