Mosaic CEO says Uralkali potash plan fails 'economic sniff test'
Uralkali's revamped potash marketing plan, focusing on maximizing sales volume rather than price, fails the "economic sniff test," Mosaic Co Jim Prokopanko said on Tuesday.
Prices of the crop nutrient have slipped since midsummer, when the biggest global producer, Russia's Uralkali OAO , quit its export partnership with Belaruskali and said it would seek to maximize sales volumes.
Prokopanko, responding to a question at the Credit Suisse Chemical and Ag Science investor conference in New York, would not predict whether he sees the partnership, called Belarusian Potash Company, re-forming.
But he said the new sales strategy may not last.
"I don't think a volume over price strategy passes the economic sniff test," Prokopanko said. "Giving it away, I don't understand whose benefit it serves. I just don't see that what we have today, one competitor's strategy of volume over price, is sustainable for very long at all."
The market has over-reacted to the break-up of BPC, one of two global trading partnerships whose members have long adjusted production to support price, Prokopanko said. Even so, it is one factor, along with the collapse of the Indian rupee and a seasonal slowdown in fertilizer demand, that has left buyers cautious, he said.
On Monday after markets closed, Mosaic cut its third-quarter sales and price outlooks for potash and phosphate.
The company's shares were down 1 percent in New York to $45.07 on Tuesday morning, but its losses were smaller than those of North American potash rivals Potash Corp of Saskatchewan and Agrium Inc.
Mosaic is the world's largest producer of finished phosphate products and North America's second-biggest potash producer. Mosaic, Potash Corp and Agrium own the potash export company Canpotex Ltd.
Indian imports of potash, which farmers use to boost growth of crops like wheat, cotton and rice, have fallen off as the rupee's decline and a government subsidy program that favors nitrogen over potash makes purchases more expensive. But Prokopanko said Brazil will use record volumes of potash and phosphate this year, and that Mosaic expects an "outstanding" autumn fertilizer season in North America.
In the longer term, population growth and a surge in demand for food look to drive up global potash shipments by 2.9 percent annually this decade to 70.3 million tonnes in 2020, from 52.6 million in 2010, Prokopanko said.
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