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Potash Shake-Up Continues to Take Toll

September 24, 2013

Agrium Inc. is the latest North American potash producer to cut its sales forecast as the breakup of the world’s largest mrketing bloc for the crop nutrient begins to take its toll.

Agrium, the third-largest North American producer, expects to sell 30 percent less potash in the third quarter and forecast a 64 percent drop in profit from its wholesale fertilizer division, the Calgary-based company said yesterday. U.S.-based Mosaic Co., the second-biggest producer, cut its sales forecast by about 20 percent on Sept. 16.

The potash market has been roiled since OAO Uralkali, the world’s largest producer, announced it had pulled out of an export sales venture with its Belarusian counterpart on July 30. The Russian company said it would boost output and start selling at lower prices, a move that sent shares of fertilizer companies falling.

Potash Corp. of Saskatchewan Inc., North America’s biggest producer and a member of rival export group Canpotex Ltd. with Agrium and Mosaic, won’t be spared the drop in demand, said Peter Prattas, an analyst at Cantor Fitzgerald LP in Toronto.

"They’re all going to hurt equally given the fact that they’re a collected group," Prattas said yesterday in a telephone interview.


‘Essentially Paralyzed’


Potash Corp. Chief Financial Officer Wayne Brownlee said during a Sept. 18 investor conference in New York that volumes in offshore markets "have been essentially paralyzed." He said today Canpotex’s strategy won’t change because of Uralkali’s intention to focus on increased volumes.

"If we signal to competitors, or to potential competitors, that we will back out of markets then we won’t have a business for a long-term basis," Brownlee said today at a conference in Toronto. "So there is no change in strategy going forward. It will be consistent and always to optimize profitability."

Buyers are holding back, in anticipation that prices will sink, before stocking up on the crop nutrient, said John Hughes, an analyst at Desjardins Securities Inc. in Toronto.

"Why buy today at 400 bucks U.S. a ton potash if the general perspective is we’re going to head to $300 or $350?" Hughes said yesterday by phone.

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