PotashCorp may forego China potash contract

09 June 2009 17:20  [Source: ICIS news]

HOUSTON (ICIS news)--Potash Corporation of Saskatchewan (PotashCorp) might not sign a new long-term contract with China for potash, preferring instead to sell potash to the Chinese at spot prices in order to reduce market speculation, the company's chief executive said on Tuesday.

The three-year contract expires in December. A new contract would usually be signed in the fourth quarter.

“China is our largest potash customer, representing 12% of our total business,” said PotashCorp president and CEO Bill Doyle.

“For moral reasons more than anything else, we may go to spot selling with the Chinese to take some of the speculation out of the market,” Doyle said at the RBC Capital Markets’ Global Mining and Materials Conference in Toronto, Ontario.

As the world’s largest fertilizer company, PotashCorp’s dealings with China and India have a sizeable impact on the potash market, and speculators watch them closely, a source said.

Doyle also said that the unprecedented decline in fertilizer use in the Western Hemisphere was fallout from the global recession and reluctance by crop producers to invest in nutrients.

“Farmers pulled in the purse strings despite farm economics that support fertilizer investment,” Doyle said.

“Paralysis in the fertilizer markets is coming to an end because farmers can only go so long mining the soil bank without replacing nutrients,” Doyle said.

Doyle said the fertilizer market will start to move in July as Brazil begins taking 1m tonnes of potash each month for four months.

“We had the ability to put the brakes on potash production when we needed to,” Doyle said. “We also have the ability to put the pedal to the metal when demand calls.”

In other comments to investors, Doyle said the recent Argentinean and Brazilian soybean harvests were down 17%, most due to the lack of fertility.

“The 2009 crop year is off to a poor start in the US,” Doyle said.

Corn planted in the eastern US Corn Belt in wet soils would have shallow root systems, he said.

Doyle added that the decline in the application of fertilizer during the corn and soybean planting season in the US would hurt crop yields.

“The US Department of Agriculture (USDA) predicted a corn yield of 155 bushels/acre this year,” Doyle said. “We think the yield will be closer to 150 bushels/acre.

“We think USDA will let a little air out of the yield bag when it reports new yield estimates on 10 June,” Doyle said.

 “Agriculture will be one of the first industries to lead the world out of the recession,” Doyle said in closing. “The need for food is too great for this not to happen.”

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By: Frank Zaworski
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