Goldman Sachs raised its forecast for potash prices, but
cautioned over the threat of low crop prices in limiting prospects for further
gains, even as Agrium cautioned again over profits, citing fertilizer market
Goldman Sachs hiked by $37 a tonne to $318 a tonne its
forecast for potash prices this year, as measured in the Brazilian market, on a
While the upgrade came the day after China, the top potash
importer, signed a deal to buy the nutrient at $305 a tonne, a factor many commentators
saw as putting a floor into the market, Goldman cited a potential reformation
of the Belarusian Potash Company cartel as behind its upgrade.
It was July's break-up of BPC, which controlled more than
40% of world potash trade, which triggered a decline in values from levels of
$400 a tonne or more, as buyers held-off in expectation of continued price
Goldman acknowledged that "no formal decision has been
announced to date" on renewed co-operation between BPC's former members Belarus-based
Belaruskali and Russia's Uralkali.
Goldman Sachs potash price forecasts
2017: $340 a tonne
2016: $320 a tonne
2015: $310 a tonne
2014: $318 a tonne
2013: $405 a tonne
2012: $513 a tonne
Furthermore, "a potential joint venture may not be as
effective in managing output in a depressed market as BPC was able to do in the
past," the bank said.
Nonetheless, a potential reconciliation, and efforts by
North American PotashCorp to curtail production, "signal that a degree of
producer discipline has returned to the potash market".
Growing expectations that prices may recover from the first
quarter of this year onwards "are likely to encourage some of the pent-up
demand from the second half of 2013 to come forward".
However, a pick-up in sales volumes would prove "temporary",
and price upside "limited".
"The bearish outlook for crop prices is not conducive to
high levels of fertilizer use," said Goldman, which has issued downbeat
outlooks for corn, soybean and wheat prices.
"Therefore, potash demand may ease again in the second half
of 2014 after a brief rally."
Indeed, further action by potash groups to mothball capacity
and expansion plans is needed to bring sustained gains in prices, the bank
said, forecasting prices averaging $310 a tonne in 2015.
The comments came shortly after Agrium extended a run of downbeat
trading updates by North American potash groups, saying that its earnings from
continuing operations for the fourth quarter of 2013 would come in at the
bottom of a range of $0.80-1.25 a share it had guided to.
Investors have forecast a figure of $1.07 a share.
The guidance is "primarily due to lower-than-expected sales
prices" achieved for fertilizers by Agrium's wholesale division, a major potash
producer, as well as "lower-than-expected UAN [urea ammonium nitrate] and
domestic potash sales volumes", the group said.
The statement follows Agrium's release in November of
below-forecast earnings, and of a profits warning in September.