Organic phosphate company Fertoz (ASX: FTZ) is continuing its commercial foray into North America after announcing a new supply agreement with Archer Daniels Midland (ADM), one of the world’s largest agribusinesses.
Fertoz has declared it expects to announce more supply and distribution agreements in the coming months.
ADM operates within a range of niche markets including food production, processing, storage and transportation.
Currently, ADM is one of the world’s largest processors of soybeans, cocoa, wheat and corn which it processes to make food, animal feed, renewable fuels and naturally derived alternatives to industrial chemicals.
ADM employs around 40,000 people, serves customers in 200 countries, wields 450 crop procurement locations around the world and operates more than 330 feed and food ingredient manufacturing facilities, as part of what it calls a “the harvest to the home” strategy.
The deal means that Fertoz can leverage ADM’s well-established transport network and existing links with thousands of farmers across North America, and therefore, expand distribution of its fertiliser products to both wholesale and retail customers.
According to Fertoz’s executive chairman Patrick Avery, the deal de-risks the company’s volume growth targets as well as validates the quality of its organic rock phosphate fertilisers and blends.
“As demand for organic packaged foods has grown among label-conscious consumers, so too has demand for organic inputs,” said Mr Avery.
“We are pleased that after reviewing a range of competing products, ADM has chosen to market Fertoz’s organic rock phosphate to its substantial grower and distributor network,” he added.
In an insight into its day-to-day operations, Fertoz revealed that it has gathered contact details of organic farmers within a 100-mile radius of its key distribution centres and is now actively targeting these potential customers as a priority.
According to Fertoz, this targeted approach is “generating promising leads that we expect to convert into sales in 2020” and is expected to mitigate a drop-off in sales so far this year which the company attributed to a “1-in-100-year weather event”.
In 2019, the US and Canada endured a record-breaking cold winter and wet spring, meaning farmers could only plant a fraction of the acreage they would usually expect to in better conditions.
The weather impact meant that Fertoz revised its production tonnage downwards by around 50% from 30,000-50,000t to 15,000-20,000t for this calendar year.
Elsewhere in the fertiliser industry, multibillion-dollar giants such as Mosaic (NYSE: MOS) and Nutrien (TSX: NTR), the world’s largest potash producer, have both shuttered their conventional phosphate and potash production and have announced they are curtailing conventional production for three months due to high inventories.
However, market analysts expect a strong recovery as organic potash products continue to experience strong demand by end customers.
Despite the challenging market (and weather) conditions, industry analytics company MarketWatch said the organic fertiliser market grew at 14% in 2018 and is forecast to maintain this growth rate through to 2023, in its recent report.
Additional distribution deals
To expand its distribution and make up for weather-related impacts, Fertoz has agreed an additional 15,000t contract with its key existing distributor Blairs Ag.
The terms of the deal state that Blairs Ag will purchase 5,000t each year for the next three years.
Notably, Fertoz signed a distribution agreement in Q2 2019 but has quickly generated material orders within three months, with first deliveries to be made before year-end.
Furthermore, the fertiliser producer has confirmed that other large-scale customers such as Humic Growth in Dubois, Idaho and Ponderosa Ag in Saskatchewan, Canada have also begun to order Fertoz’s rock phosphate product.
In addition to traditional sales, Fertoz reported that its online push is also underway as part of a “ramping up of its online presence”. The company has agreed a deal with Trimble Ag for its fertilisers to be marketed through Trimble’s e-outreach program which means Fertoz products will be promoted directly and available online among their list of organic certified products.
Moreover, Fertoz is now listed on AgVend.com as an organic fertiliser supplier.
AgVend.com is a leading online marketplace and e-commerce focused distributor to key organic farming areas in the western provinces of Canada, the US Midwest and the Pacific Northwest of the US.
In a bid to develop innovative products Fertoz said it is now engaged in several ongoing field and manufacturing trials with chicken manure, alfalfa, volcanic rock dust and other blends that are all showing “promising results”.
Last year, the company was also hopeful of attracting the attention of cannabis growers, currently flying high in Canada on the back of a booming cannabis industry that was legalised only last year.
“These positive results are expected to lead to ongoing supply of the company’s rock phosphate to third party organic fertiliser manufacturers with their own distribution networks,” the company noted.
This morning’s news lifted Fertoz shares by more than 36% up to $0.15.