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(Potash Corp.)
(Potash Corp.)

Potash Corp. results withered by India’s drop in demand Add to ...

Bill Doyle wishes India’s government would get on with its need to boost farm output and start importing more potash, his company’s namesake product.

Potash Corp. of Saskatchewan Inc., the world’s largest maker of fertilizers, has seen its profits slashed in repeated quarters this year, most recently amid delays in signing contract agreements with buyers in China and India.

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“The question in the potash market and in our outlook for the balance of the year continues to be the timing of new supply contracts with China and India,” Mr. Doyle, the company’s chief executive officer, said on a conference call with analysts to discuss the third quarter.

A failure to reach deals on schedule with the two nations, the world’s largest consumers of commodities, helped slash profit by nearly 22 per cent in the quarter, and the Saskatoon-based company warned on Thursday that earnings could fall well below its previous forecast range for the full year.

Mr. Doyle says the company could land a crucial supply contract with key consumer China before the end of the year, but talks with neighbouring India remain at an impasse.

“The contract negotiations have been constructive and ongoing and we anticipate shipments (to China) will resume prior to the end of this calendar year,” Mr. Doyle said. “The situation with India is different, because there are a number of near-term challenges that make it difficult to determine how the balance of the year will play out.”

Analysts say negotiations are taking longer than usual to resolve and signal a growing resistance to the pricing power held by Potash and other members of Canpotex Ltd., the joint venture of Potash Corp., Agrium and Mosaic that sells potash outside of North America.

Mr. Doyle rejected that perception, saying potash is actually 22 per cent cheaper to India today than it was in 2008, although farmers are paying 200 per cent more because subsidies have been pulled back.

He noted the growing pressure from the private sector on India’s government to address a potash deficiency in the farm sector, a producer of goods ranging from rice, oilseed and cotton to tea, sugar cane and lentils, among others.

“We know that proper soil fertility can improve agricultural production. What we cannot predict is how or when India will address this issue,” Mr. Doyle said. “To address these nutritional challenges that they have you just can’t go on and keep pursuing that penny-wise tom-foolish policy,“ he said.

Potash Corp. and other producers of the nutrient are betting that India’s government may boost potash subsidies to farmers, and increase demand, in the runup to elections in India in 2014. He’s also optimistic that potash demand will rise in 2013, in China, India and the world, to as much as 60 million tonnes from 52 million this year.

Demand in India could rise to about five million tonnes in 2013 from an estimated three million this year and 4.2 million in 2011. For the two years prior, India consumed about six million tonnes a year.

The delays in negotiations with China and India also saw Potash Corp. announce production cuts in recent days as it matches supply to market demands. On Thursday, Mr. Doyle warned that further curtailments were likely in the new year, despite forecasts for demand to rebound.

Potash Corp. had a third-quarter profit of $645-million (U.S.) or 74 cents a share, compared with $826-million or 94 cents in the same period last year.

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