Potash sales in Saskatchewan, one of the world’s richest sources of the crop nutrient, have dropped to their lowest level in 37 years, punching a $1.8-billion hole in the province’s budget.
Saskatchewan was expecting $1.9 billion in potash revenue when it set its 2009-10 budget in March, but slashed that estimate to $637.6 million in mid-August. Now it expects to take in just $109 million, its lowest revenue from the fertilizer in 13 years.
“I said when I tabled the budget that the one thing that was going to keep me awake was potash,” Finance Minister Rod Gantefoer told reporters in Regina while giving his mid-year financial update.
“I didn’t think it would end up turning into a bit of a nightmare.”
Gantefoer projects 2009 Saskatchewan potash sales of 4.4 million tonnes, its smallest output in 37 years.
Potash prices have tumbled as the recession cut into world grain prices and farmers put off applications of the crop nutrient, partly in response to an earlier price spike.
Producers, including Saskatoon-based fertilizer giant PotashCorp, responded to weaker demand by slashing production this year.
Saskatchewan budgeted in March for a potash price of $556 per tonne, but that dipped in July to $460 with Russian and Canadian sales to India.
In 2010, the province expects sales to rise to 10 million tonnes on the assumption that farmers will need to replenish the soil with fertilizer after holding back this year. The price will fall slightly in 2010 to $444 per tonne, which is still relatively high, the Saskatchewan government said.