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
DTS10 Sprayer Hagie
SprayersHagie Introduces 2016 DTS10 Self-Propelled Sprayer
October 6, 2015
Hagie Mfg. has introduced to the market the newest and most innovative member of its product family, the 2016 DTS10. Read More
Industry NewsSimplot, Agrium Execs Added To TFI Board
October 6, 2015
The Fertilizer Institute (TFI) announced the election of Garrett Lofto, president of the agribusiness group at J.R. Simplot Co., to Read More
Corn Field
Management‘Land Grabbing’ Grows As Agricultural Resou…
October 6, 2015
Since 2000, more than 36 million hectares — an area about the size of Japan — has been purchased or Read More
Mahindra Implement
Industry NewsMahindra USA Expands West Coast Presence
October 6, 2015
To meet the growing demand for Mahindra products,  Mahindra USA is expanding its West Coast facility with the opening of Read More
Corn Stover Stubble
Crop InputsNew Microbial Product Unlocks Nutrients, Reduces Costly…
October 6, 2015
Trash, stover, residue — regardless of the term, postharvest debris is increasing and causing more frustration and detriment to overall soil Read More
Precision AgPurdue Releases 2015 Precision Ag Services Dealership S…
October 5, 2015
In the spring of 2015, CropLife magazine and the Departments of Agricultural Economics and Agronomy at Purdue University conducted the Read More
Monsanto Sign
Eric SfiligojMonsanto And Syngenta: Stonewall Street
October 5, 2015
Recently, I was taking part in an industry-related golf tournament and happened to find a lost golf ball sporting a Read More
Greg Musson, Gar Tootelian
StewardshipGar Tootelian, Inc.: Making A Difference In ‘The Valle…
October 5, 2015
For the Environmental Respect Awards program, sponsored by DuPont Crop Protection with assistance from CropLife® and FCI magazines, the Ambassador Read More
Fiberglass Tank Workers at Precision Tank & Equipment
EquipmentPrecision Tank & Equipment: 50 Years Of Growing
October 4, 2015
Looking out onto the production floor of the fiberglass/stainless steel tank manufacturing facility in Ligonier, IN, David Hemming, president/CEO for Read More
Syngenta Sign
Crop InputsScience & Strategy Spur Syngenta’s Crop Protection …
October 3, 2015
Developing a crop protection portfolio is a lot of science and a little serendipity. “There are a number of things Read More
Dan Schaefer and Jason Solberg IFCA
StewardshipIllinois Fertilizer & Chemical Association: Tacklin…
October 2, 2015
You’ve got to be doing something right if lots of people keep coming to you for advice. That’s what’s happening Read More
LegislationFall Fertilizer Transportation Could Be At Risk With Po…
October 1, 2015
Failure by Congress to extend the deadline for the implementation of Positive Train Control (PTC) on the railroads could gridlock Read More
Weed ResistancePPO Resistant Pigweed Hits The Mid-South
October 1, 2015
If you’re a soybean grower already entangled in troublesome weed resistance in the state of Arkansas, Mississippi or Tennessee, you Read More
Weed ResistanceManagement Strategies That Worked In 2015
October 1, 2015
For better or worse, throughout many regions of the country 2015 provided the optimal growing season conditions for both crops, Read More
ManagementAn Update On CropLife America’s Meeting & The Outlo…
October 1, 2015
Editors Paul Schrimpf and Eric Sfiligoj review last week’s CropLife America Annual Meeting and how crop protection companies believe next Read More
Patriot 4440 Sprayer close up
Weed ResistanceManaging Herbicide-Resistant Weeds: The Importance Of ‘…
October 1, 2015
As the problem of herbicide-resistant weeds has spread, crop protection product suppliers have charged their top researchers with coming up Read More
Adjuvants loading
Weed ResistanceAdjuvants Trending Up For Fighting Weed Resistance
October 1, 2015
Gone with the wind are the days when adding an adjuvant to the spray tank was looked at with major Read More
Case sprayer nozzle closeup
Weed Resistance8 Best Management Practices For Spray Drift Control
October 1, 2015
Dr. Robert Wolf, Wolf Consulting & Research, LLC, Mahomet, IL, is one of the leading experts in drift management strategies. Read More