Wednesday August 20, 2014

Good economic news to start 2014


There is already good economic news for rural Saskatchewan emerging in 2014.

For starters, it looks like some normality may return to potash prices that dipped below $300 a tonne in 2013.

On Dec. 27, word out of Russia suggested that the Russian potash producer Uralkali would rejoin the European potash cartel, known as Belaruskali.

“Uralkali is ready to restore cooperation with Belaruskali,” said Alexander Surikov, Russia’s ambassador to Belarus.

So why should rural people half a world away in Saskatchewan care about potash politics between Russia and her old Soviet Union satellites?

Well, it was the breakdown of this cartel that led to the dive in potash prices this summer. That, in turn, led to PotashCorp’s decision to lay off 440 Saskatchewan employees including miners at Lanigan and Cory.

Admittedly, this news won’t likely translate into PotashCorp rehiring the people it let go shortly before Christmas. Sadly from the perspective of those PotashCorp workers and the rural communities in which they live, any additional profits the company now makes through the return to higher prices will simply remain in the pockets of shareholders.

But while it might not help the former employees already impacted, the better prices should encourage more production which might help ward off future layoffs. That should also apply to other potash companies as well, which is good news for other rural communities like Esterhazy and Langenburg. It might also keep critical new mine development in Saskatchewan on track, which is good for not only the rural economy but the entire provincial economy as a whole.

And speaking of that provincial economy, this year’s budget has already taken a $107.2-million hit because of those falling prices. Potash price stability is simply good for the economy as a whole.

The second bit of good news is that 2013 produced a record harvest — a 38.4-million tonne crop in Saskatchewan.

Admittedly, wheat falling to around $4.50 a bushel is not great news for farmers. Nor is the struggle to get rail cars so that farmers can get their produce to port.

And while some of those farmers who lobbied hard for the end to the Canadian Wheat Board’s monopoly are now quietly fuming at the grain and rail companies, supporters of the single-desk CWB are already saying: “I told you so.”

But even if a once-in-a-lifetime crop hasn’t necessarily made everything perfect for farmers, just having grain, oilseeds and pulse crops in the bin is always excellent.

There is crop to sell and as it gets sold there will be more money in the rural economy.

That’s also very good news for the Saskatchewan Party government that should see an increase in its income tax revenue pegged at $2.4 billion in the March budget. The government might even see an increase in provincial sales tax revenue that unexpectedly dipped in 2013-14 to $1.34 billion from the initially budget projection.

The final bit of the good news going into 2014 is the on-going success in the oil patch — the thing that has really driven the Saskatchewan boom these past 10 years.

According to the mid-year update of the 2013-14 budget released in November, oil revenue for the province increased by 11 per cent from the initial budget projections to $1.6 billion.

Now, it’s not all great news in the oil and gas patch. Natural gas prices are still low and Crown land lease sales for oil and gas are 40-per-cent less than the March budget projection. This may signify a slowdown in drilling in 2014.

But the fact of the matter is, oil remains a keystone of the provincial economy and certainly a key to the recent success of many of rural Saskatchewan’s smaller cities and towns.

Maybe all this economic news won’t be perfect in 2014. But it does seem that things are off to a pretty good start.

Murray Mandryk has been covering provincial politics for over 22 years.



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