The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Watch Out For Morocco's Phosphate Monopoly
Nov 07, 2010
In the November 14, 2010 issue of Bloomberg Business Week, one of their key articles was on Morocco's potential monopoly in phosphate. As most farmers remember, phosphate prices in the 2007-2008 time period rose, in some cases, by tenfold or more. For many decades, phosphate sold for about $40 per ton. However, currently, phosphate trades near $130 per ton and it may go higher.
Most phosphate mines, including those in the US, which produces about 17% of the world's supply, have been in a downward spiral for the last decade, running out of quality rock to mine and environmental issues. This has forced phosphate companies to look farther afield for additional supplies. Earlier this year, Mosaic purchased a 35% stake in a Peruvian mine to supply its phosphate operations in North and South America.
However, Morocco appears to be gaining confirmed phosphate resources. This was officially verified in September, when the International Fertilizer Development Center released its long-awaited update on global phosphate resources. Morocco's portion went from the old official 5.7 billion metric tons to 50 billion metric tons - 85 percent of the world's total. Even with about 170 million metric tons of global production, Morocco appears to have enough supply for the next 300 to 400 years.
With this abundant supply and the shortage in other country's supplies, Morocco is taking a hard stance on pricing. If they are successful in keeping supplies off the market and prices high, we may see phosphate prices near the 2007/8 level or even higher.
We shall see how this turns out over the next several years.