USA News Group reports:

Two major Canadian fertilizer companies, Agrium and Potash Corp of Saskatchewan have just merged to form Nutrien Ltd, which is now the biggest fertilizer producer in the world and according to the Province’s Premiere, the new entity will keep its headquarters in Saskatchewan.

Companies on the move in the potash space include Compass Minerals International, Inc. (NYSE: CMP), Intrepid Potash, Inc. (NYSE: IPI), Nutrien Ltd. (TSX: POT) (NYSE: POT), and Potash Ridge Corporation (TSX: PRK) (OTC: POTRF).

About 95% of potash is used for fertilizer in agriculture and about 5% is used in commercial and industrial products. Potash fertilizers can correct the problem where soil is potassium deficient and boost crop yields and quality.

Potash companies have been watching the increase in global demand for potash this year, and believe that the merger by majors will benefit all players including Compass Minerals International, Inc. (NYSE: CMP), Intrepid Potash, Inc. (NYSE: IPI), and Nutrien Ltd. (TSX: POT) (NYSE: POT).

And while large producers of potash have benefited from stronger pricing over the last year, smaller potash focused companies are playing off of market strength. Potash Ridge (TSX: PRK) (OTC: POTRF), is a junior mining company getting attention for its North American interests, which are focused on near term production in Utah.

What Nutrien Produces

Potash is a naturally occurring mineral created during the evaporation of ancient sea beds. It is most often referred to as Muriate of Potash or Potassium Chloride (MOP) and Sulphate of Potash (SOP) or Potassium Sulphate.

Potassium serves as the “Regulator” of many essential processes within the plant and is one of the three primary crop nutrients required for plant growth.

MOP, also known as KCI, is widely used in all types of farming, but contains a chloride ion that can be detrimental towards plant growth, especially fruits and vegetables. If the chloride content isn’t managed, it can lead to low quality crops and inhibit place growth in dry soils and saline areas.

MOP is the most widely used potassium fertilizer, especially in major areas of use, such as China and Brazil. It currently has a global market size of about 55 million tons per year.

SOP is a premium form of potassium fertilizer and has a smaller market of about 8 million tonnes per year, but commands a much higher price for its ability to improve crop yield without chloride build up associated with using MOP.

The Biggest Potash Company Makes Its Home

Nutrien is currently producing over 25 million tons of assorted agricultural products annually. The entirety of the company’s potash mining executives are located in Canada despite having retail operations all over the region, including the largest network of farm retail stores in the US.

The company, which currently runs its executive operations from Chicago, plans to establish its head office in Saskatchewan. The move is expected to increase corporate office jobs to 300, reflecting a 15% jump.

According to Saskatchewan Premier Brad Wall, Nutrien will have all the executives working in the Saskatchewan office live in the province.

That commitment is already in partial fulfillment, with the Nutrien CEO Chuck Magro living in Calgary, Alberta, which was the head office of Agrium.

Executive Chairman Jochen Tilk also resides within the province, in Saskatoon. Nutrien spokesman Richard Downey said that while Magro will continue to reside in Calgary for the meantime, he has plans to purchase a home in Saskatoon.

The company is not receiving any incentives from the current Saskatchewan government, but with Saskatchewan’s Ruling Party set to pick a new leader following the impending resignation of Wall, that may be set to change.

The Whole Potash Market Will Benefit

The analysts view the creation of Nutrien as a move to a more galvanized marketplace.

According to PotashCorp, the demand for potash and the strength in global demand will continue this year. It’s pinned at about 62 million-65 million tons in 2017, which is up from ~60 million tons in 2016.

Potash prices have bounced back stronger too.

Granular potash prices in Brazil have risen as much as 17% YoY (year-over-year) to $274 as of the week ending October 6. In the US Corn belt region, prices have risen ~5% YoY. The standard grade of potash was also 5% higher YoY in the South East Asia region.

The global Potash Fertilizer Market is expanding with considerable growth potential during the next five years.

Potash Ridge In Good Company

While MOP pricing continues to hold value, higher premium SOP (potash) could be a source of excellent value for junior miners. Potash Ridge is one of these looking to vitalize the sector.

Potash Ridge has two highly de-risked and advanced development stage potassium sulphate (SOP) projects; 1) the Blawn Mountain assets in Utah and 2) the Valleyfield project in Quebec, Canada.

Both projects are well received in their respective jurisdictions and have earned strong support from the various levels of government, agencies, financial groups, and stakeholders in their individual locales under Potash Ridge’s guidance.

Potash Ridge announced late last year its plans to spin-out the Valleyfield project into a new public company in order to create greater value. So now, the company plans to focus its efforts on the development of its proposed 255,000 ton per year project at Blawn Mountain, Utah.

A prime source for SOP, Blawn Mountain is in its final stages of completion with all major environmental and regulatory permits in place. Blawn Mountain has the potential to become a significant potash resource and make Potash Ridge the lowest cost producer SOP in North America.

No Good Deed

In response to the merger announcement, Nutrien shares took a slight dive in Toronto, while moving slightly in the opposite direction in New York.

For the long term however, the merger seems to have positioned the company for some impressive growth numbers. Potash and various fertilizer products will be highly sought after commodities in the agricultural sector as the world’s food demands grow with the rising global population.

Certainly the move to consolidate Nutrien Ltd. brings price strength and balance to supply levels. Increased market demand is expected to benefit junior miners and others looking to develop potash resources for the long term.