A major buying group for crop inputs has set up a new partnership aiming to bring in Canadian farmers as the owners of a new nitrogen fertilizer manufacturing plant.
Saskatoon-based Farmers of North America (FNA) on Wednesday announced the launch of FNA Fertilizer Limited Partnership (FNA FLP) to run what it calls "ProjectN," which will now seek seed capital to build and operate such a plant.
FNA itself would not be the owner of such a plant, but instead is "organizing and providing the catalyst to see a fertilizer plant built," spokesman Bob Friesen said in a release. "Participation in fertilizer manufacturing will allow farmers to capture more of the value chain."
FNA, which began importing offshore nitrogen for its members in 2001, said Wednesday that its ProjectN working group has already run a review of the nitrogen fertilizer sector, considering natural gas pricing, plant scale, market demand, competitive supply and "other indicators framing the business case for a new development."
FNA ran its initial engineering feasibility study for such a plant in 2010, and found in a separate 2011 survey that fertilizer is an "investment priority" for 74 per cent of FNA members.
"The business case is compelling," said Friesen, a former president of the Canadian Federation of Agriculture and CEO of FNA’s Strategic Agriculture Institute (FNA-STAG). "The real question is if and to what extent farmers want to gain a return on investment to offset the high cost of fertilizer rather than merely paying for it."
Whether farmers take part in ProjectN or not, they’ll be the ones who indirectly pay for any new fertilizer plants in the future, as part of the base cost of their fertilizer, he said.
Since North America now imports almost seven million tonnes of fertilizer per year, FNA said, farmers are obviously "paying for all the plants that now exist and the profits they make."
FNA FLP’s goal, FNA said, will be to bring farmers in as equity owners of a new N plant through committed purchase contracts for the plant’s products.
The new company’s business plan "provides a unique form of stability and risk mitigation to underpin the success of the project, while providing farmers a certainty of supply of a key farm input."
FNA FLP has already set up a website through which farmers can commit to take part. "The earlier farmers commit to the project, the greater the benefits that are expected to accrue from their participation," FNA said.
If ProjectN gets a strong response to its seed capital raise, "concrete announcements" on the plant’s scale and exact site would follow in a "relatively short time frame," Friesen said.
Once the engineering work is completed, land secured and regulatory approvals obtained, FNA FLP would move to raise equity for the plant, seek out operating partners and arrange financing for the build.
High fertilizer costs foster outside imports, Dec. 10, 2008
Lack of competition fuels high fertilizer prices: FNA, Nov. 12, 2007