CHS locks in fertilizer supply, scraps plan for N.D. plant

Reuters — U.S.-based agribusiness CHS Inc. said it would invest US$2.8 billion in a unit of fertilizer producer CF Industries to secure nitrogen fertilizer supplies.

This is the third deal in a week in the highly fragmented global fertilizer industry, which is trying to cope with weak prices caused by excess supply.

CHS will have the right to buy as much as 1.7 million tons of UAN and urea, at market prices annually, the companies said on Wednesday.

The deal accounts for about 8.9 per cent of CF’s total production capacity and will be effective for 80 years.

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CF said last Thursday it would buy Netherlands-based rival OCI NV’s North American and European plants for $6 billion, while CVR Partners said Monday it would buy Rentech Nitrogen Partners for $533 million (all figures US$).

CHS, an agribusiness owned by farmers, ranchers and co-operatives across the U.S., will be entitled to semi-annual profit distributions from the unit, CF Industries Nitrogen LLC, the companies said.

CF Nitrogen currently owns production plants in Louisiana, Iowa and Mississippi. CF plans to drop down a fourth plant, located in Oklahoma, into CF Nitrogen before the deal closes, expected by Feb. 1.

CHS said on Wednesday it would not go ahead with the construction of a fertilizer plant at Spiritwood, N.D., about 140 km west of Fargo.

The $3 billion project, announced in 2014, was expected to produce more than 2,400 tons of ammonia daily when completed in the first half of 2018.

CHS, a big customer for CF, said the deal does not include additional capacity CF will get from the OCI acquisition.

Reporting for Reuters by Shubhankar Chakravorty in Bangalore.

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