Potash (POT) CEO Jochen Tilk at Goldman Sachs Materials Conference

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Potash (POT) CEO Jochen Tilk thinks the market for the fertilizer has finally bottomed

“We’ve made some comments few weeks ago at our call and we communicated some cautious but supported optimism that we see the markets in a more positive light and we ought to translate that. We think that things have bottomed, if that’s the right term in terms of sentiment, in terms of potash prices.  Now 75% of the corn plus is planted in the U.S. So a lot of it was done, but we flushed our inventory out and we’re now looking forward to the some of it and the fall season. And the third one, probably somewhat more surprising, when farmers’ economics in the U.S. good, they’re certainly better than they were last year and they’re better than they were a year before. If you look at the affordability fertilizer versus the farmers’ economics, they’re quite attractive. You know that corn has come back $4 and soybeans are $11. A lot of acreage plant at $93 million acres in U.S. So they’re good basics and that all is attractive.”

He said farmer economics in Brazil are more important than political stability in Brazil

“We look at Brazil, we had good engagements there. Brazil is a huge producer of soybeans, a very attractive market. Political stability is welcome but is not the biggest reason there. Farmer economics are much bigger driver. They export in U.S. dollars — 70% of resilient crop is exported. So we see good engagement.”

Not trying to go after market share in the current environment

“People say well that would give you the opportunity perhaps to go for market share. Our approach to market is to balance supply and demand. And we have to be very clear, when you choose that right, we think it’s a better business model, it’s one that provides better margins. It provides better returns on all assets, it’s one that’s sustainable in that market that we are in, not just for historic experience but just looking forward. And the biggest driver in making that decision and looking at the market is really how we see supply and demand evolving in the next few years.”

Potash (POT) CEO Jochen Tilk said their was euphoria in the potash market about 8 years ago

“And keep one thing in mind, in the last 10 years a lot of money had been spent for expansions. Clearly there was a sense, if not euphoria, certainly enthusiasm, 7-8 years ago when those decisions were made. They were all made more than five years ago, more than half the decade ago. They’re now coming to completion. There’s really very little left. But give or take maybe I don’t know $50 billion may have been spent in incremental expansions, brownfields and greenfields in the next decade. So the same period going forward. I would doubt very much that much will be invested. I think everyone will draw from their expansion, so that the incremental investments or the new investment in capacity will be very little for a number of reasons so that in the next 10 years we will certainly see a very different environment in terms of building new capacity than we have in the past.”

 

 

Source: http://seekingalpha.com/article/3976065-potash-corporation-saskatchewans-pot-ceo-jochen-tilk-presents-goldman-sachs-basic-materials