In an editorial in the official Chinese Xinhua news agency, it was asserted the bid by BHP Billiton BHP (NYSE:BHP) for Potash Corp. Potash (NYSE:POT) would create a monopoly which would be a threat to all countries producing food.
The commentary said, "Once a monopoly is formed in the fertilizer industry, it will have negative impacts on all grain-producing countries in the world."
While that is a possibility, in the case of BHP it's highly unlikely. As a matter of fact, the opposite is true in relationship to the Potash bid, as Canada was concerned over BHP's talk that they had no desire to stay in the potash marketing arm Canpotex, which in fact does control supply and pricing already.
BHP is noted for high production and competing on price, which it has signaled it wants to do when and if it takes over Potash Corp. That has made it more difficult for BHP to acquire the company, rather than easier.
Its Mosaic (NYSE:MOS) and Agrium (NYSE:AGU), and probably their Russian competitors, who are more concerned over BHP, as they would be forced to compete on price, which BHP would probably be the marketing leading in. It would lower potash prices over the long term rather than increase them.
Rumors that Russian potash competitors Uralkali (URKA.MM) and Silvinit (SILV.MM) could be more than just rumors, and they would be a much bigger threat than any BHP, Potash merger.
Again, at this time, the best thing in regard to potash pricing would be for BHP to take over Potash without any restrictions on production or having to remain part of Canpotex once existing agreements run out.
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