May 5, 2012
US potash market recovery appears blurry
The US potash demand recovery is troubled by "unpredictability in the agricultural markets", warned Intrepid Potash, while farmers will return to applying "near-normal" volumes of the nutrient.
Shares in Intrepid, the biggest producer of potash in the US, finished 7.7% lower at US$22.97 in New York.
The company concurred with competitors such as Mosaic that crop prices were strong enough to support firm demand for fertilisers.
"Current prices provide a strong incentive to the farmer to apply nutrients to maximise the return on their crop investment," the group said.
With sowings of corn, a fertiliser intensive crop, expected to soar, "we believe that domestic farmers will apply near normal volumes of potash in the spring and fall application seasons, essentially in line with historical trends".
However, Intrepid cut to 810,000-860,000 tonnes, from 850,000-900,000 tonnes its forecast for sales of the nutrient this year, citing "the unpredictability we see in the agricultural markets at the current time".
The uncertainty appeared to stem from dealers who "have shown limited willingness to take inventory price risk on potash",despite the apparently improved market fundamentals.
Dealers, who have been "reducing their appetite for risk" from some time, "have been drawing down their inventory levels to meet farmer demand, in order to end the spring season with minimal potash inventory".
"This market demand variability is somewhat similar to the behaviour demonstrated by dealers in the spring of 2010," the time of the last potash market recovery, Intrepid said.
The comments sound a more cautious outlook than those from peers such as PotashCorp - which last week, while acknowledging a weaker-than-expected performance start to 2012, said that since a China supply deal was signed in March "customers in most major markets were actively securing new supply to satisfy pent-up demand".
But they are in line with a warning from Credit Suisse last month of "extreme caution" amongst distributors.
Intrepid said that its own earnings for the January-to-March period fell 27% to US$20.6 million, as a rise in costs more than offset the impact of a 6.9% rise to US$112.2 million in revenues.
Bob Jornayvaz said that he was "pleased" with the results despite the drop in earnings which, at US$0.27 a share, came in US$0.01 shy of Wall Street forecasts.
"Intrepid was able to achieve solid potash sales despite hesitancy by dealers during the quarter," Jornayvaz said.