Recent price drop to increase farmer demand for potash

Farmers in North America, including Western Canada, are expected to take advantage of low potash prices and purchase more of the fertilizer this fall.

Potash prices have started to decline significantly recently, following an announcement by Russian company Uralkali that it will leave a partnership and plans to sell potash independently to large buyers, such as China, at lower prices.

With the announcement, it’s expected potash prices will continue to move lower throughout the summer, said David Asbridge, president and senior economist with NPK Fertilizer Advisory Service at Chesterfield, Missouri.

Some observers in Russia predict prices for potash will drop by about US$100 per tonne, but Asbridge expects it’ll be closer to a US$50-$60 per tonne decline.

How low prices drop will depend on a number of factors, including supply and demand, and how Canadian potash producers react to the situation in Russia.

“If they (Canadian producers) continue to cut production, that will help to hold prices higher,” said Asbridge. “But if they see that the Russians and Belarus are going to basically start flooding the market with potash, they may decide that they want to get in on that too. And if they do that, then prices could fall even further.”

Asbridge said farmers were already planning on buying potash this fall to replenish some of the nutrients in the soil because large crops expected this year will have used up a lot of nutrients.

But the lower prices will likely encourage farmers across North America to purchase more potash to apply to their fields this fall than they had originally intended.

“Rebuild”

“If the price of the fertilizer is going down farmers may put a little bit extra (potash) on to begin to rebuild the nutrients that they have in their soils already,” said Asbridge.

Potash will typically carry over in the soil and will stay there until it is used, whether that’s this season, next or the one after, Asbridge said, adding that recent history proves this to be true.

“In 2009, crop prices had come down sharply, fertilizer prices were still relatively high, so farmers cut back about 30 per cent on both potash and phosphate in the U.S., and yet we still had record yields because we had really good summer weather and the farmers had built their fertility levels up to where they could get away with not applying as much,” he said.

The declines in potash values won’t likely affect any other fertilizer prices, Asbridge said, because there’s no correlation between it and other products.

“(Potash) is mined separately, it’s sold separately, and it can be consumed by the farmer separately,” said Asbridge.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Related story:
K+S sticking with Sask. potash mining project, Aug. 6, 2013

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