Spot potash is heading for $500-$600

By Tom Stundza -- Purchasing, 4/9/2008 12:50:00 PM

Prices of fertilizer-related minerals (potash and sulphur) have risen to new heights, says chief industry and commodity economist Patricia Mohr at Scotiabank Group in Toronto. She points out that potash prices at the Port of Vancouver in British Columbia “have jumped from record to record, climbing from US$316 per metric ton in January to $394 in February to $412.50 in March — up 129.2% year-over-year.”

Mohr tells clients that “prices will advance further in the next six months — likely to the $500-600 mark — with substantial gains in Brazil, Southeast Asia (Vietnam and Malaysia), India and China and an end to low-priced contracts.” Reason: Potash demand in Brazil — for growing soybeans and sugar cane — has been unusually strong in the first quarter, with prices rising by $100 to $600-610 cfr (delivered) for granular material in April.

Canpotex of Saskatoon, Saskatchewan, just concluded annual contract negotiations with India — lifting its potash price to $625 cfr (delivered) from the current $270. Shipments under the new contract will get under way around May and extend through March 2009.

China has only modest inventories of potash (just over 2 million metric tons) and is expected to settle its contract in April-May at a much higher price — more in line with the higher prices paid elsewhere. Mohr notes that China’s agricultural sector “can pay substantially higher prices for fertilizer given the rejuvenation in global farm income and tight supplies of wheat, feedgrains and oilseeds—as well as huge interest in crops for biofuel production.”