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Canada’s Minister of Natural Resources, Joe Oliver, while touring Potash Corp.’s Cory mine in 2012. (Courtesy of Natural Resources Canada)
Potash production and agriculture are set to support the Canadian province of Saskatchewan, whose economy is being “tripped up by the slide in oil prices,” the latest economic forecast by BMO Capital Markets shows.
While oil production is expected to drop by 4% this year, potash output in the province will jump 8% and its farm sector is expected to pick up, the report says.
The analysts predict provincial real GDP will grow a mere 1% in 2015, only slightly weaker than last year’s 1.4% growth, dragged down mostly by the energy sector.
The oil and gas industries, which accounts for roughly 15% of Saskatchewan’s GDP, have been affected by a much weaker price environment, said John MacAulay, BMO senior vice president, Prairies and Central Canada.
“Saskatchewan’s business owners are adopting a new level of caution given the recent drop in oil and gas prices,” said MacAulay. “[However], we have not seen a significant amount of weakening among our customers and we’re hopeful that most of them will be able to weather the downturn and emerge from this period of lower prices in a healthy state.”
The province, home to five mines belonging to Potash Corp (TSE, NYSE:POT) — the world’s largest fertilizer producer —, unveiled changes to tax rules in March after falling oil prices reduced revenue from energy operations. The province cut rates at which potash miners can deduct capital spending from gross sales.
Potash was first discovered in Saskatchewan during the early 1940s while drilling for oil. Today, the province is the 2nd largest potash-producing region.
