Astate board late last month advanced a key step in financing a proposed Osceola County potash mining facility that could lower fertilizer costs for farmers while delivering significant local economic benefits, according to agriculture experts.
The Michigan Strategic Fund approved the initial step for a $225 million bond to finance the project by Michigan Potash Company LLC, which organized in 2011 to construct a potash (potassium chloride) and salt production plant and processing facility in Evart Township, about 80 miles north of Grand Rapids. The company seeks to extract the potash and salt from about 8,000 feet underground using a water cycling process.
More than a decade in the making, the state-approved financing comes amid a strong market for fertilizer producers when prices have basically doubled in the past few years.
Meanwhile, increasing the global potash supply from within Michigan could potentially lower prices for some farmers, particularly alfalfa and soybean growers, according to a Michigan State University study this year. Soybean growers could save 3 cents per bushel while alfalfa producers could save 33 cents per ton under the Michigan-based facility, according to MSU.
“That’s not a lot, but by the same token, given how narrow profit margins are in farming, it still makes a difference,” said William Knudson, a professor in Michigan State University’s Department of Agricultural, Food, and Resource Economics.
In recent years, multiple market shifts have made the Evart Township project potentially more viable. Potash prices have more than doubled since January 2021, even with recent declines as prices stabilized. Michigan previously imported potash from Belarus and Russia prior to the invasion of Ukraine, while transportation challenges and rising energy costs also have strained supplies.
“Creating anything that would expand not just production of potash in the U.S. but around the world is going to have a pretty big impact on food security and, perhaps down the line, food prices,” Knudson said.
Fertilizer prices are expected to decline in the coming years, though Knudson expects potash prices to remain 35 to 40 percent higher than they were roughly five years ago.
“That’s due to both increase in demand and reduction in supply as other facilities’ level of output has declined over time and at the same time global agriculture production and the use of fertilizers is increasing,” Knudson said.
Michigan Potash Co.’s plans call for potash to be used as a key ingredient in fertilizer and be sold for other industrial purposes, while the salt would be sold for road de-icing, water softening and food-grade needs. The Osceola County project could supply most of Michigan’s potash needs and meet some of the needs from surrounding states. Michigan imports more than 90 percent of the roughly 300,000 tons of potash it consumes annually, while the U.S. imports approximately 96 percent of the 10 million to 12 million tons of potash consumed a year.
“Fertilizer is used on virtually every acre of farmland across the state — it’s why we really need a stable supply,” Theresa Sisung, a field crop specialist at the Michigan Farm Bureau, told MiBiz. “It’s important, and we think if we could get the project completed it would be great to have more of a domestic supply of potash, not just for Michigan producers but for producers across the United States.”
Establishing the Michigan Potash Co. project could help spur a $65 billion potash industry in the state.
The project would include a wellfield for the potash solution mining, brine water disposal and source water gathering, a production plant for extracting high quality salt and potash, and a processing facility to prepare market-ready products.
The private activity bonds approved last month would support the construction of the collection and handling of wastewater and solid waste as part of the mining and manufacturing processes.
“We’re grateful for the support from the State of Michigan, which is accelerating this project forward to break our country’s dependence on foreign potash while bringing family-wage jobs to Osceola County,” Michigan Potash Co. Chief Operating Officer Aric Glasser said in an emailed statement. Glasser did not respond to a request for additional comment.
While the company does not currently have any employees, it plans to hire 129 workers in Michigan over the next three years. It also plans to employ roughly 300 union construction jobs during the three-year construction period, according to the Michigan Economic Development Corp.
Chris Cook, the MEDC’s managing director of capital access, said that the project bonding will require “multiple” Michigan Strategic Fund approvals, and that last month’s request for the approval of a bond inducement is “really an administrative step which is required for the private activity bond inducement.”
Next, Citigroup Global Market Inc., acting as the underwriter for the bond issuance, will complete its due diligence related to the project, Cook said. The Michigan Strategic Fund would then consider a final bond authorization.
“We expect this one will move fairly quickly,” Cook said, noting that a final Michigan Strategic Fund vote could come by the end of the year.
In addition to the potential agricultural benefits, Knudson quantified the economic benefits of the project for rural communities in Mecosta and Osceola counties, where per capita income levels are nearly 30 percent below the statewide average, he said.
“This is really going to increase a lot of economic activity in the area, and the jobs that will be at the facility will pay fairly well,” he said. “Landowners also will get a royalty payment somewhere around $35 million (total) a year. That’s a pretty big impact on a couple of counties that are behind in average and median income to the state as a whole.”
Authored by Knudson, the MSU study released in February found that construction of the facility will generate $1.1 billion in direct economic activity, and construction could employ 260 people.
Meanwhile, producing 975,000 tons of potash at $600 a ton, and 1.35 million tons of salt at $120 a ton, would produce $747 million a year in direct economic activity, according to the study.