One of the members of the global potash club just broke rank in terms of price, making things a tad more interesting.
In my fourth-quarter review of PotashCorp
The offending oligopolist today is none other than Belarusian Potash Corp. (BPC), the Eastern European export collective that rivals the Canpotex crew of PotashCorp, Agrium
This seems like a pretty reasonable step, given the dislocations in Brazil's agricultural sector noted in this article. The potash exporters will still earn a high gross margin at that price, and more buyers ought to come out of the woodwork.
Still, PotashCorp and Agrium are likely not too pleased with the precedent, given that negotiations with China are under way. Unlike Brazil, which is a spot market, Chinese buyers agree to an annual rate, so the Canadians would be loathe to leave money on the table in case there's a back-half recovery this year.
Brazil was kind of a curveball, but the rates to watch remain the forthcoming Chinese and Indian long-term contracts. Even if these rates roll over flat from 2008 -- another of Merrill's assumptions -- that still leaves potash producers like Mosaic in a comfortable position. It would take a drastic concession to get me concerned about this prized product's profitability.
Further fertile Foolishness: