The timely merger of Russian potash giants Silvinit and Uralkali, which may be unveiled this month, looks a fillip to producers of the nutrient worldwide – if appearing poor news for farmers.

Reports that a purchase by Uralkali of its $7.8bn peer is imminent, after months of speculation, mean the world potash market "could tighten sooner than expected", John Chu, analyst at Mackie Research Capital, said.

The $21bn tie-up, fostered by the acquisition by billionaire Sumeiman Kerimov of controlling stakes in both groups, would concentrate further a sector in which supplies are concentrated among a handful of producers, largely in Russia and North America.

Silvinit and Uralkali would together boast a 17% share of world potash output, narrowly behind the 19% held by Canada-based PotashCorp, the top-ranked producer.

'Rogue supplier' 

Furthermore, it would bring Silvinit, which has a history of breaking ranks with other producers on pricing, into the Belarusian Potash Corporation marketing consortium, increasing its share of world capacity from 30% to 40%.

"Silvinit has long been considered a rogue supplier," Mr Chu said.

Together, BPC and Canpotex, the Canadian cartel of which PotashCorp is a member, would control about 75% of world potash output.

"This could precipitate a tighter potash supply market, which bodes well for prices as well as for the entire potash sector," Mr Chu said, maintaining an "accumulate" recommendation on PotashCorp shares, and a price target for the stock of Can$160.

Pricing power 

However, a tighter market could be a setback for growers who are facing a rebound in prices as hikes by producers gather traction, after flatlining at a wholesale level for most of 2010.

While potash prices have been slower to revive from world-recession lows than those of nitrogen and phosphate, the other two major fertilizer groups, they fell less far during the credit crunch, held up by a reluctance among producers to discount.