It looks like summer might finally happen. The forecast is for temperatures in the mid to high twenties for the entire week. Saskatchewan really needs some warmth and sunshine. There is a tremendous crop growing out there but it is going to need some help from Mother Nature to get in the bin in good condition. We started out late this spring, we seemed to be catching up and then July forgot to happen. Let’s hope August and September are nicer than usual.
Speaking of hoping and praying….I am sure that Mr. Wall and his government must be saying a few prayers after the recent announcements in the potash business. I have withheld any comment on this subject for a few weeks because I did not want to look like one of the doomers and gloomers that were in the news immediately after the breakup of the Russian potash cartel.
As everyone has noticed, the share price of every company involved in the potash business have continued to trend down. Every company has revised their income forecasts for the rest of the fiscal year and it seems like no one knows where the bottom will be. Lower prices should increase demand but that will be several months down the road before we see any movement in that regard. I don’t believe any of the large buyers will be interested in buying until they see where the bottom of the market is and with the price of corn – half of what it was last year in the United States – farmers there are going to have to make difficult decisions about whether they pay the inflated land rental because of $8.00 corn or buy fertilizer. I suspect the fertilizer buying will be held off until the last possible minute because of the dramatic cuts in cash flow.
So the big question that will have to be answered is what is the government of Saskatchewan going to do in this new world of lower potash pricing? As we all know, the Sask Party government and the NDP before them gave very large tax credits to the companies to bring on more capacity. Those tax credits would be paid off against future production and of course with everyone predicting $600 a ton potash that seemed like a reasonable deal for the owners of the resource – the people of Saskatchewan. How long is it going to take to pay those tax credits off at $300 a ton is the elephant in the room for Mr. Krawetz. How much foregone tax dollars will that mean for the people of this province because our potash take has always been based on a convoluted formula involving price and volume instead of a flat per ton royalty fee.
Several of our existing companies have announced cancellation of expansion plans and so far there is only one green field project – K+S Potash with their new mine south of Bethune – that appears to be going ahead to the finish. If companies don’t go ahead with the expansion, does that mean “no” to the tax credits? Does this mean that Saskatchewan will be changing its royalty formula?
These are questions that should be answered in the full light of public debate. Before the last election, the PC Party proposed a mechanism for the Legislative Assembly to deal with these issues. More than ever, that mechanism or one like it is necessary for the people of this province to have an open and accountable discussion about their potash resource.
This dramatic change in the potash world could have major implications for how the citizens of this province maintain their essential services. It is time for the government of Mr. Wall to bring these issues forward in an open and accountable manner and not left to a few people in the Premier’s office to call the shots.
Your feedback is welcome on anything you see in the Monday Morning Commentary. Please send your comments to contact @pcsask.ca. If you know of anyone that would be interested in receiving this by email, please forward me their email address. Also – don’t forget to check out our website at pcsask.ca.
These issues must be debated for “The Right Reasons”.