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Market Outlook: Potash Capacity Expansions to Meet Demand

February 4, 2011

Potash Capacity Expansions to Meet Demand

With rising potash demand expected to challenge the industry’s capability in the coming years, the world’s largest potash producer is expanding capacity.

Saskatchewan-based PotashCorp is developing more than 50% of the world’s incremental capacity by 2015, positioning the company to capture a significant share of future fertilizer demand growth. Capital expansions between 2005 and 2015 are expected to significantly increase operational capability to 17.1 million tons.

potash chart

Signs of steady supply are showing at the retail level, says Barry Ward, an ag economist with Ohio State University. The retail price of potash in December in Ohio was $500 per ton to $550 per ton (down 10% to 15% from a year ago).

"Potash prices will likely remain steady to higher into 2011, as high crop prices will translate into continued strong demand while the two major potash consortiums will meter out supply to keep prices stable," Ward says.

South Korea Problem Shorts Livestock

South Korea has ordered the culling of more than 1 million livestock production animals since late November to stem its severest foot-and-mouth disease (FMD) outbreak in history, the government said.

"From what I hear they have now found over 110 cases of the disease in infected livestock. The word is most of the animals killed were pigs and cattle," says Kevin VanTrump, an ag commodities market analyst with more than 20 years experience in the grain and livestock industry. "Traders in the industry are now becoming more concerned than ever before that export demand from South Korea and eventually China will soon spike much higher."

The big kicker is South Korea has also suspended imports of German pork because of the whole dioxin contamination crisis, VanTrump says. This will most likely make U.S. pork more attractive to other countries worldwide.

"Don’t be surprised if traders continue to add premium to these markets, at least until they know more about the severity of this problem, how far it will spread and how much livestock will have to be killed to keep it from spreading," VanTrump adds.

Market with a Disciplined Approach

If you want excitement, go to Las Vegas. If you want to make money on your crop production, have a plan and stick to it, says Scott Stewart of Stewart Peterson.

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FEATURED IN: Top Producer - February 2011

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