A Uralkali spokesman said yesterday that potash prices will not fall as far as they had originally thought. The new benchmark was to have been at $300.00/tonne, but that estimation was forged when friction between Belarus and Russia was at its height. India has since tendered with Uralkali for $350/tonne and China is rumored to have signed on for $250/tonne with a $76/tonne delivery fee. That would put the delivered China price at $316/tonne. There are those who would question that figure, however, as very few product tonnes have shipped under the new price.
Detained CEO Baumgertner reportedly spilled his guts to Belorussian authorities and has now been moved to house arrest in a Minsk apartment. But Baumgertner is not the one Belarus was gunning for. Sulieman Kerimov, Uralkali's largest stakeholder, is on the run. Speculation has it that high ranking officials at both companies were privy to a degree of 'under the table money'. But Kerimov got greedy and overstepped his bounds.
Belarus has made it clear that they are willing to restart the joint venture as long as the upper management of Uralkali changes, and Putin delivers Kerimov. From the Russian side, Putin is playing his cards close to his vest. A joint venture is good for Uralkali and even better for Belaruskali who would struggle without an export ally. As it is, Uralkali supplies 17% of the world's potash with Belaruskali at 14%. Canpotex now sits at the top of the heap supplying 35% of the world's potash sendouts, and is the #1 supplier to the United States.
U.S. potash pricing has responded with declines to fresh lows and I have wondered in earlier articles what these declines would look like with Dec corn at $7.00... or even $6.00. If corn futures hadn't tanked this summer, would the price of potash been so willing to give up dollars on the sticker price?
At this point, I'm growing more skeptical by the day. Uralkali joins a handful of sources that now warn of an early winter bounce in potash pricing that would have those who waited for the rumors of deep declines to materialize paying more this spring. I am not ready to pull the trigger on extended coverage because a lot of what has come out of this situation sounds at first plausible, and then does not come to fruition. However, for every action there is an equal and opposite reaction. Growers will have to pay the difference when potash corrects -- and it will.
Next week's Monitor numbers will tell us more, but as it looks now, the downside is nearly exhausted and a correction to the upside is a near certainty. We will keep you posted on our findings next week but it may just be time to think about hedging some K against upside risk through the winter.