Farmers have something of a reputation for sucking their teeth and looking at the gloomy side of things.

In the case of BHP Billiton's bid for PotashCorp, they may be right.

The mining giant's offer at first sight looks a thumbs up for growers, as a vote of confidence in agriculture. But the success of the tie-up may not be such a blessing.

Nerves of steel 

The bid certainly looks quite a fillip for farmers.

Forking out $39bn for the world's top potash producer shows quite some hunger to get big in the nutrient, and fast.

That implies some faith in crop prices, which have such a huge impact on potash prices, as the 2007-08 spike in both grains and the nutrient showed.

Indeed, it may have been the latest jump in grain markets which persuaded Marius Kloppers, the BHP chief executive, to enact the group's long-awaited bid for PotashCorp. He may have needed nerves of steel to launch himself into another megabid, after getting his fingers nipped in the collapse two years ago of his last one, for rival Rio Tinto.

Need for returns

The trouble for growers may start if BHP succeeds.

The group is already offering a significant sum for Potashcorp, in terms of the returns it can expect to get from its investment.

Assuming it succeeds with its current $130-a-share bid � which looks an uphill battle, given the slim premium of 16% to PotashCorp's closing share price last night � BHP is looking on paper at a return of less than 6% on its investment, even in two years' time. That's meagre. And the returns fall below 5% if the bid is ramped up to $150 a share, as Evolution analysts say BHP might do if it wanted to push the envelope.

For BHP to get the returns from buying PotashCorp above the target of 10% or so companies typically require would mean finding huge benefits from the deal. Which means cutting costs or raising revenues.

That process would be likely to put further upward pressure on potash prices, leaving farmers to pick up the tab.

Tightening grip

Of course, potash groups' powers to push through price rises have some limits, even though they have a far tighter grip on supplies than producers of other nutrients. (That's one reason PotashCorp is so expensive to buy.)

But the grip of the potash oligopoly will only be strengthened if another seat around the table is removed. (BHP already has its own potash ambitions.) The putative merger of Silvinit and Uralkali in Russia could lose another seat.

Farmers should enjoy, relatively, cheap potash prices while they last.