Analysis: Potash Prices To Rise?

With the status quo left intact, fertilizer retailers and the farmers who are their customers are stuck with a pricing system they say is rigged against them.

BHP, the world’s largest miner, has a reputation for running its operations at full tilt. If it succeeded in its hostile, $39 billion takeover of Potash Corp, giving it entry into the global fertilizer business, it was expected to follow the same strategy.

The current industry practice — followed by the Canpotex marketing consortium — is to link production rates to prices, assuring high returns for its three members — PotashCorp, Mosaic Co. and Agrium Inc.

But if BHP withdrew from Canpotex, as the Anglo-Australian miner signaled it would do if it acquired Potash, the cartel would have collapsed, stirring competition in the industry and depressing prices. BHP’s approach would probably have the biggest impact on prices in periods of slack demand.

Producers will no longer need to worry about that scenario if Ottawa confirms its rejection of BHP’s bid after a 30-day review period.

Canada’s rejection will "add a lot of stability to the potash market," says David Asbridge, president of NPK Fertilizer Advisory Services in St. Louis, MO. "BHP would have come in and shook things up some and I’m not sure that it would have been all that good for the potash industry."

Prices of several crops including corn — which requires heavy potash application — have shot to two-year highs in 2010, giving farmers more money and incentive to apply fertilizer. U.S. corn prices look likely to stay strong with supplies tight amid growing export and ethanol demand.

"You’re getting a strengthening in potash prices because actual market demand is going up quite tremendously, actually," says Patricia Mohr, vice-president and commodity market specialist at Scotiabank in Toronto.

Weather-Related Price Increases

Spot potash prices at Vancouver that were $342.50 per ton in September are forecast to hit $415 in 2011, Mohr says.

Canpotex recently locked in multi-year supply deals with buyers in China, Indonesia, India and Korea.

The upward trend in potash prices looks less certain more than a year out, Asbridge says, since a big reason for high crop prices are weather-related disasters that hammered crops this year in Canada, the Black Sea region and elsewhere.

A return to normal weather would leave potash prices more vulnerable to the kind of changes BHP was planning.

Farm retailers were hoping that BHP’s takeover would create more predictable supplies and pricing, says David MacKay, president and CEO of the Canadian Association of Agri-Retailers. The Canadian farm retail industry is dominated by Viterra Inc, with privately held Richardson International, Agrium and smaller players also owning outlets.

Some independent dealers lost their businesses in 2008 after fertilizer prices crashed from historic highs, leaving retailers stuck with inventory worth a fraction of what they paid for it.

"You’re caught holding the Old Maid," MacKay says. "We want to see potash priced to market like any other fertilizer or commodity. It’s one of the few natural resources that’s artificially priced."

(Source: Reuters)

Leave a Reply

Latest News
ManagementSouth Africa Update and the New New Leader G5
February 24, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the recent visit to South Africa by sister magazine AgriBusiness Global and the Read More
Fall Creek Watershed
StewardshipUpdate: Nutrient Stewardship In Indiana Requires Cool, …
February 24, 2017
Update: The application deadline for NCRS funding has been extended to March 17, 2017. Green leaves sparkle in the sunlight. Trees Read More
Greenleaf Technologies TADF03-D Dual Fan Nozzle
NozzlesSix Greenleaf Nozzles Approved For XtendiMax With Vapor…
February 22, 2017
Greenleaf Technologies has announced that six of its TurboDrop D Series nozzles have been approved for use with Monsanto’s XtendiMax Read More
Winter Wheat
Industry NewsTiger-Sul Hires Manitoba And Eastern Canada Account Man…
February 22, 2017
Tiger-Sul, a global leader in sulphur fertilizers and crop performance products, has announced that sales veteran Trevor Loewen has joined Read More
NFMS 17 Hagie Sprayer
Eric SfiligojThe Read From Louisville: Uncertain
February 22, 2017
By the time this column appears across the country, the annual Commodity Classic will be in full swing. This means Read More
SprayersApache 1000 Series Sprayer Earns 2017 EquipmentWatch Hi…
February 21, 2017
ET Works has been named a winner in the 2017 EquipmentWatch Highest Retained Value Awards program, the industry’s only award Read More
Measuring Bulk Tanks
StewardshipMeister Media Among 2017 Award Winners Presented By The…
February 21, 2017
The Pesticide Stewardship Alliance (TPSA) held its annual conference in San Diego, CA, earlier this month where three awards were Read More
John Reifsteck
CropLife 100GROWMARK’s Reifsteck Earns NCFC Director Of The Y…
February 21, 2017
GROWMARK Chairman of the Board and President John Reifsteck has earned the prestigious Director of the Year Award from the Read More
Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts …
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmatio…
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by S…
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Heritage Cooperative Finished Building Aerial
ManagementHeritage Cooperative, Agland Co-op Approve Merger
February 17, 2017
Agland Co-op and Heritage Cooperative stockholders have both approved the merger agreement between Agland Co-op and Heritage Cooperative. Now begins Read More
LegislationARA Fly-In: Ag Retail Descends on Capitol Hill, Lawmake…
February 15, 2017
More than 100 agricultural retailers, distributors and suppliers headed to Capitol Hill Tuesday morning for the Agribusiness Congressional Fly-in, according to a Read More
Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked M…
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
NL5000 With G5 Technology
SpreadersNew Leader Introduces NL5000 Dry Nutrient Applicator Wi…
February 13, 2017
New Leader, a division of Highway Equipment Company (HECO), has announced the next generation of spreading technology with the NL5000 Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
CropLife 100Pinnacle Agriculture Agrees To Credit Agreement Amendme…
February 9, 2017
Pinnacle Operating Corp. has entered into an amendment (the “Amendment”) to its First Lien Credit Agreement that will provide for, Read More