Canadian potash industry wilts as farmers hold out on prices

With the fall in crop prices during last year's economic collapse, farmers in Canada face a problem as fertiliser prices remain at more or the less the same level. The Canadian potash industry being extremely concentrated geographically, collectively decided to cut production rather than lower prices.

Farmers cut potash applications in response even as agronomists at the time said the strategy would fail over the long term as farmers would need fertilisers to keep crop yields from falling.

However, a year later, the strategy seems to have worked and crops are doing fine. According to experts this is about the longest period crops have gone without low fertiliser applications and waiting any longer may be counterproductive. But farmers seem to be in no hurry and with crops doing well they may hold out longer.

According to experts this chance has been taken for the first time but farmers have not experienced any negative yield impact and this may encourage them to take their chances a bit longer.

The strategy seems to have had the desired impact with potash producers, like Potash Corp now looking at earnings of $3 to $3.25 a share on sales volumes that have fell sharply, instead of the $10 to $12 it had confidently predicted at the beginning of 2009.

According to analysts,farmers had resorted to a very rational response on economic signals they had received from the producers and the wholesale and retail system.