Fertilizer Markets and Finance

For decades, people have accused the potash industry of operating like a cartel to keep prices artificially high. They are now closer to having their day in court.

Last week, a U.S. Court of Appeals in Chicago sent shockwaves through the fertilizer industry by ruling that an antitrust suit against potash producers should go ahead. That reversed a prior court decision to dismiss it, and set the stage for a legal battle that could run for years.

The class action suit alleges that seven Canadian, Russian and Belarusian companies have colluded to keep U.S. prices elevated, effectively acting as a “global cartel”. The defendants, including Potash Corp. of Saskatchewan Inc. and Agrium Inc., dominate world supply.

Unless it gets appealed to the U.S. Supreme Court, the case will move on to the discovery phase. A similar price-fixing suit was dismissed during discovery back in the 1990s, when potash prices were much lower than they are today.

Read more at Canada.com

Yara International revealed it may sue the former owners of it Balderton trading operation, and unnamed “individuals”, as it revealed results of a probe into the bribery allegations which have led to charges against two bosses.

The fertilizer giant confirmed that an internal investigation found evidence of “unacceptable payments” in 2007 ahead of the formation of the Lifeco joint venture in Libya, and as Yara negotiated terms on a possible Indian tie-up, allegations over which it unveiled last year.

However, the probe had also found evidence of “a number” of unacceptable payouts too - totalling $15m, and spread between 2006 and 2009-10 - from the Swiss-based Balderton business, plus other payments “of several millions” of dollars “on no commercial basis”.

The probe, which has involved reviewing 740,000 documents and cost NOK30m in fees to law firm Wiersholm which undertook it, had also unveiled “other possible irregularities in relation to Yara’s/Balderton’s trading activities”.

‘Misleading information’

Furthermore, Yara had been given “misleading information” in the group’s acquisition of the first 50% of the Balderton fertilizer trading business in 2006.

Yara bought the oustanding 50% two years ago, for $130m.

“The former owner of Balderton has been notified that Yara is considering legal action on the basis of the findings from the investigation,” Joergen Ole Haslestad, the Yara chief executive, said.

Individuals, which the group did not name, may face “legal or other actions” too.

Mr Haslestad added: “It is disappointing to confirm that unacceptable payments have been made from Yara, but I am nevertheless satisfied with the way this matter has been handled.”

Second in two days

The findings of the probe, which has seen 29 people interviewed and taken Wiersholm personnel 16,000 working hours, comes a month after Oekokrim, Norway’s white collar crime unit, charged two members of Yara’s senior management team.

The pair were Tor Holba, the head of Yara’s so-called “upstream” manufacturing operations, and Hallgeir Storvik, the group’s chief financial officer and head of strategy.

Yara’s announcement also represents a second finding of bribery in two days by an agribusiness giant, after a Glencore subsidiary was convicted of paying-off a European Union official in return for market-sensitive information.

Glencore Grain Rotterdam paid for the official, Karel Brus, to have a holiday in France, besides meeting his mobile phone bills, in return for data on grain subsidies, in bribes paid in 2002 and 2003, a Belgian court heard.

Yara shares stood 1.3% higher at NOK256.20 in morning deals in Oslo.

One of Yara International’s top executives has stepped down from overseeing key parts of the Norwegian fertiliser giant’s global operations, including its Burrup plant near Karratha, while he fights to clear his name from corruption allegations.

Tor Holba was Yara’s head of upstream operations and responsible for the global chemical company’s expensive $176 million splurge for an additional 5 per cent stake in Burrup Fertilisers in 2008 shortly before the collapse of global financial markets.

Along with Yara’s chief financial officer Hallgeir Storvik, he was charged on suspicion of “gross corruption” on Friday night.

The charge was in relation to a continuing probe at the Norwegian fertiliser giant and its operations in countries such as Libya.

Yesterday Yara, whose chief executive Jorgen Ole Haslestad has expressed surprise at the charges, issued a statement saying the pair had voluntarily stepped aside pending the outcome of the investigation.

“Storvik and Holba will continue to work for the company, but without the areas of responsibility they have stepped out of and not as members of executive,” the statement said.

Mr Holba was in Perth as recently as February as part of the company’s move to secure majority control of Pankaj Oswal’s fertiliser empire, and change Burrup’s name to Yara Pilbara.

Torgeir Kvidal was appointed acting Yara CFO and Jan Duerloo will act in Mr Holba’s position.

Shares in Yara International tumbled 8%, missing out on a rise in most fertilizer stocks, after prosecutors investigating corruption allegations charged two members of the nutrient giant’s senior management team.

Oekokrim, Norway’s white collar crime unit, has charged both Tor Holba, the head of Yara’s so-called “upstream” manufacturing operations, and Hallgeir Storvik, the group’s chief financial officer and head of strategy.

Both are members of Yara’s nine-strong senior management team, headed by Joergen Ole Haslestad, group’ chief executive, and long-term employees of the company and Hydro, from which it was demerged in 2004.

Indeed, Storvik is seen as responsible for spearheading the turnaround from 1999 of Hydro’s fertilizer division, Agri, involving the closure and sales of businesses and reduction of 35% in fixed costs, which paved the way for the creation of Yara, the world’s top nitrogen fertilizer group.

Read more at Agrimoney

There are strong indications that many of the farmers who received land under the controversial land grab program, sold most of the free inputs they received from government.

This came to light following revelations by Finance Minister Tendai Biti that the country’s ‘underperforming’ farmers have received over $2 billion since the formation of the coalition government in 2009. This also showed that the claims by Robert Mugabe that Biti is deliberately starving newly resettled farmers, are not true.

Many of the farmers who received large tracts of land are politicians and include a number of senior ZANU PF officials. Many of Mugabe’s senior military commanders also received farms, forcibly taken off commercial farmers.

Mugabe insists the land reform program was initiated to right the wrongs of the colonial era, when black farmers were forced off their land and forced into less fertile areas, while the best land was reserved for white farmers.

Read more at The Zimbabwean

With Zimbabwean farmers scrambling to find fertilizer at a price they can afford, sources say the Grain Marketing Board, which was entrusted with distribution of subsidized agricultural inputs, has been crippled by executive branch interference.

Parliamentary agriculture committee member Moses Jiri said GMB boss Albert Mandizha told his committee that the executive branch led by President Robert Mugabe draws up all programs for the state entity including the distribution of agricultural inputs.

Jiri said Mandizha and four other GMB managers said political interference has seriously hurt the agricultural agency, which is struggling to obtain reimbursement of US$19 million from the government which it spent on various agricultural input schemes.

He said the GMB managers also blamed current fertilizer shortages on a lack of finance and what they said was the Finance Ministry’s late release of funds.

Jiri said the GMB executives did not rule out corruption as another issue affecting the performance of the state enterprise. “They indicated to us that it is difficult to nail the culprits due to lack of evidence,” Jiri said.

Meanwhile, farmers in Gutu district, Masvingo, have protested what they charge is the looting by senior politicians in the local ZANU-PF branch of farming inputs made available through the Grain Marketing Board, Obert Pepukai reports.