POLITICS

Saskatchewan says too soon to say how potash market will affect its budget

07/30/2013 02:25 EDT | Updated 09/29/2013 05:12 EDT
REGINA - The Saskatchewan government says it is too soon to say how the drop in the potash market will affect its bottom line or the province's economy.

Shares of major North American potash producers plunged Tuesday following news that a Russian corporation is making moves that could push down global prices for the mineral fertilizer.

"It is too soon to know the potential impact of today’s announcement by OAO Uralkali on price, production and provincial potash revenues here in Saskatchewan," Kathy Young, a government spokeswoman said in an email Tuesday.

"We will be monitoring these developments closely and speaking with Saskatchewan potash producers to gain a better understanding of the potential impact."

Details on how potash revenues could potentially be affected will be included in the government's first-quarter budget update when it is released in August, she said.

The Saskatchewan Party government has been counting on potash revenues to help meet its goal of a modest budget surplus this year. Potash is forecast to contribute almost $520 million to provincial coffers in 2013-2014.

The market turmoil is affecting PotashCorp, Mosaic and Agrium, companies with significant potash operations in Saskatchewan. BHP Billiton, Gensource and K + S Potash have projects on the drawing board.

An economist at the Royal Bank of Canada said a big price drop could reduce forecast economic growth in Saskatchewan this year by almost half.

Patricia Mohr, a Scotiabank commodity expert, suggested proposed new potash projects in Saskatchewan will now probably be delayed a few years.

"The prices that are required to justify investment are, in many cases, quite high, so I think that a lower pricing environment will mean the deferral of some capital investment in Saskatchewan," she said.

Officials with PotashCorp and K + S Potash said it was too soon to comment on how lower prices could affect their operations.

Both companies said they were monitoring the situation.

"We will continue to run our business as we usually do and we will keep an eye on the situation," said Bill Johnson of Potash Corp.

"It is important in circumstances like this not to overreact."