IT'S BEEN A FEW YEARS IN THE MAKING but the rebound in the commodity arena is now a major factor in the performance of Saskatchewan's economic sector.
The petroleum industry has been the most visible leader in the resurgence of the past two years but it has even been evident in agricultural commodities, despite the BSE debacle undermining the performance of the beef sector. Droughts, coupled with declining world stocks of grains as consumption outpaces production, sparked a surge in prices over the last 18 months which, in turn, pushed demand for inputs upwards.
This bullish outlook for the agricultural sector is reflected in Potash Corp's nearly half-billion dollar rise in revenues as global demand for fertilizer has escalated with farmers' expectations of better returns on favorable fundamentals of low stocks, growing demand and significantly improved moisture prospects.
As agriculture goes, so goes Potash Corp as farmers increase their investment in inputs during times of optimism or buoyancy. Like another member of the Saskatchewan Top 100--Saskatchewan Wheat Pool--Potash Corp's performance is based on volume. As farmers increase their purchases, top line sales increase and bolster bottom line results. The only difference between the two is that Potash Corp's volume comes before the crop is in the ground, Saskatchewan Wheat Pool's volume comes after the crop is harvested. For the Pool and the independent inland grain terminals that rank in Saskatchewan's Top 100, the coming year holds even more promise than the one reflected in this year's results.
Equally important in this year's numbers is the China Factor.
The People's Republic of China has been defying economic gravity for years, as constant growth and infrastructure development fuel one of the world's most impressive and continuous growth spurts ever. As the world's most populace nation makes its way to becoming the world's largest economy it has skewed global demand for all types of commodities--from cement to steel as well as grain and inputs such as fertilizer.
Saskatchewan-based companies, as major players in their market segments, have risen with China's financial prowess. Like other companies who have survived the steel industry shakeout, IPSCO is in the midst of a record-setting run. IPSCO has proved itself an able player in a sector that has undergone a remarkable realignment. Firms with forward-looking management, willing to invest in new technology--like IPSCO--have flourished as older, less agile operations have disappeared or experienced significant restructuring as steel went through one of those inevitable low cycles. Similarly, Canpotex--the potash industry's offshore marketing agency--has turned in a strong performance as Asian sales are pushed upward.
Whether we like to admit it or not, Saskatchewan's economy is driven by commodity prices. Yes, we've tried for years to diversify and, in large measure, enjoyed some success in this area but there's no denying our reliance on commodity prices and demand. When the cycle is in our favor, companies such as Potash Corp, the Wheat Pool, IPSCO, Nexen and so on produce results that reflect global trends.
Nonetheless, that's not to say strategic management decisions are not a factor as evidenced by the remarkable growth story written by Gavin Semple and the team at Regina-based Brandt Industries.
It is now Saskatchewan's largest privately held firm as measured by sales revenues, Brandt has more than doubled its top line in the last three years, rising from $253 million in 2001 to more than $530 million this year. To put that into context, it ranks between the province's two largest health districts in terms of revenue.
A player in the agricultural and industrial sectors, Brandt's aggressive expansion strategy has made it a case study in the business community's drive to strengthen the private sector by building larger, home-grown firms with head offices here and operations beyond our borders. Repatriating income and profits to Saskatchewan from elsewhere adds wealth that builds the economic base here at home, creating jobs and spurring local suppliers who use firms like Brandt as conduits to...