Investors hoping for a turnaround in the potash industry in the near-term appear to be out of luck as the U.S. Department of Agriculture has revised its corn production estimates to near-record highs.
The USDA has upped its forecast for corn in 2009 to about 12.8 billion bushels, compared with previous estimates of 12.3 billion and also higher than market consensus of 12.5 billion bushels. If the USDA estimates hold out, this bumper crop would be the second-largest on record.
Figures from the Ontario Corn Producers' Association show a bushel is typically about 56 pounds or 25.4 kilograms, and contains 72,800 kernels.
Even worse for potash producers, weather conditions are expected to be favourable for crop growth in the next few weeks, putting even more pressure on the fertilizer industry.
However, John Redstone, analyst with Desjardins Securities, does see cause for optimism.
Corn futures have held steady at or above the $3.25 a bushel mark, above the June low of $3.04. While less than half of the high of $7.64 a bushel price from last year, the latest corn prices are a good sign.
"This leads us to believe corn prices may have bottomed," Mr. Redstone said in a note Thursday. "The prices for foodstuffs have to increase before farmers are compelled to increase their purchase of fertilizers."
Mr. Redstone expects potash prices to rise to $600 a tonne by 2011, as pricing for corn and other foodstuffs firms up.