Analyst Questions Industry Study Forecasting Heavier N.A. Potash Demand

03:30PM Jul 27, 2012
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The potash industry is bullish on future demand coming out of North America, but at least one industry analyst takes exception to that view. In his latest review of the potash industry in general and Potash Corp in particular, Mark Gulley, Gulley & Associates, LLC, points out U.S. potash demand "has been flat for the past two decades at roughly nine to ten million short tons despite steady increases in crop production, due to better agronomic practices. That can mean only one thing; 'specific' potash consumption, in pounds-per-bushel, is declining on a secular basis.

"As a rule of thumb," he continues, "if crop production has increased over that period by 2% per year, pounds/bu. has decline 2% per year compounded. That means that pounds/bu. had decline by fully 50% over that 20-year period. Therefore, it will be very interesting to see if potash consumption increases in N.A. in 2013," he observes.

Gulley points out the industry has responded with a study the International Plant Nutrition Institute (IPNI) which suggests N.A. growers have been mining their fields over the past two decades with crop withdrawal of nutrients exceeding application rates. The thought is as the soil inventory of P & K declines, yields may deteriorate and fertilizer demand will grow to re-build nutrient inventory.

Gulley says growers do not care about what the "top-down study" indicates. "They do care about a bottoms-up analysis of their field under cultivation," he counters. "They will do the same thing this fall they have always down, but they will do it better. They will conduct soil tests after harvest, analyze the data and if they are employing precision dispensing equipment, apply fertilizer where it's needed and, importantly, not apply where it's not needed," he states.

"Even if IPNI's conclusions are correct, the industry faces a sizable education challenge," he continues. "It would need to convince thousands of county extension agents, hundreds of farm consultants and a million growers to increase P&K application rates," he states.