Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

What to Expect for Future Potash Prices

Commodities / Agricultural Commodities Sep 02, 2010 - 10:08 AM GMT

By: Investment_U

Commodities

Best Financial Markets Analysis ArticleTony Daltorio writes: One of the main ingredients in fertilizer, Potash helps plants resist disease, thereby improving crop yields. Now, some investors think it can revitalize their portfolios…

They have some reason to, considering that demand should only rise from here.


The United Nations sees food production needs rising 70% by 2050 to feed the global population of 3 billion additional people. That – and the world’s rising appetite for meat – should easily boost fertilizer demand.

Also in investors’ favor, is recent history. Potash fertilizer first gained attention from 2007 to 2008 when it rocketed from $150 a ton to almost $1,000.

But when the financial crisis hit, demand dropped by almost half and prices fell nearly to their 2006 levels.

Prices have begun picking up again though, with the latest quarterly contract closing near $370 a ton. And industry executives expect potash demand to soar again by 2011, causing prices to continue higher.

Still, don’t bet on $1,000 a ton anytime soon. Current global production capacity sits at about 70 million tons, well above next year’s expected demand of 50-55 million tons.

And besides, the industry is set for a serious shake-up.

The Potash Industry Status Quo

As it stands now, the potash industry is fully consolidated, with eight companies controlling more than 80% of global supplies:

•Potash Corporation of Saskatchewan (NYSE: POT)
•Agrium (NYSE: AGU)
•Mosaic (NYSE: MOS)
•Germany-based K+S ADR (PINK: KPLUY)
•Russian firms Uralkali and Silvinit
•Belarus-based Belaruskali
•Israel Chemicals ADR (PINK: ISCHY).

Meanwhile, two marketing groups – Canpotex and BPC – dominate global trade. They negotiate annual and quarterly contracts with big buyers such as China, the world’s largest potash consumer.

Broken down, they’re basically legal cartels, rather like OPEC in the oil market. Protected by arcane rules, they don’t have to worry about antitrust action as they regulate production to match demand and keep prices high.

But their power may be short lived if a different industry has anything to say about it…

BHP Billiton and Potash

Large mining companies such as BHP Billiton ADR (NYSE: BHP) – the sector king – and Vale ADR (NYSE: VALE) have their sights set on the industry. They want to diversify outwards while still staying within their core competencies.

Since mineral fertilizer allows them to do just that, BHP recently made a $39 billion, all-cash, $139 a share offer for the world’s largest potash producer, Potash Corporation of Saskatchewan (NYSE: POT).

That kind of interest indicates a lot of change ahead for the industry…

BHP has already indicated its willingness to break the cartels. If POT accepts its offer, Billiton could lead the potash market away from negotiated pricing much as it helped end the benchmark iron ore pricing system last year: by producing as much as possible.

Since it usually likes running its mines at full capacity, such a strategy wouldn’t hurt it. Though it would certainly hurt the cartels, as all fertilizer companies would have to compete on prices for the first time since 1972.

High-cost producers could rapidly fall out of the industry, including Intrepid Potash (NYSE: IPI), which doesn’t belong to any marketing group.

A Potash White Knight?

With that all said, Potash Corporation is calling BHP’s offer a “bankrupt strategy.” And it is trying to persuade other suitors to save it from such a fate.

One such potential white knight is Sinochem, the parent company of China’s largest potash importer, Sinofert Holdings (PINK: SNFRF).

China does have a vested interest in potash, and imported half of its supply from the cartels last year. But while it heavily relies on the mineral to become self-sufficient in grain production, without any sort of control, China has no real interest in such investments.

Even if Sinochem did take over Potash Corporation, it would have the same goal as BHP. And why spend billions of dollars when someone else will drive down the price just the same?

More than likely, BHP will win out. And if that happens, the potash industry will never be the same.

Good investing,

Source: http://www.investmentu.com/2010/September/potash-prices.html

Tony Daltorio

http://www.investmentu.com

Copyright © 1999 - 2008 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules