Potash business taking a hit
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All the news in commodoties this week is about the Potash Corp. of Saskatchewan, which is reporting that sales fell by more than $1 billion U.S. in their third quarter (ending September 30). Falling crop prices have meant that farmers cut corners in the fertilizer department, causing Potash Corporation shares to drop by 80%.
Not to worry, shareholders, Potash Corp. says things are looking up for potash next year, since crop prices are back on the rise. They expect worldwide demand for their main product to fully bounce back, although they do admit that things are looking a little less sunny for 2010 than they had predicted last month – about 50 million tonnes versus their previous forecase of 52.5 million tonnes. Potash Corp.’s 2009 forecast was re-budgeted three times this year due to fluctuations in the market and the effects of the global recession.
Potash Corp. of Saskatchewan is the number one producer of potash in the world. Potash is a type of potassium that is a key ingredient in fertilizer. In 2007, potash prices quadrupled as commodities prices soared. Since the recession hit, the market has been tanking.
Potash Corp. isn’t the only fertilizer company suffering either. Calgary-based Agrium is expecting its third-quarter results to be down as much as 90 to 95 percent against last year’s profits.
While some crop prices are beginning to come back up, the prices fell so hard earlier this year that many farmers are wary about investing in anything more than the absolute bare essentials.
While Potash Corp. is looking up at the stars, some analysts predict that fertilizer prices are on their way to bottoming out. China is the world’s largest importer of potash, and is set to negotiate a big contract for its purchase in the near future. With fertilizer prices at an all-time low and potash companies scrambling to stay afoot, any major purchaser has the power to potentially push the prices down even lower. When the recession hit, China halted their lucrative potash imports. The market’s recovery is hinging somewhat on China’s renewed demand.
