Fertilizer price boost moderate
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Hey there, time traveller!
This article was published 02/06/2011 (4387 days ago), so information in it may no longer be current.
FERTILIZER prices are rising at a lower pace than skyrocketing crop prices — and that’s not a bad thing, said an executive with the world’s largest producer of potash, a crop nutrient.
Wayne Brownlee, CFO of Potash Corp. of Saskatchewan (TSX:POT), said he does not foresee a repeat this year of the massive fertilizer price run-up of 2008.
“What you’ve seen is a more moderated price increase in fertilizer that has not matched the increase in agriculture commodity prices. And so it’s leaving the farmer in a very healthy situation,” he told a Scotiabank fertilizer industry conference Wednesday in Toronto.
Brownlee said Potash’s customers — farmers — are earning record margins. Instead of experiencing another 2008-style bonanza, Potash foresees “having a firm foundation under customer engagement on an ongoing basis.”
“So we can see growth in prices, but on a moderated basis. That ensures the volume does not become volatile again.”
Global grain demand has outstripped supply for seven of the past 11 years, and that has led to deep draw-downs on inventories.
“To put this into perspective, just to stand still and not have the situation get worse, we need crop production this year in the grain sector of five per cent growth,” Brownlee said.
“To actually make a difference, you need to be higher than that.
“You need to be around seven per cent in terms of starting to replenish inventory levels.”
Since production growth is around two per cent per year, farmers have a long way to go to maintain the status quo.
“So we need almost perfect weather conditions, which we’re not getting,” Brownlee said.
“I think that you should expect sustained pressure on grain prices for the course of this year, and probably into next year.”
— The Canadian Press