India opens door to much higher potash subsidies


Here we go. Despite buzz circulating in recent weeks, India is not actually signing potash supply contracts at $390 per ton of the key fertilizer component. But the real news is even more bullish. What really happened is that India is talking about raising the maximum subsidy it will pay on all potash purchases from a contemplated $350 a ton to $390 a ton. In other words, Delhi is not just locking in potash at $390 a ton -- a little under the current asking price -- but setting an effective floor on prices at roughly where we are now. Expect Indian farmers to pay around $450 a ton next year, with the government picking up as much as 86% of that price. The main reasons for higher potash prices are still the same as before: strong demand and problems with supply. Demand is obvious, with everyone talking about food inflation and crop failure in China. Supply is less monolithic, but boils down to problems at producers -- strikes at ICL, a production halt at K+S and delivery interruptions in Europe -- and declining stockpiles in places like India. Potash suppliers are already sold out for the current quarter. Your fertilizer basket: POT ( quote ), MOS ( quote ), AGU ( quote ), ICL ( quote ), YARIY ( quote ), SYT ( quote ), even MON ( quote ).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , International , Stocks

Referenced Stocks: MON , MOS , POT , SYT , YARIY

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