Food prices could drop following potash industry agreement

By Noel Ebdon

- Last updated on GMT

Fertiliser prices could drop by 25%, according to Uralkali
Fertiliser prices could drop by 25%, according to Uralkali

Related tags: Potassium

Recent changes within the potash industry could signal the beginning of a food price drop across the region, as prices of the potassium fertiliser look set to fall.

The potash industry has long been under the control of just a handful of companies and has seen prices rise steadily over the years. This, in turn, meant that crop farmers within areas that rely on potash were forced to pay a premium, resulting in high-priced produce. On the other end of the scale, many farmers within emerging nations have simply avoided using potash, resulting in lower harvests and higher prices.

Now, food prices could be set to drop, after a cartel emerged among leading producers.

Back in July, Russian fertiliser giant Uralkali withdrew from a trading partnership with the Belarus-based potash mining company Belaruskali. This move alone had a significant effect on the global fertiliser market; between them the two companies controlled 70% of the potash industry.

While the Russian company wanted to maintain a stable price, the producers were not on the same page. In a statement, Belaruskali said: “Belaruskali and BPC don’t support the new strategy of Uralkali and disagree with their estimated price scenario for potash market development in as much as it causes damage to our customers and leads to uncertainty in the market.”

By ending the agreement, Uralkali revealed that the price of potash would fall by as much as 25%, to $300 per tonne.

After announcing new potassium chloride (KCl) prices had been agreed with compound fertiliser (NPK) producers, Victor Belyakov, acting Uralkali CEO, said: “The agreements undoubtedly contribute to the further development of the Russian mineral fertiliser market. We believe monthly recalculation of KCl prices according to the FAS formula is in the interests of domestic farmers and will have a positive impact on the strengthening of agricultural sector of Russia.”

Emerging markets such as Africa are now beginning to express a strong desire to tap into the potash industry, with affordable prices meaning they can begin to farm land that has lain dormant. And, with many Gulf companies owning land in Africa that could be used for potash-based farming, the GCC economy could also be boosted by the development of this land.

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