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Potash the New Crude    •

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    Fertilizer Price Hikes Are Pinching Farmers
    By Jacob Adelman
    The Associated Press

    Sunday 20 April 2008

Higher produce costs likely for consumers.

    Los Angeles - Link Leaven's fertilizer bill has been growing faster than the lemons and avocados on his Ventura County farm.

    Every week or so, when he orders another truckload of the nutrients, he's been getting hit with a price hike of up to 20 percent.

    "It's like there's no end in sight. It's very scary," said Leaven, who pays $600 for a ton of some fertilizer mixes that he paid half as much for just six months ago.

    Farmers across the country are seeing similar price increases caused by several factors, including the booming demand for fertilizer to produce animal feed for rapidly developing nations like India and China, where people are adopting diets richer in meat.

    In the United States, high gasoline prices are prompting growers to plant fertilizer-dependent corn for the manufacture of ethanol fuel. High energy prices also have affected the availability of natural gas, which can be sold more profitably as fuel than as a key ingredient in the production of nitrogen-based fertilizers.

    California Growers Hit

    Midwestern growers of commodities such as corn and grain have been able to absorb the cost hikes as their crops fetched higher prices. But growers in California, the nation's leading agriculture state, have yet to see retail prices increase for the fruits and vegetables that dominate their farms.

    In fact, farmers saw the average price of broccoli fall to about 23 cents a pound in February, down from 26 cents a year earlier, according to the U.S. Department of Agriculture. Lettuce prices also dropped about 3 cents to 13 cents a pound during the same period.

    Along with soaring labor, water and fuel costs, increasing fertilizer costs have been draining farmers' savings and will probably lead to higher prices for fruits and vegetables to go with separate increases in meat, poultry and dairy products.

    Jim Prevor, editor of Produce Business magazine, said some produce prices are already beginning to creep up due to fertilizer and other costs, but major increases won't be seen until farmers curtail crops that become too expensive to grow.

    "Eventually it's going to have to change," Jack Vessey, a lettuce and spinach grower in San Diego County, said of prices.

    Vessey said he's currently pushing for a price bump from distributors that buy from his farm.

    In the Central Valley, almond, tomato and lettuce grower Mark Borba said the twofold price increase for some nutrients could lead him to cut production.

    "At some point, when any manufacturing business finds their raw material costs exceeding the price of what they've produced, they will stop," he said.

    U.S. farmers paid about $322 a ton for fertilizer in April 2007, the most recent figures available, up from $291 a ton a year earlier, according to the USDA.

    The agency won't release its next set of annual figures until later this month, but its monthly fertilizer pricing index points to even more drastic increases.

    Joe Burdullis, co-owner of Oxnard-based fertilizer supplier AG RX, said he's been receiving a constant stream of price-hike notices in recent months from dozens of manufacturers.

    "We'll get four or five different price increases in any one day," said Burdullis, who has been supplying growers in Ventura and Santa Barbara counties for about 50 years. "I've never seen anything like this."

    Not Enough Capacity

    Fertilizer producers have been operating their factories at full bore to meet the growing demand, but there's not enough manufacturing capacity to bring down prices, said Charles Nekvasil, a spokesman for Deerfield, Ill.-based fertilizer producer CF Industries.

    "It's supply and demand, and there hasn't been a lot of supply coming on the market," he said. "It's almost a bidding war."

    Fertilizer prices also are being nudged higher by the heightened security costs paid by manufacturers to produce and ship ammonium nitrite, a fertilizer ingredient that can be used to make explosives, said Harry Vroomen, chief economist for the Washington, D.C.-based Fertilizer Institute.

    California growers are feeling the pain and said it's only a matter of time until shoppers do, too.

    "Budgets have to increase in order to keep doing what we're doing, and the hope is that on the retail end we can get it back," said Andy Hooper, who manages a farm that grows strawberries, celery and bell peppers in Ventura County. "The bottom line is the consumer's going to be paying more."

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    Potash the New Crude
    By Cassandra Kyle
    The Saskatoon StarPhoenix

    Thursday 17 April 2008

Chinese agency agrees to hike price by $400 a ton.

    Saskatchewan potash is the new crude oil, according to one market analyst monitoring the historic rise in value of the plant nutrient.

    On Wednesday, the same day crude reached a record high, shares in potash companies spiked based on news the largest distributor of fertilizer products in China - Sinofert Holdings Ltd. - has agreed to pay $400 US more per tonne of Saskatchewan potash this year than in 2007. The Port of Vancouver FOB price of $576 US that Sinofert agreed to in negotiations with Canpotex Ltd., the offshore marketer for Saskatchewan potash producers, is higher than most analysts expected, said Patricia Mohr, vice-president of economics at Scotiabank in Toronto.

    "It's up as much as crude oil and maybe a little more," Mohr said in a telephone interview. "It's very good news for the potash producers in Saskatchewan and for shareholders."

    Due to the timing of the agreement and demand from other world markets Canpotex, which has prorated China's 2008 volumes, has only one million tonnes of potash it can commit to China through the remainder of the year. In 2007, Canpotex sent 2.5 million tonnes of Saskatchewan potash to the Asian country.

    Still, Saskatchewan's potash industry will gain momentum from the agreement with Sinofert and a recent negotiation with India seeing distributors in that country pay $625 US per delivered tonne this year, an increase of $355 US per tonne over 2007, said Mohr.

    "It puts the industry on a very firm footing, so all the different kinds of equipment and supplier industries to the potash industry will be doing quite well. And the province's tax take from the industry, the tax revenue, will be going up a lot, I assume," she said. "It will eventually percolate down to suppliers and there will be a lot of jobs opening up in construction for some of the mine expansions that the companies have, so there will be more job opportunities."

    Richard Downey, director of investor relations for Agrium Inc., one of the three Saskatchewan potash producers represented by Canpotex, (the others are Mosaic Co. and Potash Corp. of Saskatchewan) said the closely watched agreement with Sinofert is still a good deal - even though less product is heading to the Asian nation than last year.

    "The reality is the market was extremely tight, and with the Indian deal behind us we would be hard-pressed to supply a lot of potash to China anyway, especially in the near future," Downey said from his Calgary office.

    A shortage of labour and equipment in Western Canada is a challenge for the industry which sees the problems working to push commodity prices higher, he said.

    "Just with all the projects that are going on with all the commodities, the minerals, the oil and gas as well as the potash side of things, it makes the time horizon a little tougher and it makes the costs a little higher."

    But nothing is pushing potash prices higher than farmers working to meet world food and fuel demand, said Denita Stann, PotashCorp's director of investor relations. Speaking from the company's Northbrook, Ill., office, Stann said global tastes are turning to protein-rich diets.

    "They key to really understanding what's driving this globally is the pressure on food production and the shifting diets that you're starting to see in China and other areas in southeast Asia," she said. "In terms of what's driving our business, that is it."

    PotashCorp, which supplies 54 per cent of Canpotex's potash supply and also owns 20 per cent of Sinofert, understands the amount of potash that the world needs is going to continue to grow, she said.

    "The volumes, I think, reflect the fact that there's tremendous pressure on potash globally. It's a very tight market and it really all comes back to the intense pressure on food production around the world," Stann explained. "Farmers are trying to bring their yields up and really, fertilizer is a critical part of that."

    At the end of trading Wednesday, PotashCorp's stock value on the TSX exchange had risen by $10.35, or 5.5 per cent to close at $199.08, a clear indication that the company isn't the only group that sees a strong future in potash. Last year, PotashCorp recorded a record net income of $1.1 billion. The company is currently experiencing a year-over-year share price increase of 201 per cent.

    Agrium's value rose by $6.20, or 7.7 per cent, to $86.70 Wednesday while Mosaic's value, which trades on the New York Stock Exchange, rose by $9.22 US, or 7.23 per cent, to close at $136.82 US.

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