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
ManagementWashington Visit and Bayer/Monsanto Deal Update
May 26, 2016
Editors Paul Schrimpf and Eric Sfiligoj discusses a recent trip to DC and the latest news on the proposed pairing Read More
Fertilizer closeup in hand
Industry NewsVerdesian: Striking A Balance Between Yield & ROI
May 26, 2016
Finely tuned nutrient management plans are helping farmers throughout the U.S. improve nutrient use efficiency, increase return on investment (ROI) Read More
Crop InputsLand O’Lakes Announces Minnesota Water Quality Pa…
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Corn close up
Crop InputsArysta LifeScience Establishes Global Headquarters In R…
May 25, 2016
Arysta LifeScience has announced plans to relocate its global headquarters from West Palm Beach, FL, to Cary, NC, over the Read More
fertilizer blending and storage, Top 100
BlendersCHS Dakota Expansion Features AGCO’s GSI InterSys…
May 25, 2016
The continued growth of precision agriculture has increased farmer use of customized fertilizer blends best-suited for their soil conditions. Several Read More
ManagementAgriculture 3.5: A Bumpy Road Ahead
May 24, 2016
You may have read my article a few years ago on Agriculture 3.0, which is a term I coined to Read More
Topcon’s X30 display with CropSpec sensors
EquipmentGPS Autosteer Systems: Product Updates From Precision A…
May 24, 2016
Throughout 2015 GPS Steering solutions continued to evolve from what was once an after-market add on, to today’s cab where Read More
Trimble TMX-2050 In-Cab Display
Eric SfiligojThe Precision Ag Revolution Continues
May 24, 2016
It’s funny how much “the first time” tends to mean to someone as they get older. I sometimes can’t recall Read More
Eric Wintemute, AMVAC
Precision AgAMVAC Ups The Ante With New Precision Ag Technology
May 24, 2016
A potentially industry-changing at-plant soil treatment system from American Vanguard Corp., or AMVAC, is coming soon to large growers in Read More
Dry and Liquid Plant
CropLife 100CropLife 100 Map
May 24, 2016
The new CropLife 100 map shows the locations of each of the headquarters of the 2015 CropLife 100 retailers. The interactive Read More
Southern States Cooperative
Corn Field
Industry NewsTiger-Sul Names Veteran Account Manager To Lead Central…
May 23, 2016
With the continuing growth of the sulphur bentonite and precision crop nutrient industry, global agriculture firm H.J. Baker has announced that Read More
Bayer sign
Industry NewsReuters: Bayer Defies Critics With $62 Billion Monsanto…
May 23, 2016
German drugs and crop chemicals group Bayer has offered to buy U.S. seeds company Monsanto for $62 billion in cash, Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Industry NewsCompass Minerals Hires Industry Veteran To Lead Plant N…
May 19, 2016
Compass Minerals has hired plant nutrition industry veteran Vatren Jurin to steer the company’s portfolio expansion into specialty liquid micronutrient Read More
ASMARK Retailers LIVE! Tour 2016 Group shot The Andersons
CropLife 100The Andersons Rejects Unsolicited Proposal From HC2
May 19, 2016
The Andersons, Inc. has announced that its Board of Directors has rejected two non-binding, highly conditional, unsolicited proposals from HC2 Read More
glyphosate
Crop InputsWHO: Glyphosate ‘Unlikely’ To Cause Cancer
May 16, 2016
Via Reuters.com reporter Kate Kelland: The weed-killing pesticide glyphosate, made by Monsanto and widely used in agriculture and by gardeners, Read More