According to market experts high food prices are likely to persist for the next few years. However, high food prices are good news for potash prices, because as the price that farmers can sell their crops for rises, so does their cash flow to spend on fertilizer.
While grain prices have been experiencing volatility in the aftermath of Japan’s earthquake; potash prices have yet to feel the effects.
The share prices of many potash and phosphate producers are battle-scarred this week, as instability in the Middle East and Africa has sent markets on a tailspin. One of the key markets impacted by the turmoil is the grain markets.
Despite U.S. farmers move to plant more corn this spring, supplies will remain tight through 2012, according to the U.S. Department of Agriculture’s chief economist Joe Glauber. As the price of corn rises, so does the incentive for farmers to fertilize their crops; good news for potash and phosphate prices.
Last week, the potash market anxiously awaited Q4 earnings release from Potash Corporation of Saskatchewan. It was not the 2010 earnings recap that had market stakeholders holding their breath; it was Potash Corporations statements on their 2011 potash market expectations.
The potash market is waiting with baited breath for Thursday, when Potash Corporation of Saskatchewan (NYSE:POT) will release its Q4 earnings as well as its targets for the 2011 season.
Analysts have already warned that extremely tight phosphate inventories could put significant constraints on supplies and further buoy phosphate prices. In some areas, analysts caution that phosphate supplies may be used up, resulting in a delay for farmers to get their hands on much needed phosphate.
Potash producer’s share prices rallied this week on the expectation that corn and soybean futures will extend their gains into the New Year.
It has been a wild ride for the potash market. In 2008, the price of potash soared to $1,000 per tonne. In 2009, as the recession hit farmers in the pockets, the price retreated to $350 per tonne.
Concerns about adverse weather in western Canada and Russia are sending grain futures on a rally. This is good news for diammonium phosphate and other phosphate based fertilizer prices.
Wednesday, May 25, 2011