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Potash: BHP or PCS - Which is the best deal for farmers? Farmers of North America Comment...What do you think?
 
Potash:  BHP or PCS - Which is the best deal for farmers.
 
Commentary from FNA-STAG
 
The coverage of the offer by BHP Billiton to buy potash mining giant Potash Corporation of Saskatchewan (PCS) has been missing one very important element - the potential impact on agricultural producers.  This important stakeholder is, after all, the end consumer of the important fertilizer product.
 
There has been full and complete analysis and speculation of the impact of the deal for shareholders, governments, and citizens of Saskatoon and Saskatchewan.  These are all important stakeholders to be sure, but the potential impact of the takeover on the farmer who uses that potash seems to have been left out of the mix. 
 
Bob Friesen, CEO of FNA-STAG, comments, "Have either of these companies talked about their farm customers yet?  What effect would this deal have on farmers?  Fertilizer costs are one of the biggest expenses for most farmers, but there hasn't been any talk about retail pricing and the impact it has on farmers' ability to grow the crops that feed the world".
 
Farmers are in a bad position compared to the fertilizer companies who set prices based on what they think they can extract from farmers for crop nutrients.  Add to that the small handful of potash companies out there, and you have a situation where the farmer has no choice but to pay the price that's given.
 
In June, 2008, according to a Bloomberg report, potash jumped to $650 a metric ton from $190 a year earlier.  This was in response to rising grain prices, including corn and soybeans, two major crops that use potash.  Friesen points out, "When a farmer finally catches a break and the price of grain goes up, the fertilizer companies go right after that margin by increasing the price of fertilizer." 
 
Friesen continues, "When the price of grain went up in 2008, there was a perceived food shortage and farmgate prices were blamed for some people having to go hungry.  Yet there were reports of some farmers around the world not producing because they could not afford to buy the requisite fertilizer".
 
FNA-STAG questions which company would be the best for farmers.  PCS's history of managing production to increase the price may be good for shareholders, but it has a negative impact on the price for farmers and the price of food.  It seems unlikely that they would change this monopolistic behavior.  As the potential new owner, would BHP continue the same price strategy that is used by PCS, or would they increase production and sell higher volumes?  This important question has so far not been addressed.
 
FNA-STAG also urges the Governments of Saskatchewan and Canada to consider their farm constituents and use whatever tools they have to ensure the interests of farmers and input costs are considered.  FNA-STAG's number one priority is farmer profitability and believes profitable farms are just as important to the economy as mining companies.
 
As the debate about the future of these two companies goes on, FNA-STAG would like to ask both PCS and BHP:  Do either PCS or BHP care about the impact that fertilizer prices have on farmers and what are you planning to do about it?
 

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Permalink Reply by Bristow on October 7, 2010 at 11:59am
As you can see by the response no one cares. You know that the price is going to go up who ever buys it. And I bet ten to one the Saskatchewan and Canadian governments will buy shares with your tax money to get the lions share out of the higher prices you will be paying, after the deal is done.

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