Thursday, September 11, 2008

The last hot commodity...

May be potash.  There is a significant chance of a looming potash shortage as potash mine workers take advantage of labor shortages (thanks to the energy boom) to demand their slice of the much-publicized potash profit pie.
Managers at Potash Corp. of Saskatchewan restarted operations at the fertilizer giant's Allan mine on Monday, the largest of three potash mines where workers have been on strike since Aug. 7, a spokesman said Tuesday.

The company has not determined how much potash it will be able to produce from two shifts at the mine, which normally runs on four shifts, spokesman Bill Johnson said.

The Allan mine produced 1.744 million tonnes of potash in 2007, or 19 per cent of the company's total output.

It is still too soon to gauge whether the strike by about 500 mine workers will affect Potash Corp.'s ability to meet its sales commitments, Johnson said. [More]
As I posted earlier this summer, until potash production capacity rises demand will be pushing prices until usage is curtailed.  This seems to be happening in the minds of stock analysts as fertilizer stocks have dropped back sharply from recent stratospheric highs.
In early August, close to 500 United Steelworkers union members walked off the job at three Potash Corp. mines after contract negotiations broke down. The workers had been without a contract since April. As of Monday, there weren't any talks scheduled between the union and the company. Potash Corp. has plans to increase capacity at their mines by 76% by 2012, and is still expecting to go forward

As of now, Potash has managed to start up one of the mines, at least in a limited fashion. While the strike has affected deliveries of the mineral to Potash Corp.'s industrial customers, farming season demand has yet to hit - look for headlines to scream of a potash shortage, and spot prices to rise, if the strike continues on into October. (That all could be good news for Mosaic, of course, which is the key competitor in terms of potash production.) [More]
with those expansion plans. Of course, increasing capacity without actual miners to turn that into capacity utilization ...
The rumor in my corner of the Corn Belt is probable rationing of around 80% on at the dealer level. Of course those are the same hysterical voices who last year said seed corn could hit $300/bag.

Wait a minute, here...

2 comments:

Jim D. said...

The high fertilizer prices are already prompting demand destruction among farmers. I've had one of my largest fertilizer customers tell me he plans little to no dry fertilizer application this year. This is a guy who has been putting down 400lbs of product on soybean stubble every year for years, and figures it's time to take some out of the bank. Another customer applied extra fertilizer this spring, and will apply only a little bit this fall. I'm expecting my sales to be down 30-40%...if not more.

John Phipps said...

jim:

Sounds like I'm not the only one who figured out a counter-strategy. We're going to find out just what our P & K supplying capacity is on our farm this year.

Thanks for commenting and reading.