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Potash

Canpotex and potash: The monopoly behind the mineral Add to ...

Barry Senft's Saskatchewan roots run deep. For four generations, his family has tilled the land near Lipton, Sask., a little more than an hour's drive northeast of Regina.

Mr. Senft knows quite a bit, too, about the long Saskatchewan tradition of co-operation in the agriculture business, having served in a senior role in the 1990s with the Saskatchewan Wheat Pool, the farmer-controlled co-operative that has since been transformed into a global-straddling company named Viterra Inc.

So it's not a surprise that the protracted takeover fight for Potash Corp. that is playing out in far away in places like Melbourne, London and Chicago, and that faces a critical decision next week by the federal government in Ottawa, has grabbed Mr. Senft's attention.

But Mr. Senft's rooting interest in the Potash fight isn't what you might think. Rather than bemoaning the possible loss of the company to Australia's BHP Billiton Ltd. (as Premier Brad Wall is), he is hoping it will lead to the destruction of a different Saskatchewan institution - one that played a central role in making Potash Corp. a $40-billion company in the first place.

Canpotex Ltd., the company that handles overseas sales of Saskatchewan's three major potash producers, Potash Corp., Mosaic and Agrium, has conspired to keep global fertilizer prices too high, Mr. Senft believes; the impact, he says, is felt by Canadian farmers, even though the group doesn't operate here.

"Cartels are good for the shareholders," Mr. Senft says from his office in Guelph, Ont., where he runs Grain Farmers of Ontario, a lobby group, while still helping to manage the family farm back in his home province. "They aren't good for our farmers."

This little cartel on the prairie, though, has existed in relative obscurity and with little opposition for the past four decades, despite its control of about 40 per cent of the global trade in potash, a key ingredient in fertilizer used to increase the yields of corn, fruit and other staples. (OPEC, by comparison, controls about a roughly equal proportion of the world's oil trade - but that is spread among 12 members, not just three.)

Canpotex is arguably one of most important global companies Canada has, a business that this year will ship about $3-billion worth of potash to dozens of offshore markets. In places like South Korea and Japan (and yes, even Australia), it holds something close to a monopoly on potash sales. In four of the world's five most populous countries - China, India, Indonesia and Brazil - Canpotex is a critical, and sometimes controversial, supplier of a product that helps feed the masses. Yet most Canadians know little about it, if they have even heard of it.

That lack of scrutiny is over. Whatever the final ending of the Potash Corp. takeover story, BHP's hostile offer has unleashed a fierce debate about Canpotex's future - one that will rage on even if the Australian company doesn't win the day. Early on, Marius Kloppers, the chief executive of the world's largest mining company, suggested the agency had outlived his usefulness and said BHP would eventually remove itself from it, if were to win Potash Corp. That got the company on the wrong foot with the Saskatchewan government, which sees Canpotex as vital to keep prices for the commodity and government revenues aloft.

But Mr. Kloppers' position is supported by many others. Some follow his business line of logic that such export monopolies are out of date and not needed in a world of rising fertilizer demand - not to mention that competition watchdogs tend to frown on them. "Regulatory tolerance of selling arrangements is different now from what it was 15 years ago," says Mr. Kloppers. Others make humanitarian arguments, suggesting food production is too important to allow producer organizations control fertilizer prices by managing supply.

Global food demand is expected to increase by up to 80 per cent in the next 40 years as the world's population reaches 10 billion people. That means food production must rise by nearly 2 per cent annually, about double the current production rate, and fertilizer will be needed in abundance. BHP's bid has "really triggered a series of questions," says Sylvain Charlebois, a professor at the University of Guelph's College of Management. "A lot of people are asking themselves: Is Canpotex still relevant?"

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