Although there has been increasing concern over the control of the potash industry by a couple of major players, including Canpotex and Belarusian Potash, it's puzzling as to why there hasn't been more support for BHP's (NYSE:BHP) bid for Potash Corp. (NYSE:POT), as they've stated they want to pull out of the monopoly once the existing agreements expire.
That raised a firestorm in Canada and among other Canpotex members Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), who have been controlling prices for a long time.
You would think there would be a rally on behalf of BHP. Some think BHP would stay in Canpotex once they controlled Potash, but I don't think so.
In the past BHP has been known for moving according to market conditions of supply and demand and not holding back in order to push up the price of potash to protect margins and earnings.
So farmers and consumers would strongly benefit from a BHP takeover of Potash, and hopefully this part of the story will get out more before the foolish and irresponsible leaders of Potash go the Chinese to protect them from the BHP bid.
2 comments:
Dear Ellen,
If you're "puzzled" as to why there hasn't been more support for BHP's bid you're an idiot. I'll try to help you understand in one word...VALUATION. You shouldn't be allowed to write about stock on a company you know so very little about.
As part of the fertilizer industry for more than 20 years, I can confirm that the leadership which PCS has established in the industry has protected North American Nitrogen production facilities from going bankrupt and thereby putting agriculture at the total mercy of imports. There were more than 20 nitrogen production plants in 1988....dwindling to 13 by 1992 when PCS purchased Arcadian and became a true N-P-K company. There
Arejha still 13, and each plant serves important regional and national needs.
The BHP approach may work well for mining, and potash is
certainly a purely mined product and also part of a global oligopoly. In fact, without the strength in potash prices over
the last 10 plus years, the increased investment into global potash projects would not have progressed. Important new
volumes in Belarussia and the Ukraine would still be in initial stages. As an oligopoly, potash does not follow the
typical commodity supply demand models.
I have full respect for bhp and it's strategy and plans, and it's right to grow via acquisition or growth. but I have to say that the entire industry will be impacted, and cheaper potash for farms may likely be wiped out by the loss of domestic nitrogen and phosphate supplies.
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