The troubling silence on potash pricing
EUGENE WHELAN
From Friday's Globe and Mail Published on Friday, Feb. 26, 2010 12:00AM EST Last updated on Friday, Feb. 26, 2010 3:31AM EST
The Hon. Eugene F. Whelan served as MP from 1962-1984 and senator from 1996-99. He is a former minister of agriculture for Canada (1972-79, 1980-84) and former president of the UN World Food Council (1983-85.)
Potassium is a non-perishable resource that has lasted thousands of years in the bowels of the Earth. It is an abundant element, but the large deposits are found in only a handful of countries - with about half the global supply found in Saskatchewan.
When potassium is mined and refined it becomes more commonly known as potash; around the world, more than 90 per cent of potash is used in the form of fertilizer.
Potash fertilizer is a crucial factor in food production. After centuries of farming, much of the land in many countries is depleted of nutrients. Just like humans, plants are a reflection of what they take in. Without proper soil nutrients, food crops are weaker; they do not retain water well; their taste and colour are poorer. They are more prone to disease. The harvest is smaller and crop failure is possible. Many types of crops, from fruits and vegetables to cereals and grains, benefit from the application of potash.
As the world population increases, global food production becomes an even more pressing concern. How to feed an ever-growing population with the same amount of land is a question asked over and over. Improved crop yields, attainable by using potash, is one answer.
In 2007 and 2008, the cost of potash rose dramatically on the world markets, climbing from a seven-year average price of $145 a tonne to more than $1,000 a tonne. The cost to produce this same tonne was roughly $70. Many farmers could not afford the purchase price, and chose to not apply potash to their lands, or used it at a lower-than-recommended rate of application. At the same time, potash producers reaped mega dollars from the sales that were made. Potash companies both here in Canada and in Russia, and their executives and shareholders, fared well. Meanwhile, small farmers in countries such as Brazil and India struggle to exist, with food shortages ever-present threats.
The cartel of potash producers agreed to a world price. When prices rose to more than $1,000 a tonne, if you wanted the potash you had to pay, no matter where you live in the world. What happened to the ethic that we are our brother's keeper? What happened to the idea that that we live in a competitive free market, ruled by the law of supply and demand? It seems that greed now rules in its place, at the expense of millions of the world's poor.
Sales and prices dropped dramatically last year, after the price increases, but shorter-term potash prices have recently climbed to as high as $430. It is incomprehensible how civilized companies can do what they have done in the potash fertilizer business. Corporate executives know this product is essential to grow food crops, yet they are treating it not as it if were a basic resource, but as if it were some sort of luxury item, like diamonds, that can be made scarce and sold to the highest bidder.
What is so amazing - and alarming - is that no government or government body can or will do anything about this organized activity. Even the World Trade Organization, whose goal it is to make sure that global trade is conducted fairly, does nothing.
It is also hard to fathom that investors continue to purchase stocks of potash producers. Do they not see that the inflated price for potash cannot do anything, ultimately, but raise the price of food and deprive the hungry? The self-interested cartel sets the market price - a price which has nothing to do with the cost of production of potash. Remember, it currently costs about $70 to load a tonne of potash onto a rail car at the mine.
There is not a lowered demand for potash, as the companies say. Instead, there is a demand for lowered prices. Without a price drop, there will be less potash fertilizer used, leading to food shortages and higher food prices. Lives and livelihoods will be lost. Malnutrition, starvation and death are real outcomes.
