Potash Tops 2009 Highs

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

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

While potash miners are bringing back capacity following the 2009 downturn, and are expected to increase production to near-limits, demand for the nutrient has soared as farmers seek to maximise yields.

At a farmer level, potash prices have already hit $598 a ton in the U.S., as measured by Illinois data, up 22% from an August low.

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

Prices approached $900 a ton 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.

In Russia Uralkali and Silvinit are in the process of merging. The groups last week unveiled a 9% rise to 2.6m tons 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."