Fertilizer costs have long been a concern for farmers and an area over which they’d like to have some measure of influence. This point was reaffirmed by a recent survey of members of Farmers of North America (FNA), where nearly three quarters of respondents indicated they’d be interested in a fertilizer investment opportunity.
Member Investment Interest
What FNA priority areas would be of greatest interest to you for an equity participation opportunity?
Since 2010 we have specifically been working on the idea of building a nitrogen fertilizer plant in Western Canada—one in which FNA members could participate. Since that time we have met with civil and environmental engineers, owners and manufacturers of similar plants, finance and legal teams, all with the hope of putting together a plan to take this project forward with FNA members.
ProjectN is the culmination of that preliminary work and a launchpad for the rest of the initiative to move farmers further up the fertilizer value chain. It is the FNA team that has done the foundational work, held Member consultations, built the business profile of the industry and the opportunity for Members. ProjectN, in a nutshell, is FNA’s team effort to get things rolling.
We want to give farmers like you the ability to participate in and profit from a new nitrogen fertilizer plant, while guaranteeing you a source of fertilizer supply at wholesale prices.
Building a nitrogen fertilizer plant will obviously require a large amount of capital investment from farmers, and, if needed, other third party investors.
But to get to the stage of presenting a large-scale investment opportunity, we first need to solidify farmer commitment and raise seed capital to complete the required legal, engineering and environmental work.
To facilitate the seed capital raise and to further progress ProjectN, a new business has been created, called FNA Fertilizer Limited Partnership (FNA FLP). The FNA Fertilizer Limited Partnership is a standalone, independent legal partnership of those farmers who choose to participate. It is not FNA and is not answerable to FNA. Nor is FNA selling investments or partnership units.
The seed capital units being made available to FNA Members are offered directly by the FNA Fertilizer Limited Partnership. There are two series of Seed Capital Units, namely Series 1 Seed Capital Units and Seed 2 Capital Units.
The Series 1 Seed Capital Units refer to those Seed Capital Units issued by the General Partner prior to 5:00 p.m. (central time) on December 31, 2012. If you are holding Series 1 Seed Capital Units, in the event that the project does not go through, for each Series 1 Seed Capital Unit invested, you will receive a $600 credit to your account or an one year extension to your current FNA membership. Members who hold multiple Series 1 Seed Capital Units may choose to receive a combination of the two. If you hold Series 2 Seed Capital Units, you are not entitled to any compensation or benefits whether from Limited Partnership or any other entity if the development of the nitrogen fertilizer plant does not proceed.
The separation of Series 1 and Series 2 Seed Capital Units is being made to recognize the higher risk the initial group of investors (approximately 1000+ in number) have taken in their opening investment in the Limited Partnership. Subsequent investors, or subsequent investment by the same investors, carry a lower risk and therefore will not maintain the same attributes.
Once the seed capital raise is complete and the remaining developmental work is done, FNA FLP will provide farmers a mechanism for ownership of a new fertilizer manufacturing facility.
The mission of FNA is simple: “Improving farm profitability.” FNA Fertilizer Limited Partnership’s mission is similar: “Improving farm profitability through member participation in the fertilizer industry”.
The goal of ProjectN is not to drive down prices in the fertilizer industry, instead to create an opportunity for FNA Members to directly benefit from ownership in a new fertilizer business. The FNA Fertilizer Limited Partnership will do just that.
We want to help you move up the supply chain. We want to build a nitrogen plant with you!
- Move yourself up the supply chain. Participation in the fertilizer manufacturing industry will reward members on their, fertilizer purchases rather than having nitrogen ferilizer remain a pure expense.
- Create a stability of supply.
- Take advantage of possible added value through a low overhead farm direct distribution system to get fertilizer to the farmgate.
Profitability. Year after year, Western Canada has some of the highest prices for fertilizer in North America because of its distance from ocean ports and the Mississippi river. This makes imported Nitrogen more expensive to transport to Western Canada, thus keeping prices higher.
Nitrogen Fertilizer Prices
In addition to the price advantage, Western Canada also has:
- A very supportive political climate.
- Proximity to target market of FNA members. Western Canada is where a large percentage of FNA members are located, as well as close proximity to the Northern Plains U.S market. The lower freight costs, the more successful a production company will be.
- Western Canada has an abundance of natural gas, and currently enjoys favorable natural gas pricing. Most analysts outlooks are bearish on long term natural gas pricing.
FNA is first and foremost determining if there is a will among farmers to have a new fertilizer plant built. Obviously FNA’s primary audience is its own Members, but to be successful a project of this scale must go beyond that, gaining support from all farmers and those allied to the agriculture industry.
FNA had taken the lead role in organizing the development of the project with members by means of establishing FNA Fertilizer Limited Partnership. As with other input solutions, FNA is not acting as an owner, nor is intended for FNA to be an owner in any fertilizer plant. Instead FNA is using resources provided by Members to establish the level of interest among farmers, to bring together farmers, experts in capital and legal requirements, and other financial, technical and physical resources required.
For this project as for other successfully completed projects, FNA is the organizer, communications vehicle and agent of change for farmers. If there is sufficient will among farmers to proceed, then those farmers who come together in the FNA Fertilizer Limited Partnership will be connected with other necessary players to see that the plant is built. Other players will include world class technical, operational and financial entities. Just as FNA is not FNA FLP, but has worked to bring farmers together in that partnership, so too will ProjectN work to bring into the mix some institutions that Members will not only recognize, but value for their expertise. The critical first step is firmly established that there is a significant number of farmers who want to see the project move forward.