By KEVIN WALKER
SASKATOON — The world of potash has been disrupted since the July 30 announcement by Russian potash producer Uralkali that it was pulling out of a joint venture with the Belarus Potash Co. (BPC).
Uralkali stated it will sell potash on its own rather than through the BPC and will increase production to boost global supply of the fertilizer, which could drive down prices. Potash is mined in Saskatchewan, Canada, in Russia and in a handful of other places worldwide.
Shares of Potash Corp., the world’s largest potash producer, were down by 18 percent last week. Other major North American potash producers, Mosaic and Agrium, were down by 18 and 4 percent respectively, according to a GlobeAdvisor.com report last Friday. Agrium was less affected because potash production makes up a smaller share of its business.
It is not exactly clear, however, what effect these developments will have on the price of potash itself over the long term. The Uralkali CEO said on July 30 the price of potash could be reduced by 25 percent, from $400 to $300 per ton.
“It’s pretty big right now,” said Stephen Jazinski, a mineral commodities specialist at the U.S. Geological Survey (USGS), of the news. “People are worried that prices could drop more. It’s kind of a wait and see situation. It could affect prices coming down the line.”
Jazinski said the Russian decision could affect potash prices for up to six months; however, Potash Corp. CEO Bill Doyle said on Aug. 8 the situation could be resolved soon.
“We actually have seen this before,” he explained. “They would have these fights, they would last for a little while and then they would be over with. It’s important to understand that we’ve seen this before. Not as public, not quite this way. They weren’t publicly traded companies all that time.
“The Russians are a very minor player in this largest (North American) market, for us. The Belarusians won’t even be able to sell because of constraints that have been put on them, political, not only here but also in Europe.”
Doyle also stated “no one company” determines potash prices, reacting to the comment by Uralkali’s CEO. Referring to the huge price drop predicted by the head of the Russian potash producer, he said, “We don’t see that. We haven’t seen it so far. It’s been eight or nine days since the announcement.”
People were also concerned about what might happen to Canpotex, the export marketing company for potash produced in Saskatchewan by Potash Corp., Mosaic and Agrium. The company is equally owned by all three producers.
“I don’t see any change in Canpotex whatsoever,” Doyle said. “Canpotex is the leading supplier out there.”
Potassium (K), which is derived from potash, is a major nutrient for plant growth and is frequently used as a fertilizer. In balance with nitrogen, phosphorous and other nutrients, K performs several functions: it helps plants resist drought and diseases and builds cellulose and makes plants stiffer. Root growth is also improved.
“For improving the K status of the soil, broadcast and incorporation of potash is the best approach,” said Michigan State University crop and soils expert Darryl Warncke in an MSU extension bulletin from March 2010, after potash prices had fallen from their previous highs in 2008 and 2009.
The latest developments could affect the prices farmers pay for potash in the next growing season.