Market and product
'Unpredictability' clouds US potash market revival
Intrepid Potash sounded a cautious note on the revival inUS potash demand, saying that while growers will return to applying "near-normal"volumes of the nutrient, the recovery is clouded by "unpredictability in the agriculturalmarkets".
Shares inIntrepid, the biggest producer of potash in the US, finished 7.7% lower at $22.97 in New York.
The company concurredwith competitors such as Mosaic that crop prices were strong enough to support firmdemand for fertilizers.
"Current prices provide a strong incentive to the farmer toapply nutrients to maximize the return on their crop investment," the groupsaid.
With sowings of corn, a fertilizer intensive crop, expectedto soar, "we believe that domestic farmers will apply near normal volumes ofpotash in the spring and fall application seasons, essentially in line withhistorical trends".
Reduced risk appetite
However, Intrepid cut to 810,000-860,000 tonnes, from 850,000-900,000tonnes its forecast for sales of the nutrient this year, citing "theunpredictability we see in the agricultural markets at the current time".
The uncertainty appeared to stem from dealers who "haveshown limited willingness to take inventory price risk on potash", despite the apparentlyimproved market fundamentals.
Dealers, who have been "reducing their appetite for risk"from some time, "have been drawing down their inventory levels to meet farmerdemand, in order to end the spring season with minimal potash inventory".
"This market demand variability is somewhat similar to thebehaviour demonstrated by dealers in the spring of 2010," the time of the lastpotash market recovery, Intrepid said.
Earnings decline
The comments sound a more cautious outlook than those from peers such as PotashCorp - which last week, while acknowledging a weaker-than-expectedperformance start to 2012, said that since a China supply deal was signed inMarch "customers in most major markets were actively securing new supply tosatisfy pent-up demand".
But they are in line with a warning from Credit Suisse last month of "extreme caution" amongst distributors.
Intrepid said that its own earnings for the January-to-Marchperiod fell 27% to $20.6m, as a rise in costs more than offset the impact of a6.9% rise to $112.2m in revenues.
Bob Jornayvaz said that he was "pleased" with the resultsdespite the drop in earnings which, at $0.27 a share, came in 1 cent shy ofWall Street forecasts.
"Intrepid was able to achieve solid potash sales despitehesitancy by dealers during the quarter," Mr Jornayvaz said.
