Detained Uralkali CEO Baumgertner has been moved from what a Reuters report called a KGB prison, to house arrest in Belarus. Officials from Belarus and Russia have been in a series of separate discussions regarding the release of Baumgertner in the last week, but no concrete progress has thus far been reported.
Many industry watchers believe the move may signal an end to the potash war and suggest that Belaruskali and Uralkali could patch things up and rebuild the joint venture Belarus Potash Company (BPC). But the original beef between the two stemmed from accusations leveled from both sides that each had conducted unfair commerce outside the union, a violation of the joint venture's agreement. Since the June breakup, each has signed its own deals with outside partners -- Belaruskali with Qatar's Muntajat, and China acquiring a 12.5% stake in Uralkali in a cashless exchange.
As the two become more entwined with new ventures, the likelihood the two will restart BPC diminishes. Belarus' decision to move Baumgertner to house arrest from the bowels of a KGB gulag could be perceived as Lukashenko trying to make nice with Putin without letting his only prisoner in this potash skirmish go free. Putin has already curtailed imports of Belorussian dairy and pork and stemmed the flow of Russian crude to Belarus. As President Lukashenko watches his export revenue dwindle and crude stocks decline, he finds himself in the difficult position of choosing between standing his ground by throwing Baumgertner in jail, and pleasing Putin.
If Lukashenko releases Baumgertner, his only bargaining chip in the potash cold war would leave Belarus, leaving Lukashenko with zero leverage against Putin. But with 12% of his export revenue already in jeopardy in the form of diminished potash sendouts, add cuts to dairy and pork exports, and Lukashenko may have trouble keeping the lights on in Minsk.
The soap opera continues to work in favor of North American farmers, and, really, potash users worldwide. The suggestion the dispute will continue to pressure potash pricing lower has suppliers and retailers on the sidelines, waiting out the decline. As potash producers look for the pricing point that will set off a much needed round of bookings, end users are more than willing to sit back and watch how all of this plays out, delaying potash purchases until some sign where the market will finally bottom.
Expect that sentiment to carry through until spring applications force buyers to enter the market. There is a lot of hype in this tale but the fact is, wholesale potash sendout prices leveled off this week. We have advised booking 20% of spring potash needs at current pricing as a risk management tool -- a hedge against reality catching up with rumors of price declines.
Baumgertner's move from a KGB prison cell to house arrest is a signal that Belarus may be willing to make certain concessions to Russia. Raw pride may be the only thing detaining Baumgertner at this point and as Lukashenko struggles for leverage in the potash cold war, the momentum has shifted in Putin's favor.
Current Midwest retail potash pricing reported to your Inputs Monitor this week is down $5.43/short ton at a regional average of $505.56 -- $96.02 below year-ago.