Potash miners may find respite from U.S. farmers
U.S. farmers look poised to offer battered North American potash miners a sorely needed respite after the breakup of a trading alliance between Russia and Belarus.
The exit of the world's top producer of the pink crop nutrient, Russia's Uralkali OAO, from Belarusian Potash Company and the miner's switch to a volume-driven strategy has weakened potash prices. In the wake of that development, off-shore buyers to the sidelines to digest the biggest changes to global potash trading since BPC formed eight years ago.
The breakup escalated into a diplomatic row after Belarus arrested Uralkali Chief Executive Vladislav Baumgertner and Russian media has speculated that the main owner of Uralkali, Suleiman Kerimov, may be under pressure to sell his stake so the alliance can re-form.
Half-a-world away however, U.S. growers, who pay a premium for potash compared to Chinese and Indian buyers who negotiate bulk purchases, may offer relief to miners like Potash Corp of Saskatchewan and Mosaic Co.
Flush U.S. farmers are expected to deliver traditionally strong autumn demand for the crop nutrient, even as off-shore buyers hold out for lower prices.
U.S. farmers will have ample reason to apply the fertilizer this autumn at normal levels once they wrap up the harvest, according to a Reuters poll of 11 farm retail dealers, who buy crop nutrients from wholesalers and sell fertilizer to farmers.
The United States is reaping what's expected to be a record-large corn crop and its fourth-biggest soybean crop, providing farmers ample income to buy potash, a fertilizer that boosts yield and promotes root growth, dealers said.
"We're pulling off incredible yields on corn and soybeans that take a lot of potash and phosphate," said Larry Jayroe, Memphis, Tennessee-based regional fertilizer manager for Jimmy Sanders, a U.S. chain of farm retail dealers.
"What (farmers) made on wheat, plus what they made on soybeans, that's a grand slam, not a home run."
While U.S. fertilizer prices will still be well down from a year ago, strong autumn demand could help stabilize earnings and shares of Potash Corp, Mosaic, Intrepid Potash Inc and Agrium Inc, which have been under pressure since the mid-summer split.
Shares of Potash Corp and Mosaic, the two biggest North American producers, have fallen 18 percent and 15 percent respectively since BPC collapsed on July 30.
Potash Corp shares stumbled on Friday after the Saskatoon, Saskatchewan-based miner warned quarterly profit would be below analysts' expectations.