The Potential Economic Impact of a Potash Plant in Osceola County

DOWNLOAD

February 1, 2022 - Author: <knudsonw@msu.edu>

Executive Summary

Potassium is a critical nutrient for crops for which there is no substitute. Potash is the primary source of potassium used for crop production. However, there are few sources of potash. The vast majority of potash used in the U.S. is imported from other countries, with Canada, Russia, and Belarus being major sources of potash. These three countries accounted for more than 67 percent of global production in 2021. In 2021, the U.S. imports accounted for 93 percent of consumption (Jasinski). Trade sanctions may eliminate Belarus as a source of potash, and the situation in Ukraine may eliminate access to Russian potash. The level of uncertainty in the potash market has increased dramatically.

These factors plus an overall increase in the global demand for potash has increased the price. From 2016 to 2020, the price of potash has increased from about $225 a ton to about $725 a ton (Outlaw et al). Potash prices are expected to increase in 2022 and decline only slightly from 2023 through 2025 (Outlaw et al). This is due to increased global demand in addition to limited sources of supply.

Michigan is one of the few places in the world that has a commercial sized potash deposit. A potash extraction and processing facility in Osceola and Mecosta Counties is being considered. This facility would produce about 10 percent of the potash consumed in the U.S. The facility would double U.S. potash production (Jasinski). Salt is also to be extracted at the facility. Total output of potash is estimated by Michigan Potash Company to be 650,000 tons per year; an additional 900,000 tons of salt will also be produced. There are plans to produce up to 975,000 tons of potash, and 1,350,000 tons of salt. The firm also anticipates approximately 260 construction jobs created during the construction phase of the project and 184 jobs at the facility once the facility is operational. It should also be noted that additional capital expenses of $25 million will be required annually.

IMPLAN, a standard economic impact software package was used to generate the economic impact of construction and operation of the potash facility. It is anticipated that the construction of the facility will generate $1.1 billion in direct economic activity with a total economic impact of $1.80 billion. The construction phase will also employ 260 people with a total impact of employment of 416. It should be noted that the construction phase of the project is a one-time impact while the operation of the facility will be ongoing activity.

The impact of on output assuming that 975,000 tons of potash are produced at $600 a ton and 1,350,000 tons of salt are produced at $120 a ton yields a figure of $747 million a year in annual direct economic activity. The total economic activity is estimated to be $1.24 billion a year. The plant plans to employ 184 workers, generating a total impact on employment of 362 workers. This facility has the potential to be one of the largest employers in the region.

The project will have additional positive outcomes. It will have a major impact in Osceola and Mecosta counties; these counties have considerably lower incomes compared to the state as a whole. This impact includes royalty payments in addition to increased employment. The project also will have a small impact of the price of fertilizer which will improve net farm income.

DOWNLOAD FILE


Authors

Accessibility Questions:

For questions about accessibility and/or if you need additional accommodations for a specific document, please send an email to ANR Communications & Marketing at anrcommunications@anr.msu.edu.