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LinkedInWill the Breakup of the Potash Cartel from the former Soviet Union Affect Berry Cost of Production?
This past July the Russian potash producer OAO Uralkali threw the global potash market for a loop by halting its long running cooperation in what was essentially a cartel with the Belorusian owned producer Belaruskali, enabling it to now produce potash flat out and very likely gain a lot of market share. Not incidentally this move has landed the CEO of Uralkali in house arrest for abuse of power and embezzlement. Whatever the case may be, this decision has turned an oligopoly for potassium supply into a much freer market, and has consequently sent potash prices plummeting, crushing the shares of several listed American potash distributors in the process (Graphic 1 and 2 below).
In numbers, Uralkali plans on increasing production of potash from 10.5 million pounds this year to 13 million next year, out of a total global market of some 50 million pounds per year. According to Bloomberg, this separation of the two companies should bring the price of potash from above $400 a ton before July, 2013 to approximately $300 a ton.
What does this mean for local berry producers? Probably not a lot. First, potassium is a tiny proportion of berry cost of production of the already small cost of fertility at under 2% of the total. Second, if my experience and lots of soil and tissue samples serve me right, there is not much necessity for adding much more potassium to many of our soils! After decades of potassium fertilizer additions, this non-mobile nutrient has built up to astonishing levels in many of our fields (adequacy of K in soil in usually thought of being 200-300 ppm and in leaf tissue above 1.3% during the harvest season), meaning in most cases that required additions are quite small.
Contrast this with the case of the Central Valley for producers of heavy potassium feeding crops such as almonds for example. Scanning the Cost of Production studies for almonds, we find that annual potassium fertilizer use resides north of 5% of total costs of production, not to mention that the “potassium gravy train is coming to an end” for many other crops of the San Joaquin Valley in the words of Dr. Tim Hartz of UC Davis, with the decades long draw down of what were formerly potassium rich soils. Might be a good time for these growers to start loading that potassium back up again while prices are down.
Shares of Potash Corporation pounded in late July after the break up of the Belorussian potash cartel - what does it mean for local berry producers?
Shares of the Mosaic Company down heavily in late July after the break up of the Belorussian potash cartel - maybe a good time to bring K deficient soils back to par.
