“Substantially lower than forecasted” potash sales volumes have led the world’s largest potash producer to cut back its earnings guidance for its second fiscal quarter.
Citing “deferral of purchases by customers around the world and lower realized prices for phosphate fertilizers,” Saskatoon-based PotashCorp said Thursday it would shift its target from $1.10-$1.50 per share down to about 70 cents per share.
The company last week said it would further cut its 2009 potash production by 800,000 tonnes, bringing its total production curtailments to 5.5 million tonnes since August 2008.
“However, with the world’s soils and supply chain nearing depletion after almost a year of deferral, we expect demand to return in second-half 2009 as Brazil approaches its major application season and India and China inevitably return to the market,” the company said June 16.
“This unprecedented period of draw-down throughout the supply chain, coupled with the expectation of lower global crop production and higher crop prices, is expected to lead to an even stronger rebound in 2010.”
Company CEO Bill Doyle recently drew some farmers’ ire when he was quoted in Toronto’s Globe and Mail in April saying farmers who continued to put off fertilizer purchases were playing a “dangerous game” that could damage crop yields and quality and possibly impact global food supplies.
Any comments by fertilizer industry players implying that farmers are putting world food supplies “at risk” by not buying fertilizer inputs are “extremely aggravating” to those companies’ farmer customers, said Ian Wishart, president of Manitoba’s Keystone Agricultural Producers (KAP), in an op-ed piece June 18.
“When you make everyone irritated, use fear as a market tool, and dip into farmers’ pockets in a big way, is it any wonder input purchases have been very cautious?” Wishart wrote. “It makes you wonder how big the bonuses have to be to get your customers this angry.”
Fertilizer prices, he said, started to rise as grain prices went up, even though fertilizer companies’ input costs rose “only moderately” at worst.
But as grain prices peaked and dropped to more moderate levels, fertilizer makers, “now accustomed to large profits,” tried to drive prices even further based on fear of tight supplies, he said.
“During this time they kept telling any farmer or farm organization that offshore demand would drive prices even further,” Wishart, who farms at Portage la Prairie, wrote. “Try as we might (KAP) could not find these huge demand numbers or even higher prices than we were paying anywhere in the world.”