Alan Guebert: Gee, what a coincidence | TSLN.com

Alan Guebert: Gee, what a coincidence

by Alan Guebert

Sometimes coincidences are just too coincidental.

For example, in a Jan. 27 conference call with Wall Street analysts, William Doyle, the president and CEO of Potash Corp. of Saskatchewan, the world’s leading supplier of potash, was asked where “the point of price elasticity is for potash in international markets… the $550 (per ton) … that you’re going to be seeing effective March 1… or that $800 level that they pushed price to, or tried, in 2008?”

Skipping the reference to “they” – whomever “they” are – Doyle couldn’t offer “an exact number” where potash prices might nick demand. He suggested, however, the analysts look to farm prices for insight.

“(J)ust look at the percentage of fertilizer cost as part of the return,” he urged. “I mean, it’s miniscule. So there’s a hell of a lot more room with $14 soybeans and $6.50 corn and $8.00 wheat… and cotton at $1.50-plus. I mean, you start looking at the incentive here (and) we’re a long way from any type of demand destruction.”

Just as Doyle hinted in January, potash prices, according to April 20 University of Illinois data, have “increased from $488 to $565 per ton at the beginning of the year, an increase of $77 per ton.”

Confirming the trend, DTN reported on April 26 that per-ton potash prices now stand at $599, nearly $100 higher then in April 2010.

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Coincidence?

If so, it’s a very coincidental coincidence, says C. Robert Taylor, the Alfa Eminent Scholar of Ag Policy at Auburn University. According to research by Taylor, Doyle made a similar observation in 2008 when potash prices soared from less than $400 per ton to a record $850 per ton for the year.

“A $100 per ton increase is worth only $0.03 to a corn farmer in the Midwest of the U.S.,” Doyle observed back then. “So you start doing the leverage on that, while it’s huge for us… it’s not a big deal to the corn farmer…

“But if you’re adding $500,” Doyle observed, “you’re only adding $0.15 to the cost of production of a bushel of corn. So you can see, we’ve got a lot of pricing room going forward and we don’t see a peak in our business.”

That any businessperson – be they peddling potash, potatoes or baloney – can predict, then pull off, such price increases suggests to Taylor that the global fertilizer market is rife with “tacit and explicit agreements on prices and market shares between producers.”

Rife may be an understatement because the global fertilizer industry is dominated by just three forces, explains Taylor, “and the first is the combined power of two government cartels, Canpotex and PhosChem.”

Next, he adds, is OCP, “a private monopoly sanctioned by Morocco;” and, third, is “a cabal of three potash companies in the former Soviet Union.”

(To read more about global fertilizer firms go to http://www.farmandfoodfile.com.)

The first among equals, however, are Canpotex and PhosChem. Canpotex, says Taylor, is “a potash cartel sanctioned by the Canadian government” with only three members – Potash Corp., Mosaic, controlled (and about to be divested) by Cargill, and Agrium.

Likewise, PhosChem is a phosphorus cartel – with “coincidentally,” remarks Taylor, “only two members, Mosaic and Potash Corp.” – that operates openly under something called the Webb-Pomerene Act, a 1918 U.S. law designed to promote cooperation between “small American” firms.

Potash Corp., of course, is neither small nor American and Mosaic-Cargill is $100 billion-big. So what gives?

To Taylor, the answer is obvious: “The red flags of market manipulation are flying everywhere and the flags of government are seen nowhere.”

This unquestioned “supra-competition” has cost U.S. farmers “on the order of $1 to $4 billion and in the tens of billions annually worldwide,” Taylor estimates.

All is old news. This space outlined these government-blessed, never-investigated cartels last August. Back then potash was $475 per ton; today it’s $600 and headed higher.

Coincidence?

Sometimes coincidences are just too coincidental.

For example, in a Jan. 27 conference call with Wall Street analysts, William Doyle, the president and CEO of Potash Corp. of Saskatchewan, the world’s leading supplier of potash, was asked where “the point of price elasticity is for potash in international markets… the $550 (per ton) … that you’re going to be seeing effective March 1… or that $800 level that they pushed price to, or tried, in 2008?”

Skipping the reference to “they” – whomever “they” are – Doyle couldn’t offer “an exact number” where potash prices might nick demand. He suggested, however, the analysts look to farm prices for insight.

“(J)ust look at the percentage of fertilizer cost as part of the return,” he urged. “I mean, it’s miniscule. So there’s a hell of a lot more room with $14 soybeans and $6.50 corn and $8.00 wheat… and cotton at $1.50-plus. I mean, you start looking at the incentive here (and) we’re a long way from any type of demand destruction.”

Just as Doyle hinted in January, potash prices, according to April 20 University of Illinois data, have “increased from $488 to $565 per ton at the beginning of the year, an increase of $77 per ton.”

Confirming the trend, DTN reported on April 26 that per-ton potash prices now stand at $599, nearly $100 higher then in April 2010.

Coincidence?

If so, it’s a very coincidental coincidence, says C. Robert Taylor, the Alfa Eminent Scholar of Ag Policy at Auburn University. According to research by Taylor, Doyle made a similar observation in 2008 when potash prices soared from less than $400 per ton to a record $850 per ton for the year.

“A $100 per ton increase is worth only $0.03 to a corn farmer in the Midwest of the U.S.,” Doyle observed back then. “So you start doing the leverage on that, while it’s huge for us… it’s not a big deal to the corn farmer…

“But if you’re adding $500,” Doyle observed, “you’re only adding $0.15 to the cost of production of a bushel of corn. So you can see, we’ve got a lot of pricing room going forward and we don’t see a peak in our business.”

That any businessperson – be they peddling potash, potatoes or baloney – can predict, then pull off, such price increases suggests to Taylor that the global fertilizer market is rife with “tacit and explicit agreements on prices and market shares between producers.”

Rife may be an understatement because the global fertilizer industry is dominated by just three forces, explains Taylor, “and the first is the combined power of two government cartels, Canpotex and PhosChem.”

Next, he adds, is OCP, “a private monopoly sanctioned by Morocco;” and, third, is “a cabal of three potash companies in the former Soviet Union.”

(To read more about global fertilizer firms go to http://www.farmandfoodfile.com.)

The first among equals, however, are Canpotex and PhosChem. Canpotex, says Taylor, is “a potash cartel sanctioned by the Canadian government” with only three members – Potash Corp., Mosaic, controlled (and about to be divested) by Cargill, and Agrium.

Likewise, PhosChem is a phosphorus cartel – with “coincidentally,” remarks Taylor, “only two members, Mosaic and Potash Corp.” – that operates openly under something called the Webb-Pomerene Act, a 1918 U.S. law designed to promote cooperation between “small American” firms.

Potash Corp., of course, is neither small nor American and Mosaic-Cargill is $100 billion-big. So what gives?

To Taylor, the answer is obvious: “The red flags of market manipulation are flying everywhere and the flags of government are seen nowhere.”

This unquestioned “supra-competition” has cost U.S. farmers “on the order of $1 to $4 billion and in the tens of billions annually worldwide,” Taylor estimates.

All is old news. This space outlined these government-blessed, never-investigated cartels last August. Back then potash was $475 per ton; today it’s $600 and headed higher.

Coincidence?

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