Russia’s Uralkali has put the market through the ringer this morning. In a story that has many caught off guard, Russia’s Uralkali has decided to break up its partnership in Belarus Potash Company. This has greatly impacted the ability for the potash cartel to operate effectively.
As reported on CNBC.com this morning,
The break-up of the Belarus Potash Company (BPC) leaves North America’s Canpotex as the ruling potash export venture. BPC and Canpotex had accounted for 70 percent of global trade in potash, an important ingredient for fertilizer, and the duopoly had set identical prices in key markets such as China and India.
I have been sitting in the Saskatoon downtown Starbucks all morning and it does not take long to figure out that today’s 20% declines in both Potash Corp and Mosaic stocks have rocked Saskatchewan today. At both tables beside me the loss in market cap for both Mosaic and Potash Corp has everyone talking. While the concern in Saskatchewan may be jobs and shocks to people’s pension funds, it will be the opposite reaction in places like Ontario or the US where farmers use heavy amounts of Potash to grow corn.
A farmer that asked to remain anonymous told me,
“the stocks are getting hammered because I will be able to buy Potash cheaper. With declining corn prices this fall, a decrease in the cost of inputs is a good story for my farms’s bottom line.”
Big movements in stock prices or potash prices to the farmer always come with over reaction but this one will be interesting to watch as it develops through the fall. The one thing that seems certain is that potash prices this fall have a good chance of being lower.