PotashCorp's market position amid agricultural demand uncertainties

¶ … PotashCorp

Industry Trends:

-Agricultural demand is increasing with the world's population

-Arable land areas are shrinking due to environmental changes and other factors

-New and previously unfarmed land might be opening up in new areas due to warming

-Moves to natural fertilizers/compost are becoming more common on commercial farms

-Agriculture is continuing to shift to the developing world with globalized distribution

-Innovations in plant science are leading to newer and more efficient growing methods

Bureau of Labor Statistics)

Uncertainties (from high to low):

-Legislation promoting agricultural growth might be drawn back as an austerity measure

-Food price shocks could create ripple effects that put buyers out of business

-U.S. Presidential election in 2012 could cause real economic turmoil with any outcome

-Environmental legislation could impact production methods and expenses significantly

-Import legislation could restrict the flow of agricultural products and affect demand

If legislation providing subsidies and other incentives to agricultural producers are cut back or eliminated, the demand for PotashCorp's products is likely to significantly decrease. This, along with the potential for food price shocks to also negatively impact producers, runs the risk of putting smaller producers out of business. This will in turn give the major producers -- already large customers of PotashCorp -- more consolidated buying power, which could affect the price PotashCorp is able to command for its products and thus the ultimate profitability and stability of the company. It is for this reason that these tow uncertainties are seen as having the highest potential.

SWOT Analysis

The company's primary internal strength is its capital and resource reserve, which provide a great deal of stability to the company and also give it a definite competitive advantage in the industry. A weakness of the company is its resource-intense series of products and production methods, which while unavoidable place the company at greater risk exposures on a variety of levels. An opportunity in the current market is provided by the economic uncertainty, which makes it more difficult for competitors to enter the field and allows PotashCorp to remain on firmer financial footing than existing competitors, given its size and market share. There are also threats inherent to this uncertainty, however, as identified above in the possibility of a negative impact on the agricultural industry and the demand for its products, which would have a direct and significant effect on the demand for the company's products and its overall profitability. Maintaining growth without making any major changes to structure or operations is advisable given this current mix of internal and external features.