Potash tops $400 a tonne for first time since 2009

Potash prices have returned above $400 a tonne for the first time since 2009, helped by a further fall in inventories as high crop prices prompt farmers to ramp up fertilizer applications.

Wholesale potash prices topped $400 a tonne, excluding freight, last month in Vancouver, continuing a rebound which has seen them recover more than $50 a tonne since last summer, data from PotashCorp showed.

The improvement was helped by a 183,000-tonne drop in inventories held by North American producers to some 1.8m tonnes, the lowest March figure since at least 2008, and 26% below the five-year average.

While potash miners are bringing back capacity mothballed during the 2009 downturn in crop prices and fertilizer demand, and are expected by PotashCorp, the sector leader, to take production near to the limit this year, demand for the nutrient has soared as farmers seek to maximise yields

Farmers to pay more 

At a farmer level, potash prices have already hit $598 a tonne in the US, as measured by Ilinois data, up 22% from an August low.

And the PotashCorp data come on the eve of an expected round of price rises by K+S, the European Union's top potash group, as the region's spring fertilizer application season gets into full swing.

Joachim Felker, the head of the German's group's fertilizer unit, said last week that recent price increases "have been realised in full", adding that "confidence has returned to the business".

"Nobody in the wholesale trade is expecting that there won't be [further] price increases."

K+S said it would after Easter, which falls this weekend, "provide a new price guidance".

'Close to pre-crisis levels' 

Vancouver potash prices were, for years, stable at just over $100 a tonne before growing consumption left producers in 2004 and, notably, 2007 struggling to meet demand.

Prices approached $900 a tonne in 2008, at the height of the last agricultural commodities boom.

The subsequent drop in potash prices, against a backdrop of rosy long-term forecasts for the industry, fostered a wave of consolidation, which has seen, for example, K+S buy Canada's Potash One and BHP Billiton buy small operator Athabasca Potash but fail in a bid for PotashCorp.

In Russia Uralkali and Silvinit are in the process of merging. The groups last week unveiled a 9% rise to 2.6m tonnes in joint potash shipments in the first three months of the year, a figure which UralSib analysts said "implies 90% average capacity loading, which is close to pre-crisis levels".

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