this should make you mad--what the production cost of potash?

[mcfarms]

Business Now that potash prices established, buy into fertilizer sector
By Jonathan Ratner, Financial PostJuly 31, 2009
With the settlement of the Indian contract with Canpotex and Belarussian Potash Co. (BPC) settled, there is an established international benchmark for potash prices. There is also a North American benchmark now that Potash Corp. cut its domestic pricing, according to Dundee Securities analyst Richard Kelertas.

He expects Agrium Inc. to meet this new pricing level and revised his potash price forecast lower with these better indications on both domestic and overseas prices.

"We have been advising investors to take some short term profits since May," Mr. Kelertas said in a report this week. "However, we now believe that after the overbought period from March to May and the subsequent decline period from the peaks in May to current prices is over. As such, we would advise both short and long-term investors to buy into the fertilizer sector."

Nonetheless, the price reduction has reduced Dundee's earnings estimates for Agrium. It cut its 2009 EPS forecast from $4.45 to $3.77, for 2010 from$7.34 to $5.52, and anticipates $6.25 in 2011.

The analyst noted that the average cost of potash production in 2006 and 2007 was $85 per tonne, which rose to $109 in 2008. In the first quarter, costs rose to $277. However, Dundee sees Agrium's normalized cost of production at roughly $100 per tonne, "hence the segment remains very profitable despite lower prices."

"Now that India has settled at lower prices we believe buyers throughout the world will re-stock their inventories, creating more normalized potash demand," Mr. Kelertas added.

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[furrowtickler]

This is no surprise at all, production costs have nothing to do with the outrigt ****ing and pillaging that POT has been doing. The good thing is that is blowing up in their faces as we speak. You can not sell a Chev at Lamborgini prices and demand that consumers pay it or else - sooner or later the consumer will say f you!!

[Fransisco]

Price is not determined by production costs. It is determined by supply and demand.

[jensend]

even when suppliers form a cartel? maybe over the long term but in the short term there are real market and price distortions. supply and demand work in a free market environment but there are very few sectors of the economy that meet those criteria.

[Fransisco]

Not sure if potash actually qualifies as a cartel, but if it does then cost of production again has little to do with setting the price.

What's the market share? How many other players are there? And what is the formal OPEC style arrangement between these players?

[LWeber]

http://canpqlx.sasktelwebhosting.com/company.htm

[Fransisco]

According to wikipedia

"In 2005, Canada was the largest producer of potash with almost one-fourth of the world share followed by Russia and Belarus in Soligorsk, reports the British Geological Survey"

So looks like 25% market share, when it comes to production anyways.


According to the link Webber put up they sell 9-10 million metric tons a year. Major international markets include Australia, Brazil, China, India, Indonesia, Japan, Korea, and Malaysia.

[Fransisco]

Interesting interactive map here

http://www.potashcorp.com/media/flash/world_map/

Canada is definitely the number 1 exporter though there are times when the FSU gives us a run for our money.

We do import 10-20,000 tonnes a year so we can get it from off shore. I would imagine the biggest barrier is transportation costs. But I'm open to correction on this one.

We only used 197,000 tonnes in Canada in 2006. So we're just under 2% of Potash corps buisness. Pretty small beer. Even if we are getting gouged they're not getting rich off of Canadian farmers.

[furrowtickler]

I was implying that farmers world wide not just in alone here in western Canada have trimmed consumption due to high prices for a product that is not nearly worth it's weight at any farm level in any country on earth. And yes Sask needs POT to perform well, but they puched pricing way too far and they are getting burned.

[jensend]

the biggest thing the co's have going for them is that where soils are deficient a year of cutting back rates just makes the deficiency bigger. so the next year the marginal return is that much greater.

[Fransisco]

"but they puched pricing way too far and they are getting burned."

Bingo, the demand just wasn't there at that price.

[agstar77]

Potash was rejected by U.S. as being too high priced and is sitting in hopper cars on railway sidings. How much do you think that is costing them?

[Fransisco]

All these people not deciding to by high priced potash. Making a choice. Sounds like the free market at work to me.

[Hopperbin]

I was told by a mine employee that is still out of work. The mines still want to be able to produce fast because at a certain time of the year the more product they can produce gives them the market share from Canpotex. What is definition of Cartel?

[Fransisco]

http://en.wikipedia.org/wiki/Cartel

A cartel is a formal (explicit) agreement among firms. It is a formal organization of producers that agree to coordinate prices and production.[1] Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion is to increase individual members' profits by reducing competition. Competition laws forbid cartels. Identifying and breaking up cartels is an important part of the competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to collude on paper.