March 1 (Reuters) - Drastic moves by potash producers, from idling mines to bartering with farmers, may pay off soon for the hard-hit industry, company executives said on Tuesday.
Potash Corp of Saskatchewan, the third-largest potash producer, expects demand for the crop nutrient to pick up after significant supply cuts, Chief Executive Jochen Tilk said on Tuesday.
“We’re now at the point where we expect that there be a response from the market,” Tilk said at a BMO investor conference in Hollywood, Florida, but added that it’s too soon to say if more cuts are necessary.
Potash Corp in January shut down its newest mine in New Brunswick, Canada, and last week announced temporary shutdowns at two other Canadian mines.
Canpotex Ltd, the export potash sales agency for Potash, Mosaic Co and Agrium Inc, has reduced first-half export plans by 1.5 million tonnes, representing nearly 8 percent of Canpotex’s estimated 2015 sales.
Farmers’ limited access to credit in Brazil, a key importer of potash used to nourish corn and sugarcane crops, has hurt demand there, said Mosaic Chief Executive Joc O‘Rourke, speaking at the conference.
So Mosaic is bartering with Brazilian farmers, allowing them to use crops as collateral to borrow money for fertilizer purchases, he said. Agribusinesses Archer Daniels Midland Co and Cargill Inc are Mosaic’s counterparties in the transactions.
“We’re starting to see potash move,” O‘Rourke said. Barter is becoming a more popular form of credit in Brazil today, he said.
Potash Corp expects global potash shipments to climb from a range of 59 million to 62 million tonnes this year to 70 million by 2020.
To be sure, Indian demand is “a perpetual disappointment,” Tilk said, and lower U.S. farm incomes have limited farmers’ spending power, although fertilizer makers say their products remain affordable.
While Potash Corp is cutting some capacity, it is also expanding its largest mine. Agrium is increasing output and K&S AG and EuroChem are building new mines.
Potash sells for under $300 per tonne in the U.S. Midwest, down from nearly $450 per tonne a year ago, according to data published by Raymond James.
Shares of Potash and Mosaic rose 2.4 percent and 1.9 percent, respectively, in Tuesday morning trading in New York. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Phil Berlowitz)