Potash: 2010 'A Bang-Up Year'

The collapse of sulphur and ammonia prices led buyers to wait on the sidelines in hopes of bigger bargains. By the end of the quarter, some producers and distributors were selling off nitrogen and phosphate inventories below cash cost mainly due to liquidity concerns.

However, fire sale prices did not trigger significant new demand... A large percentage of production in all three nutrients was shut down by the end of the quarter.

In potash, the total announced production curtailments for the first quarter add up to as much as 5.5 to 6 million tons, over a third of the world's current production capability. At Potash Corp., we announced our intention to shut down more than 2 million tons of production this quarter.

In phosphate, an estimated 50% of the world's solid fertilizer production was being curtailed at the end of 2008.

In nitrogen, unprecedented levels of agricultural and industrial production were shut down by year end.

Fertilizers will pick up:

In the key growing regions of China and India, food remains a top priority, with governments working diligently to further incentivize farmers to raise food production... We expect to see a return to increased planting and proper fertilization in the near future.

Early in 2008, food shortages were a top-of-mind issue around the world and they threaten to become a more pressing issue very quickly.

Farmers around the world, with the exception of Brazil, are in a good financial position. These are the end users of our products and according to the U.S. Department of Agriculture, American farmers generated a record $90 billion in net income last year and their debt-to-equity ratio dropped to 10%.

There are signs already:

Nitrogen has hit the bottom. I don't think there's any question about that. Phosphate we believe is close to the bottom, if not hitting it already. And potash, as you know, has been able to weather the storm.

We have seen some activity in the nitrogen area here in the last few weeks... We're hoping here in February and March in the southern half of the U.S., when that season typically starts, for things to start moving, and I would assume no later than March product start moving here in the Midwest.

We right now believe 2010 is going to be just a terrific year for the fertilizer business in general… Second half of 2009, and 2010 is going to be a bang up year.