Potash prices will come under further pressure in the next few months, as more competition and currency declines continue to affect demand in an increasing “challenging environment”, US fertilizer group Mosaic (NYSE:MOS) forecasts.
The Plymouth, Minnesota-based company said it expects to sell the key crop nutrient for $200-230 a tonne in the current quarter. This compares to an average selling price of $254 a tonne in the previous three-month period.
Reporting its fourth-quarter earnings, Mosaic — the world’s largest producer of finished phosphate products — also predicted that phosphate prices would fall as much as 14.6% to $350 per ton in the first three months of the year.
Tanking fertilizer prices have affected potash companies worldwide. In January, Canadian Potash Corp of Saskatchewan (TSX, NYSE:POT), the world’s largest crop nutrient company by capacity, decided to mothball one of its newest mines — a $2-billion New Brunswick operation that was in production for little more than a year.
The crop nutrient began its decline four years ago as weak crop prices and currency declines pinched demand. Prices also suffered from increased competition following the breakup in 2013 of a Russian-Belarusian marketing cartel that previously helped limit supply.
In recent months, the price collapse has picked up speed, with some prices falling by a quarter since last spring. That has put a lot of more pressure on producers of the crop nutrient ingredient, whose profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices.
Decreased currency values against the U.S. dollar have lowered production costs 17% in Canada, where Mosaic’s largest potash mines are located, but the savings amount to 41% in Belarus, where potash rival Belaruskali operates, Mosaic said.
Despite bleak market conditions, Mosaic revealed it is interested in acquisitions related to either potash or phosphate, but would weigh any opportunities against the benefits of further repurchases of its stock, which value has halved in past year.
“The down parts of the (commodity) cycle do present opportunities,” Chief Financial Officer Rich Mack said on a call with analysts. “If there is something that is extraordinarily compelling, it’s something that we could act on.”
Shares in the company were dropping Friday by 6% to $23.14 at 10 am ET. So fat this year, the stock has lost roughly 16% of its value.