Potash Corp. of Saskatchewan Inc. Chief Operating Officer and Executive Vice President David Delaney told attendees of the Bank of America Merrill Lynch Global Hedge Fund Conference Feb. 29 that the company’s potash capacity will run at only 40 percent of capacity during the first quarter of 2012. Delaney said the company is continuing its long-held strategy of matching supply with demand, which began back in 1987. “But we do think the market will start to kick in here in March, and we truly believe the 55-58 million mt demand mark for the year.”
Delaney was asked whether increased brownfield production coming online in the next few years might cause the company to lower prices instead of cutting production.
“We are not going to oversupply the market,” said Delaney. “We do think there will be growth, but at the end of the day … you can give up price, but it’s not always easy to get back. So we’re going to really focus on really maximizing our margins as much as we can.”
Delaney said the company will be taking 30 weeks of downtime between late December and the end of March. He believes negotiations with the Chinese will wrap up by the end of March and that the country will take 6.5 million mt, producing some 4 million mt themselves for total consumption of 10.5 million mt.
Delaney also weighed in on USDA’s recent projection of 94 million acres of corn in the U.S. in 2012. “We think there is some down side…. Number one, that’s a lot of acres to get planted here this spring. We think the incremental acres will be in South Dakota. So those are not the best producing, yielding acres.”
Delaney thinks there is a downside to USDA’s projections of 164 bushels per acre, saying to get there you would need ideal conditions across the board – early planting, good weather, and good harvest conditions. He also noted extremely dry conditions in northwest Iowa and dryness in parts of Minnesota and the Dakotas. “We haven’t had a lot of snow cover in the Midwest this winter. So there’s a moisture deficit already in some of the key growing regions of the country.”