Potash Profits Boosted by Rising Demand

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"The underlying structure of the potash market is changing. . ."

Potash prices have tracked the boom and bust in the financial markets over the past two years, as investors rushed into the agricultural stocks, and then later abandoned them. The underlying structure of the potash market is changing to reflect the new world economy, but one thing will stay the same: people need to eat. The long-term fundamentals of the potash market are supported by increasing populations around the world and decreasing arable land. In the near-term, the industry is banking on pent-up demand from farmer's who last year held back on potash use, speculating on a decline in fertilizer costs while suffering from low grain prices.

For the future, the world's population growth will be centered in developing countries, where crowded conditions and limited arable land will put extra pressure on the local resources. India, China and Brazil are new world leaders in terms of the future potash market. During 2009, China was one of the first countries to see a decline in potash consumption on the back of record high prices in 2008. India, conversely, continued to purchase potash, becoming the largest consumer in 2009. India's potash purchases were virtually unaffected by the financial crisis due to a government subsidy on fertilizers.

The sector will get an unexpected boost from Canada, as a mild spring has led the country to plant a record crop of nutrient needy canola.

Russia's anti-monopoly agency (FAS) said last month it would support proposals to impose an 8.5% export duty on potash due to rising pricing on the domestic market. Russian potash miner Uralkali's President Denis Morozov said such a tariff would seriously affect his company's ability to compete in the global market. The FAS added that a final decision would be taken by a commission of first deputy Prime Minister Igor Shuvalov.

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