SASKATOON – A deal that will see Potash Corporation of Saskatchewan become the largest integrated fertilizer company in the world is another indication of growing concentration in the industry.
And that has some people in agriculture concerned.
Last week, the Potash Corporation, the world’s largest producer of potash, announced it would merge with Arcadian Corp. of Memphis, Tenn., the largest producer of nitrogen fertilizer in the Western Hemisphere.
The deal would be worth $1.18 billion and make PCS the world’s largest integrated fertilizer company, with nitrogen, phosphate and potash production.
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The deal will be reviewed under U.S. anti-trust laws, but PCS president Chuck Childers expects no problem because Potash Corp. doesn’t have any nitrogen plants now. He said the deal should have little impact on western Canadian farmers.
“The advantage for us is that we will be able to service our customers a little more efficiently. We’ll be able to use some of the same warehousing and sales distribution for more than one product,” he said.
But some farm groups are concerned corporate concentration might affect fertilizer prices. They note that Viridian took over all of Sherritt Inc. fertilizer assets recently and there have been other mergers and buyouts.
In a report to Canada’s agriculture ministers in July, the Saskatchewan department of agriculture said fertilizer prices have risen 34 percent in the last two years.
Darren Qualman, executive director of the National Farmers Union, said his organization is concerned about corporate concentration and the effect it might have on rising input prices. “Profit margins in fertilizer are huge, yet net farm income is down,” he said.
He agrees with Saskatchewan agriculture minister Eric Upshall that there needs to be a national inquiry into input costs.
Qualman said the review shouldn’t be on collusion among fertilizer companies, but on relationships between costs of production and price.
Alex Graham, Alberta Wheat Pool president, said he’s generally concerned about corporate concentration.
“How do small, independent operations thrive or survive against that kind of competition?” he said.
Big producers can influence prices by limiting production to eliminate surpluses, he said.
Potash Corp. says it keeps potash off the market sometimes to keep supply and demand in balance and maintain prices. However, analysts say the nitrogen market does not have a dominant player that can make such an impact.
Meanwhile, Upshall said that after the meeting of agriculture ministers a committee was set up to look more deeply into the need for an input price inquiry. But he said the PCS-Arcadian deal shouldn’t make much of a difference to fertilizer prices.
“I think there are enough companies out there that no one will have a monopoly. On the upside, it might mean more jobs for Saskatoon,” he said.
