As potash falls, Saskatchewan tightens purse
By Globe and Mail
Aug. 17, 2009 -Volatility in commodities, particularly in potash, have forced the Saskatchewan government to revise its budget surplus forecast, dropping it just $50 million, including one theory that says we are now seeing the global impact of a decline in demand for commodities.
August 17, 2009
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.