Fertilizer exports to India are down this year...way down. According to a Chemicals and Fertilizer Ministry of India official, the nation does not plan to buy any potash or DAP until the end of the fiscal year. This has Canadian suppliers Canpotex a little nervous. Canpotex consists of the Canadian big three nutrient producers, PotashCorp, Mosaic and Agrium and while each of the three will struggle to different degrees, potash and DAP exports to the company's number one buyer, India, will have to wait.
A potash contract was expected to be inked between Canpotex and India in August or September, but the sale was not made. In 2011, India accounted for around 10% of Canpotex's sales; in 2010 nutrient sales to India amounted to 14%.
PotashCorp has the most to lose from delayed sales to India of the three Canpotex members. PotashCorp provides 53.6% of Canpotex's potash -- Mosaic throws in 37.1% and Agrium provides 9.2%. Agrium derives the loin's share of its profits from nitrogen while potash accounted for only 6% of total sales in 2011, and therefore, AGU will fare better than the other two.
India is the World's second largest importer of potash and dragging their feet to buy will likely affect prices globally. An already robust potash supply in India is being partially blamed for the hesitation to order, but the surplus comes at a convenient time as the government of India is looking to slash fertilizer subsidies to growers. The pause could save the nation up to 50% on its fertilizer subsidy bill.
Meanwhile, Urea has become the nutrient of choice on the farm in India and agricultural officials are battling overuse of Urea as it has caused a major imbalance in soil nutrition. A plan has been suggested that would impose a 10 - 40% increase on the retail price of Urea in an attempt to curb its overuse in favor of a more balanced nutrient strategy.
The ballooning supply of potash this fall will have a softening affect in proportion to the amount each of the three Canpotex players relies on potash. PotashCorp could see the biggest hit with Mosaic not far behind. Reliance on nitrogen on the heels of cheap natural gas should insulate Agrium as demand for potash falters in India.
As of now (Noon CT)...
PotashCorp (POT) trending higher on the day after a very choppy summer. Currently $0.30 higher on the day at $41.87.
Mosaic (MOS) found downside support in early June 2012 at $44.43 -- trending higher ever since, but losing most of its summertime gains, plunging to $54.28 this morning. Rebounding on moderate volume to $55.03 -- currently fourteen cents over today's opening price.
Agrium (AGU) has also trended higher through the summer, continuing its upward movement on moderate volume today, $0.82 higher to $104.29.