Winnipeg | Reuters –– Potash-rich Saskatchewan hopes to revise its taxes on production of the crop fertilizer to avoid big revenue drops in years when prices sag, the Canadian province’s economy minister said Friday.
Saskatchewan, home to mines operated by PotashCorp, Mosaic Co. and Agrium, is conducting its first full review in 10 years of its complex potash tax and royalty structure. It is currently weighted more by potash prices than output.
“We want to be assured that the taxpayers of Saskatchewan see a return on the resource even if (potash) prices are low and volumes are higher,” said Economy Minister Bill Boyd in a phone interview from Kindersley, Sask.
Read Also
Feed Grains Weekly: Price likely to keep stepping back
As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
The government collected a record-high $1.36 billion in potash revenue when prices spiked in 2008-09, but its royalty program finished with a negative balance the following year when prices crashed.
Saskatchewan, running a deficit this year after two decades in the black, began the potash tax review in October and hopes to have recommendations by late 2016.
Boyd said the province intends to make any changes to the formula close to revenue-neutral, but he would not say if Saskatchewan’s potash taxes will remain the world’s highest.
“There’s no pre-conceived decisions around the royalties in any way.”
Making changes that help potash miners, whose profits have fallen due to weak prices, is “an open question,” Boyd said, but added that they are seeing stronger U.S. sales of late.
“We’re optimistic that we’ve reached the point where we’re seeing the market start to turn around,” Boyd said.
PotashCorp and Mosaic last month said they would reduce output to support falling prices, while Brazilian miner Vale has put on hold a planned potash mine near Kronau, southeast of Regina.
However, Germany’s K+S is continuing construction of Saskatchewan’s first new potash mine in four decades, northeast of Moose Jaw at Bethune. BHP Billiton is slowly developing another mine at Jansen, southeast of Humboldt, though it has not committed most of the capital.
— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.
