Canpotex, the marketing conglomerate for North American Potash Producers signed a deal earlier this month to sell 600,000 tonnes of potash to India for $370 per tonne. That potash will last roughly through June, and for future contracts India will seek to lower prices due to a growing national deficit.

India has returned to the bargaining table, seeking to secure potash supplies for the remainder of the year. Rumour has it that India will offer a maximum of $350 per metric tonne for the year starting April 1. Earlier this year, China settled a contract with Belarusian Potash for $350 per tonne, a far cry from the $1,000 per tonne potash was selling for in 2008.

India was the biggest importer of potash last year, importing 5.09 million tonnes. Brazil grabbed second spot with 3.57 million tonnes, and China came in third with 1.59 million tonnes. India has no domestic potash production, and is 100 per cent reliant on imports. With a budget deficit at a 16 year high, India needs to secure lower import prices to cut fertilizer subsidies of $11.1 billion. With agriculture the nation's largest employer, fertilizer is an important part of India's economy.

With resurgence in demand, suppliers may be reluctant to meet India's price demand. "If $350 is the price the government is looking at, the challenge before us is to get that price," P.S. Gahlaut, managing director of Indian Potash Ltd., the country's biggest importer, said in an interview. If suppliers meet India's price point; it will open the flood gates for other bargain hunters.

January was the third straight month that North American potash inventories fell at the supplier level. According to Potash Corporation of Saskatchewan, in January potash inventories fell by over 550,000 tonnes, to hit roughly 2.5 million tonnes. Stockpiles are now at their lowest level since December 2008, and only 6 per cent above the prior five-year average.

India just changed the way it will do potash business, as the country attempts to slash its deficit. In the past system, the country paid a subsidy to farmers. They are doing away with this method of business and will instead set a maximum retail price for which fertilizers may be sold. This way, as global fertilizer prices increase companies will no longer have to depend on government subsidy and will instead increase prices at farm gate level, improving the company's cash flow. Information and Broadcasting Minister Ambika Soni announced the decision to India's cabinet on February 19. The changes will come into affect starting April 1 2010.

Meanwhile, Brazil is considering the formation of its own fertilizer company as part of the country's overall strategy to become less dependent on imports. Brazil hopes to be completely self sufficient for its fertilizer needs by 2020. According to Brazil's energy ministry, the country currently imports 91 per cent of its potash needs, 49 per cent of the phosphates it uses and 75 per cent of its nitrogen-based fertilizer raw materials.

Company news

MagIndustries Corporation has received the final approval from the Ministry of Sustainable Development of the Republic of Congo on its Environmental and Social Impact Assessment Study for the construction of its Mengo Potash Project. This authorization is valid for a period of three years and will be able to be renewed at the time the Project begins to operate. MagIndustries President and CEO Bill Burton commented, "Receiving environmental and social approval from the Government of the Republic of Congo represents another major step in the Company's development and construction plans. Our positive relationship with the ROC, the improving global investment environment and increasing potash demand and pricing are all key factors as we work towards the goal of full construction start-up later this year. We would like to acknowledge the encouragement and support we have received for this project from the ROC Government." MagIndustries just closed a prospectus offering on Feb 24. Gross proceeds of the offering totaled CDN $23,000,000. A portion of the raised capital will be used to fund the development of the Mengo Potash Project.