A Conversation with Eddy Fay – OCP’s representative in Argentina
During my recent discussion with Michael Sebag, I was interested to learn that Morocco has 70 per cent of the world’s phosphate reserves and that OCP, a Moroccan state-owned company, is the country’s sole exporter of phosphate-based fertilizers. I wanted to learn more. My friend and mentor, Ivo Sarjonivic, put me in touch with Eddy Fay, OCP’s representative in Argentina. We set up a Zoom call.
Before speaking with Eddy, I asked Chat GPT about Morocco’s fertilizer exports. After the call, Zoom sent me an AI-generated summary of our conversation.
I am unsure that old folks like me fully understand how AI is revolutionizing every aspect of our lives. I have, therefore, taken the unusual step of sharing with you, with only the most minor edits, the Chat GPT answer to my question and the Zoom summary of my conversation with Eddy.
I have added, in Part Three, a brief note on the Haber-Bosch process.
One of the great things about my life now is that I continually learn new stuff. My conversation with Eddy was doubly fascinating. Not only did I learn more about fertilizers, but I also learned more about the power of AI.
Don’t worry; I will revert to my usual (human-generated) format for future conversations.
Part One: Chat GPT answers my question about Morocco’s fertilizer exports.
Morocco is one of the world’s largest exporters of fertilizers, mainly due to its vast reserves of phosphates, which are essential for fertilizer production. The key types of fertilizers that Morocco exports include:
- Phosphate-based fertilizers:
- Monoammonium Phosphate (MAP): Commonly used for crops that require high phosphorus levels.
- Diammonium Phosphate (DAP): One of the most widely used phosphorus fertilizers, containing phosphorus and nitrogen.
- Triple Superphosphate (TSP): A concentrated form of phosphate fertilizer.
- Nitrogen-Phosphate-Potassium (NPK) fertilizers: Morocco also exports NPK fertilizers, which are compound fertilizers that combine nitrogen, phosphorus, and potassium to provide balanced nutrition for crops.
- Phosphoric acid: Although not a direct fertilizer, Morocco exports large quantities of phosphoric acid, which is used as a raw material for producing phosphate fertilizers.
Morocco’s fertilizer industry is dominated by the state-owned company OCP Group (Office Chérifien des Phosphates), which controls most of the country’s phosphate resources and fertilizer production. OCP exports fertilizers to markets worldwide, including Europe, Latin America, and Africa.
Part Two: Zoom’s AI-generated summary of my conversation with Eddy.
Sugar and Grains Industry Experiences
Jonathan first reminisced about his time at Cargill working in sugar, first in London and then Minneapolis for two years before moving back to London. Eddy discussed starting with Cargill in grains in Buenos Aires before training in Geneva, working in molasses in Minneapolis, and then fertilizer in Tampa.
Fertilizer Industry Merger and Mosaic Formation
Jonathan and Eddy discussed the history of the US fertilizer industry, specifically focusing on the merger between IMC and Cargill Fertilizer in 2004 to form Mosaic. Eddy explained that the merger was driven by Cargill’s need to invest a significant amount of resources to grow, and instead, they chose to form a company with IMC’s assets. This decision proved profitable for Cargill, as 65 per cent of Mosaic’s yearly profits was similar to all of Cargill’s earnings.
Jonathan asked Eddy about Mosaic’s dominance in the US fertilizer market and its domestic production. Eddy clarified that while Mosaic is the largest producer, the market can buy domestic production and imports.
Jonathan then shifted the conversation to OCP, a Moroccan company that produces fertilizers. Eddy explained that OCP mainly produces phosphorus-based fertilizers and has a significant presence in India, Brazil, North America, Europe, and Argentina. He also mentioned that OCP exports fertilizers such as MAP, DAP, and TSP, as well as phosphoric acid, rock phosphate and NPS (new products). Eddy estimated that around 15-20 per cent of OCP’s exports are in raw material form as rock, while the rest are processed fertilizers. He also noted that OCP is a market maker and is careful not to compete against itself in specific markets.
Agricultural Product Pricing and Volatility Discussion
They then discussed the pricing and volatility of agricultural products, particularly fertilizers. Eddy explained that while fertilizers have some form of futures markets via future swaps, they lack the liquidity to be a robust reference market. Prices are determined mainly by current economic and fundamental factors. He noted that nitrogen and potash products have recently calibrated to grain market levels. At the same time, phosphorus prices have increased significantly due to reduced exports from China and stock depletion in India.
Jonathan asked about price volatility, to which Eddy responded that it’s driven by events like the Ukrainian war and climate situations. He also confirmed a correlation between grain and fertilizer prices; not all fertilizers follow oil prices.
Strategies for Selling Product and Industry Dynamics
Eddy and Jonathan discussed strategies for selling their product, emphasizing the importance of long-term contracts and price security through formula contracts tied to published prices. They also discussed the changing dynamics of the value chain in the fertilizer and grain industry, noting that companies are now more focused on buying, supplying, and selling back to back, as opposed to taking positions. Eddy highlighted the challenges in setting up a supermarket or grocery store for farmers due to the grain and fertiliser businesses’ different profit and loss objectives. The distribution model hasn’t been mastered by anyone yet.
Fertilizer Industry in Argentina: Production and Politics
Jonathan and Eddy discussed the fertilizer industry in Argentina, which produces single superphosphate (SSP) while the rest of P products are imported, i.e. monoammonium phosphate (MAP). Eddy explained that Argentina mainly imports rock for production and that Bunge handles most SSP production while ACA, a cooperative, manages the rest. They also touched on the political aspects of the industry, with Eddy noting that Argentina has had populist governments in the past that have caused sudden changes in import quotas and exchange rates. However, Eddy expressed hope that the new government would bring stability and predictability to the economy, including the fertilizer industry.
Argentine Fertilizer Challenges and Brazilian Comparison
Eddy discussed the recent challenges faced by Argentine farmers due to economic and political instability, which led to insufficient fertilizer application and reduced soil nutrient levels. He compared this to Brazil, which has tropical soils and requires more fertilizer for production, with relative economic and exchange stability over the last 20 years. Eddy suggested that Argentina needs to import between 50 to 70 per cent more fertilizer to maximize grain production. Jonathan understood this and noted that Argentine farmers have historically not applied enough fertilizer regardless of the farming intensity that good crop yields bring. Eddy also pointed out that Brazil’s fertilizer consumption is significantly higher than Argentina’s and that Argentina should aim to consume around 6 to 7 million tons of fertilizer annually versus today’s almost 5 million tons.
Fertilizer Industry Dynamics and Import Challenges
Eddy and Jonathan discussed the fertilizer industry, focusing on the role of importers and the challenges faced by farmers. Eddy explained that the distribution industry is cyclical, with three bad years followed by two profitable ones, leading farmers to try to avoid market fluctuations by importing directly. He mentioned that significant players like Bunge, Cargill, COFCO (trading companies), and farming cooperatives are involved in importing. Eddy also highlighted the importance of brands in the industry, with companies like COFCO and Nutrien diversifying into specialized products. Jonathan inquired about the logistics of importing, to which Eddy responded that most imports are in bulk, with only 30 per cent being bagged at ports for distribution. They also touched on the safety precautions needed for bulk logistics, which are comparable to international standards.
Fertilizer Supply and Food Security Concerns
Jonathan and Eddy discussed the importance of fertilizer in agriculture and its potential impact on food security. Eddy clarified that while there are concerns about the supply of fertilizers from certain countries like Russia, international safety standards and country controls mitigate these risks. He also mentioned that some countries, like Brazil, have taken steps to secure their fertilizer supply. Jonathan expressed concern about the potential for a few fertilizer exporters to hold countries to ransom due to their dependence on these exporters. Eddy reassured him that while there have been price spikes and minor supply disruptions, these have not led to significant food security issues.
Part Three: The Haber Bosch process
After my previous conversation with Michael Sebag, some people questioned the importance of the Haber Bosch process in enabling and maintaining current population levels. This article by Hannah Ritchie explains the arguments behind the assertion.
We often talk about the effect of industry on our health, but the Haber Bosch industrial process has produced half the nitrogen in your body.
According to Chat GPT (again), the human body contains about 3 per cent nitrogen by mass. Nitrogen is a key component of many biological molecules, including amino acids (the building blocks of proteins), nucleic acids (DNA and RNA), and other vital compounds. It is essential for cellular function, growth, and repair, forming the backbone of proteins and genetic material.
For an average adult human weighing around 70 kg (154 lbs), about 2.1 kg (4.6 lbs) of their body mass would be nitrogen. It means your body contains at least one kilo of fossil-fuel-based Haber-Bosch nitrogen.
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