Potash in Saskatchewan could be facing some tough times after some negative reports.
On Monday night after trading, the Mosaic Company announced it would be cutting production at its Colonsay mine. It will be extending maintenance downtime and continuing slow production.
The company blames delayed fertilizer purchases in Brazil and North America, and lower grain and oilseed prices pulling back demand for agricultural products.
“The long-term positive outlook for crop nutrient demand has not changed, but the industry faces some near-term challenges in the current environment … we are managing our production levels to match current demand, controlling our costs, and maintaining our discipline,” said Joc O’Rourke, president and chief executive officer of Mosaic Co., in a news release.
Several media reports cite a Macquarie Capital Ltd. report that was released on Monday which predicted that potash demand could slide next year, leading to a record surplus and lower prices. Several analysts are predicting lower prices for the commodity next year.
On the other hand, RBC Economics’ Provincial Outlook is has a positive outlook for potash, calling potash production a bright spot in 2015, and saying the commodity shows signs of growth that are expected to continue for the rest of the year.
On Tuesday morning, Mosaic Company’s stock price dropped $2.82, and PotashCorp’s had dropped $2.14.
Sask. economy’s forecast takes a hit
RBC Economics is downgrading its latest forecast for Saskatchewan’s economy this year.
Weaker capital spending and lower crop production due to drought are the main reasons the bank is lowering its GDP growth prediction to 0.6 per cent. That’s down a full percent from its June prediction of 1.6 per cent.
RBC said the energy sector slump due to low oil prices was expected, but the sudden drop in crop production was a surprise. Despite the arrival of moisture late in the growing season, production will likely still decline 10 per cent from the year before, the bank said.
The weak energy sector is also the main factor for less spending from the private and public sectors. So far this year, spending is off by 13 per cent after seeing a two per cent drop in 2014, according to Statistics Canada’s CAPEX survey.
The economic news isn’t all bad, however. The bank is expecting the provincial economy will come back even stronger next year, projecting GDP growth of 2.5 per cent in 2016.
The prediction, however, is tempered by lessening declines in the energy sector.