Potash miners may find respite from U.S. farmers
It's also possible - although not at all predictable - that Russia and Belarus could quickly patch up their differences and return to a disciplined production model that once again makes strong prices the goal over market share. Such a move could lead buyers to conclude prices have hit a floor, resulting in strong off-shore demand in the fourth quarter.
The weather notwithstanding, fertilizer producers say they expect a strong U.S. season because grain prices are high enough to justify farmers spending more to maximize yields of next year's crops. Still, Mosaic admits noticing some hesitation.
"It's really a matter of psychology now that the supply chain is reluctant to put product in when you have (Uralkali) stating - and now they're trying to pull that back and retract - that 'we might do $300 or lower than $300 (per tonne) potash," said Mosaic Chief Executive Jim Prokopanko during the company's analyst day on Oct. 7. "Farmers in Nebraska, palm plantation owners in southeast Asia, they all heard that. I don't think it's going to happen."
The price of standard muriate of potash (MOP) in southeast Asia averaged $365 per tonne, down from $490 a year ago, while the U.S. corn belt price of granular MOP averaged $389, a steep drop from $504 a year earlier, according to data released Oct. 4 by Mosaic.
Agrium said Oct. 8 that it expects a strong U.S. application season for potash and phosphate, while Potash Corp is in a quiet period ahead of reporting quarterly results and declined to comment.
Analysts aren't so sure better times are around the corner.
Only six brokers rate Potash Corp as a "buy" or "strong buy," with 17 rating is as a "hold" and four giving it an "underperform" recommendation, according to Thomson Reuters data.
Three months earlier, prior to BPC's breakup, 17 rated Potash as a "buy" or "strong buy", 10 as a "hold" and two at "underperform."
Not only is off-shore demand soft, but there is excessive supply.
Supplies at the mine level were some 31 percent larger in August than the five-year average at the mine level, according to industry data.
"The signal out there to the farm community is that potash prices are unstable, that it's not likely they're going to increase," said Gene Gauss, vice-president of fertilizer and nutrition for California-based Wilbur-Ellis. "Farmers are just waiting for when they need it."
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