Entering upswing after seven-year slide

By Paul Martin, Martin Charlton Communications

For those who follow commodity cycles (and that is probably most of us living in Saskatchewan) we are entering the second phase of the current upswing. For example, veterans of the potash industry will tell you that we live 15-year cycles: seven up and then seven down with a short transition in between.

Sometimes called SaskaBoom 2.0, this cycle began in 2021, almost seven years to the day that the previous upturn reversed itself, pushing us into the typical seven-year slide. For those with good memories, you’ll recall that the price of both potash and oil fell off the cliff in November 2014, triggering the valley on the graph charting our progress.

However, Saskatchewan’s up cycles also tend to have two segments. The first is what I like to call the Income Statement boom – where strong commodity prices generate above-average cash flows for industry and government. It can be measured by the price of our commodities – grain, potash, oil or uranium – multiplied by the volume to derive an income or revenue figure. The price and output of primary products, such as oil and potash, are levelling out as, in the case of potash, Saskatchewan’s competitors are learning how to circumvent international sanctions spawned by the war in Eastern Europe.

The second half of the journey – and arguably the most important – is the Balance Sheet boom which we are now enjoying.

In short, this is all about investment. Capital inflows attract people, which is reflected in our recent population growth, higher levels of expertise and new commercial players. It also adds to the province’s net worth. For example, while the price of potash may go up or down and affect output, you don’t unbuild a mine once its completed, so it is a permanent addition to the overall economy regardless of how prices move. That’s the difference between an income-led boom and one sparked by investment capital.

That’s the curve we’re riding right now. Investment intentions are currently running between $10 billion and $15 billion, depending on who’s numbers you use. Either way, these are significant sums and are the catalyst for attracting further investment. A new mine or canola crush plant leads to increased demand for services and infrastructure, benefiting the entire economy.