The reason so much resistance has emerged from the BHP Billiton (NYSE:BHP) bid for Potash Corp. (NYSE:POT) has been the socialist nature of the agricultural industry in general, and the potash industry in particular.
With the Canpotex consortium and the Belarusian Potash Co., they pretty much control the potash market and its prices. That needs to end and free market prices allowed to determine how much the fertilizer will cost.
In the case of Potash, the Canadian Province of Saskatchewan sucks a bunch of money out of them, the reason they want things to continue on as they are with controlled prices, rather than allowing the market to dictate events.
The Canadian consortium includes Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), along with Potash. They oppose the acquisition by BHP as well, as they would have to compete with them directly, rather than continue the cozy relationship among one another.
Competition is always the best way to decide who wins in business, and to keep Canpotex operational goes against that idea, as well as keeps the costs of Potash artificially high.
Interestingly, China is concerned about higher prices of Potash if BHP takes over the fertilizer giant, and the Province of Saskatchewan is concerned about lower prices if they do.
All that government has to do is start to become more limited, the best way to deal with out-of-control spending and promises.
Either way, BHP is good for the industry, and whether they land Potash or not, they'll eventually ramp up their Jansen property, which may produce 8 million tons of potash a year.
No comments:
Post a Comment