Losing Another Season vs Forex BenefitWe are now running the danger of losing another season of fertilizer sales as they start in May for the next seasons planting. It has been suggested that our partner could pull out of the whole deal if it looks like this will happen. However, this would be short sighted as the foreign exchange benefit, over the past year, has made these assets far more attractive as explained. The Brazilian Real has dropped in half relative to the USD in the last year alone from 2:1 to 4:1. This means imported fertilizer now costs twice as much or conversely internally produced fertilizer should sell for almost twice as much. But the profit potential is significantly more than this. Consider the operating costs just over a year ago were about US$120 per tonne SSP but since these are internal costs largely consisting of salaries it would still equate to only double that in Real or about R$240. Lets factor in inflation of about 15% since it is quite high in Brazil so operating costs today would be about US$140 or R$280. However, SSP imports running at US$190 or R$380 per tonne last year now cost R$760 (since currency dropped in half) this year. If they can sell the SSP for anywhere near this price internally then the profit margins go from R$380 R$240 = R$120 per tonne last year to R$760 R$240 = R$520 per tonne this year. Thats over 4 times the profit. This is not exact and the numbers are rough estimates only but you get the idea. Some may argue that the farmers cant afford the fertilizer then but this is not necessarily true either as the currency difference then benefits the farmers in the opposite way. That is, their crop exports will fetch double the price in Real. It is also important to note that this is not just a passive issue for the multinational fertilizer producers i.e. they are not just missing out on adding new assets and production but they are actively losing a large export market due to the Real depreciation and that can only be recovered through internal production. So it would be very short sighted for MBACs partner to pull out now when the potential of these assets is so much more today than just one year ago. This should be apparent to the multinational producers as well. And in case you think the M&A field is dead, especially in the agricultural sector, read the headlines today where China National Chemical Corp. is offering to buy Swiss based Syngenta for $42.8 billion. It would be the largest Chinese acquisition in history. It is the other side of agriculture namely dealing with seeds and pesticides but nonetheless shows the interest still here. And MBAC is not too small for anyones consideration at 500,000 tonnes per annum SSP potential and another equivalent amount when Santana is built. These assets are still good and in fact better than just one year ago. Someone will want them. AIMHO. Greg