The breakup of Belarus Potash Co., one of two international potash cartels, is good news for consumers and farmers across the world, which carries a promise of less expensive fertilizer and (as a result) cheaper food. It is hard to see how BPC’s North American equivalent, Canpotex International Pte. Ltd., the marketing organization shared by Potash Corp. of Saskatchewan Inc., Agrium Inc. and The Mosaic Co., will be able to maintain potash prices at their previous levels. The raison d’être of Canpotex is likely to be in question. Without the quasi-duopoly of Canpotex and BPC, the potash market will be substantially more competitive.
OAO Uralkali, the Russian member of BPC, has accused its former Belarussian partner, Belaruskali, of selling potash outside BPC. Indeed, last December, the dictatorial President of Belarus, Alexander Lukashenko, issued a decree cancelling BPC’s exclusive right to market and export Belarussian potash; maybe Belaruskali was just being obedient.
But Uralkali may have another motive, too; it has the advantage of being able to ship potash directly by rail to China, a country with a great appetite for fertilizer. Uralkali appears to have decided to seek buyers by offering attractive prices, rather than by restricting supply.
The provincial government of Saskatchewan will presumably receive fewer potash royalties and other related revenues, as a result of a fall in prices.
The long-term upshot for Canada may be good, however. Canadian law does not permit cartels within this country. Canada has worked in favour of a proposal for negotiations toward an international agreement on competition, to discourage and counteract international cartels, especially with a view to assisting developing countries.
We should practise what we preach internationally, and demonstrate Canada’s dedication to competition. If the breakup of Belarus Potash Co. leads to a more open potash market throughout the world, Canada would emerge as a better exemplar of commercial principles.
Follow us on Twitter: