BHP or PCS – Which is the best deal for farmers?

The coverage of the offer by BHP Billiton to buy potash mining giant Potash Corporation of
Saskatchewan (PCS) has been missing one very important element – the potential impact on
agricultural producers. This important stakeholder is, after all, the end consumer of the important
fertilizer product.
There has been full and complete analysis and speculation of the impact of the deal for shareholders,
governments, and citizens of Saskatoon and Saskatchewan. These are all important stakeholders to
be sure, but the potential impact of the takeover on the farmer who uses that potash seems to have
been left out of the mix.
Bob Friesen, CEO of FNA-STAG, comments, “Have either of these companies talked about their farm
customers yet? What effect would this deal have on farmers? Fertilizer costs are one of the biggest
expenses for most farmers, but there hasn’t been any talk about retail pricing and the impact it has on
farmers’ ability to grow the crops that feed the world”.
Farmers are in a bad position compared to the fertilizer companies who set prices based on what
they think they can extract from farmers for crop nutrients. Add to that the small handful of potash
companies out there, and you have a situation where the farmer has no choice but to pay the price
that’s given.
In June, 2008, according to a Bloomberg report, potash jumped to $650 a metric ton from $190 a year
earlier. This was in response to rising grain prices, including corn and soybeans, two major crops
that use potash. Friesen points out, “When a farmer finally catches a break and the price of grain
goes up, the fertilizer companies go right after that margin by increasing the price of fertilizer.”
Friesen continues, “When the price of grain went up in 2008, there was a perceived food shortage
and farmgate prices were blamed for some people having to go hungry. Yet there were reports of
some farmers around the world not producing because they could not afford to buy the requisite
fertilizer”.
FNA-STAG questions which company would be the best for farmers. PCS’s history of managing
production to increase the price may be good for shareholders, but it has a negative impact on the
price for farmers and the price of food. It seems unlikely that they would change this monopolistic
behavior. As the potential new owner, would BHP continue the same price strategy that is used by
PCS, or would they increase production and sell higher volumes? This important question has so far
not been addressed.
FNA-STAG also urges the Governments of Saskatchewan and Canada to consider their farm
constituents and use whatever tools they have to ensure the interests of farmers and input costs are considered. FNA-STAG’s number one priority is farmer profitability and believes profitable farms are
just as important to the economy as mining companies.
As the debate about the future of these two companies goes on, FNA-STAG would like to ask both
PCS and BHP: Do either PCS or BHP care about the impact that fertilizer prices have on farmers
and what are you planning to do about it?
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Farmers of North America Strategic Agriculture Institute (FNA-STAG) is a not-for-profit organization
with the single mission of “Improving Farm Profitability.”
For more information contact:
Bob Friesen, CEO: (613) 230-2222 / (613) 852-9711