That have been disappointing. Agriculture is struggling to grow in India.
India has been providing farmers with heavily subsidized fertilizer for more than three decades. The overuse of one type—urea—is so degrading the soil that yields on some crops are falling and import levels are rising. So are food prices, which jumped 19% last year. The country now produces less rice per hectare than its far poorer neighbors: Pakistan, Sri Lanka and Bangladesh.
Agriculture's decline is emerging as one of the hottest political issues in the world's biggest democracy.
On Thursday, Prime Minister Manmohan Singh's cabinet announced that India would adopt a new subsidy program in April, hoping to replenish the soil by giving farmers incentives to use a better mix of nutrients. But in a major compromise, the government left in place the old subsidy on urea—meaning farmers will still have a big incentive to use too much of it. [More with great comments]
It was whopping purchases of potash that ignited the run on that commodity back in 2008. And I suspect their shifting much of that business to Russia will further hassle Canadian potash suppliers.
Belarusian Potash Co., the world’s biggest exporter of the fertilizer, expects to sign contracts with India, the largest importer, in a “matter of weeks” as global demand strengthens.
The new contracts will most likely run through at least December and deliveries may start as soon as April, BPC sales chief Oleg Petrov said in an interview. BPC, which represents Belarusian and Russian producers, expects talks to start in the next two weeks, he said.
International Potash Co., the biggest supplier to India, said earlier this month the Asian nation may start running out of the fertilizer as early as March. Prices fell as low as $350 a metric ton last year from as much as $1,000 in 2008 as a slump in grain prices spurred farmers to curb purchases. India agreed to buy potash from marketer Canpotex last week at $370, signaling improving demand. [More]
I'm starting to doubt the potash cartel can survive in its present form as India and China are now large enough to deal seriously, and Russian competition and capacity can take advantage of much lower freight costs.