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Opinion: PotashCorp bets high again

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It's up to PotashCorp boss Bill Doyle if he wants to make his latest forecast work.

The world's biggest fertilizer group has sure made some duff predictions this year.

For instance, that that farmers were treading dangerous turf by scrimping on spring potash applications. (Growers are expecting record soybeans yields, and bumper corn production too.)

Or that there were would an autumn rebound in farm demand for potash.

If Mr Doyle really wants to make sure that potash shipments live up to a projection of doubling in two years he should bring down his prices.

Depleted nutrients

The fertilizer market may follow PotashCorp's script, even at current costs to farmers of $450-500 a tonne.

The Canadian group is right that soil nutrient levels will have taken quite a pasting from two years of bumper crops, and only one year of decent fertilizer applications.

Growers will want to put something back.

Economy drive

But a strong rebound is not guaranteed.

Farmers will also be aware that potash costs are well above historic average. The group's own data show potash staying within a $110-200 a tonne range until half way through 2007.

And they do have some leeway for cutting down on their fertilizer bills.

One way, for instance, is to favour soybeans, for which fertilizer costs are up to $75 an acre according to Purdue University, rather than the $130 an acre that corn swallows.

Assuming that soybean prices remain firm into the US planting season, and that farmers retain the tight purse strings evident in forecasts from farm machinery group such as Deere & Co, it's not at all inconceivable that global shipments will come below PotashCorp's 50m-tonne forecast for next year.

Credibility factor

Indeed, Germany's K+S is already forecasting a 45m-tonne results.

And Standard & Poor's, the ratings agency, has pointed out that historically one weak year for fertilizer applications can follow another.

Mr Doyle can plough on with his rich furrow. But it is a strategy with some risk.

And that might not be what PotashCorp needs at a time when its missed forecasts have already cast a cloud over its credibility, and mining giant BHP Billiton is rumoured to be poised to strike.


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