August 17, 2009

Patrick White

Marking a drastic turn in the province's world-beating fortunes, the government of Saskatchewan announced yesterday it will divert over $700-million from construction projects, Crown corporations and its rainy-day fund in a bid to stanch the $1-billion drain of plummeting potash revenue.

Finance Minister Rod Gantefoer announced the fiscal shuffle in his first-quarter financial report, revealing the extent to which provincial fortunes mirror those of the sagging fertilizer industry.

The new forecast signals a shift from the government's rosy budget outlook just five months ago, when Mr. Gantefoer anticipated a $465-million surplus. Mr. Gantefoer is now forecasting a $50-million surplus, and only through a series of deferrals, cuts and transfers.

“A couple of things have conspired against us,” Mr. Gantefoer said. “We are very much a commodity-based economy and the volatility of those commodities has been incredible.”

Chief among those are declining receipts from potash, a key ingredient in worldwide fertilizer production. The February budget forecast getting $1.9-billion from the industry –20 percent of total provincial income –a sum since downgraded to $638-million.

The entire potash industry has been roiled by dropping prices of late. Potash Corp. of Saskatchewan had tried to keep the price above $625 a tonne by cutting production, but a single sale from Russia to India at $460 set a new international low last month –well below the province's budget estimate of $556.

Global impact only now hitting home