Talks On Potash Supply To India Continue To Fail.

Negotiations in Montreal this week have failed to settle a pricing dispute between potash producers and India, and both sides continue to signal that they will not back down.

The International Fertilizer Industry Association’s (IFA) annual conference brings together the biggest global buyers and sellers of fertilizer to discuss important issues facing in the industry. With food security and high prices on the minds of governments worldwide, it takes on more significance every year.

This year’s event in Montreal was especially important for the Indian visitors, as they are stuck at an impasse with the potash companies. They insist that their farmers cannot afford to pay current high prices, and are demanding that producers give them a 10% discount on spot prices (currently just under US$500 a tonne).

Indian negotiator P.S. Gahlaut said that no resolution was reached at the conference, though talks will continue. “A big market like India should get a little preferential treatment. We can’t be equated with [smaller markets],” he said in an interview.

U.S. Awasthi, managing director of the Indian Farmers Fertilizer Cooperative Ltd., which represents small farmers, said that India can tweak its agricultural practices and take advantage of “sufficient potash” in its soil to avoid importing for years, if necessary. He also pointed out that there are greenfield potash projects popping up around the world in Thailand and Ethiopia and elsewhere, and expressed confidence that India can take advantage of these new supplies. That would mean less reliance on marketing groups such as Canada’s Canpotex Ltd.

“We are prepared to work out a potash price of US$445 to US$450. We don’t think farmers can support more than this as of today. If [the producers] don’t agree, then we have no intention of buying potash,” Mr. Awasthi said.

Bill Doyle, the chief executive of Potash Corp. of Saskatchewan Inc., said he doubted there would be a long-term potash boycott from India. He also dismissed Indian claims that they do not need to import potash as a “negotiating tactic”. “Their own agronomists would tell you something different,” he said in an interview.

The Indian contract is a crucial one for the potash industry because the country is such massive consumer of fertilizer. According to Potash Corp.’s own numbers, Indian demand could reach 6.9 million tonnes this year. Total global demand is expected to be 55 million to 60 million tonnes.

If potash producers decided to give such an important customer a break on prices, experts pointed out that others would demand the same treatment. That could make it tougher to push through price increases in the future.

Mr. Awasthi maintained that India deserves special treatment. He stated that about 600 million people in India depend on agriculture for a living, much of which is subsistence agriculture that is not for profit. The Indian government already helps its farmers out with a major subsidy program.

Ajay Shriram, an Indian citizen who is also president of the IFA, expressed confidence that the dispute can be resolved. He pointed out that India backed out of the market a few years ago when fertilizer prices reached record levels, and “things worked out all right.”

Mr. Doyle also said he is confident that a deal will get done. He is seeking a six-month contract with India. That is shorter than most prior contracts, which he said could “take some emotion out of the process.”

Source : business.financialpost.com