Saturday, April 25, 2009
One of the guys posted this on AgTalk and it shows what farmers deal with every day. Last year it was diesel fuel plus seed and fertilizer costs, this year our problem is potash priced over our ability to buy much of it at today's market prices.
"SASKATOON: The world is setting itself up for a hungry future as farmers play ``a dangerous game'' by skimping on fertilizer, the chief executive of Potash Corp. of Saskatchewan (TSX:POT) said Thursday after a ``terrible'' first quarter in which sales fell by more than half from a year ago.
The market will turn quickly, Bill Doyle predicted after the world's biggest fertilizer producer, reporting in U.S. dollars, said quarterly earnings withered to $308.3 million or $1.02 per share.
This was down 46 per cent from a bonanza year-ago profit of $566 million or $1.74 per share. The latest quarter's net income would have been lower by another $166.8 million if not for beneficial tax adjustments.
Sales shrivelled to $922.5 million from $1.89 billion, but ``we've got the pain largely behind us,'' Doyle told a conference call.
``While economic conditions have been the focus for most people in recent months, the world's attention must return to the science of food production,'' he declared.
``A year ago, concerns over world food shortages were headline news, and little has changed to alleviate the pressure on the food supply.''
Southern-hemisphere farmers in Argentina and Brazil are producing ``a bad start to the global crop year'' as a result of lower fertilizer applications, and after record world grain production in 2007 and 2008, ``the year 2009 could be a completely different story,'' he said.
``You could see dramatically higher grain prices going into this fall.'' (The market isn't bidding that way, sir!)
Beyond then, he predicted, potash demand will blossom, ``leading us to an exceptional 2010.''
But in the meantime, after taking 39 mine shutdown weeks in the first quarter, ``we will continue to reduce production by as many tonnes as it takes'' to stabilize prices.
Management also plans no major new capital expenditures until prices rise, he said, though projects underway in Saskatchewan and New Brunswick will continue, expected to cost C$7 billion and expand PotashCorp's capacity to 18 million tonnes in 2014.
``A dangerous game is now unfolding around the world,'' Doyle told analysts.
``Fertilizer applications are being reduced at unprecedented levels, with our estimates for North American potash applications falling as much as 30 to 35 per cent'' _ back to levels of the early 1980s while demand has risen 90 per cent, powered by nutrient-intensive corn.
``This level of reduction has never been seen before,'' Doyle said. ``No one can state precisely what the impact will be on the world's food supply, immediately or over the longer term. But we know with scientific certainty that nutrient underapplication damages both crop yields and quality.''
He added that the reduction in fertilizer use ``is more about psychology than economics,'' as global grain inventories remain tight and farmer returns are well above historical averages.
PotashCorp expects second-quarter earnings per share of $1.10 to $1.50, and its full-year EPS outlook has been cut to between $7 and $8, from $10 to $12 three months ago, to reflect the ``extremely slow'' first half.
Potassium or "K" as we call it is an important macronutrient farmers apply of the 17 nutrients crops need for healthy crops. Farmers have really backed off potassium purchases this year as it is $800 a ton here in southwest Ohio and that high just about everywhere.
This move by Potash Corp has put them and us in a risky situation but farmers can't buy what the balance sheet won't allow them to. We are learning how to get by with less potash and how to release more of it in our soils with good lime programs and cover crops that release phosphorus and potassium.
I share this to point out what the farmer goes through every year whether it is tech fees for genetically modified seeds or in this case, potash we use to fertilize our crops.
The "rules" are really against the little guy right now! The farmer is one of the few businessmen I know who pay retail for everything we buy and sell wholesale everything he sells and expected to deliver it 40 miles away to get it!