The cozy relationship between Agrium (NYSE:AGU), Mosaic (NYSE:MOS) and Potash (NYSE:POT) through their marketing arm Canpotex is under pressure from the bid by BHP (NYSE:BHP) for the fertilizer giant, as they declared they have no interest in continuing on with the arrangement once the existing agreements run out.
That also has Saskatchewan taking a closer look at the bid and possible fallout, as they have imposed royalties on potash produced in the region, and with BHP's decision to move volume and be less concerned about prices would have a detrimental impact on revenue in the Province.
BHP isn't the problem though, as other possible suitors have reiterated the same thing, that they aren't interested in continuing the monopoly represented in Canpotex for the benefit of Saskatchewan.
It will be good for the industry to remove this anti-competitive group and let them compete head to head like they should be doing in the first place. That will lower prices and be better for consumers and farmers in the long run.
With Potash accounting for over 50 percent of the sales volume of Canpotex, that has Agrium and Mosaic concerned, as their shareholders must be as well, as they would have to compete on the market and not be reliant on the strength of Potash for their success.
Even the Canadian federal government is looking into the effects of the acquisition of Potash, showing there's far too strong of a connection between the industry and the government, which will be good to break with the deal.
This reveals a dark side to the monopolizing of the potash market by these companies, as they've been controlling prices and not competing against each other in order to maintain margins for the sake of Saskatchewan specifically, and Canada in general. That isn't the free market operating, and it would be good to see it abandoned. Hopefully that's the outcome of all this.
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