It’s not unusual these days to see headlines announcing hundreds, even thousands, of layoffs.

What is unusual is to see the companies that are laying off thousands of workers making record profits and paying sky-high executive compensation. It sounds crazy, but that’s exactly what’s happening in the potash industry in Saskatchewan.

Saskatchewan has been mining the mineral, an essential ingredient in fertilizer since the early 1960s and is now the largest producer in the world, accounting for about one-third of global supply. Saskatchewan has become the Saudi Arabia of potash — and sometimes local potash producers behave not unlike Persian Gulf oil sheiks.

Starting in December, the companies that produce thousands of tonnes of the pink-coloured potash annually also started producing thousands of pink slips. Agrium Inc. issued layoff notices to 380 workers at its potash mine near Saskatoon, to begin taking effect in March. Potash Corp. of Saskatchewan Inc. (PCS), the world’s largest producer, quickly followed suit by sending notices to 940 workers at three mines, beginning in January and continuing through to March. Then, Mosaic Co., which operates the world’s largest potash mine at Esterhazy, issued layoff notices to slightly more than 1,000 employees.

Yet, almost at the same time as the layoffs were announced, along with production cuts of 10% or 20%, the companies were announcing record or near-record profits. In January, PCS announced an astounding $3.5-billion profit for 2008 — more than triple its 2007 earnings of $1.1 billion. Mosaic reported that its operating profits more than tripled to $550 million in the second quarter, largely because of higher potash prices.

Indeed, potash prices, unlike virtually every other commodity, have remained remarkably strong, at or near record highs. Not that long ago, potash prices languished around US$200 a tonne; now, potash is worth a record US$872 a tonne. That’s why you don’t see potash producers looking for a bailout. Certainly, their senior executives won’t be in the breadlines anytime soon.

PCS CEO Bill Doyle made a healthy $17 million in compensation in 2007. If you include 10 years’ worth of accumulated stock options, Doyle made an astronomical $320 million that year. According to some, Doyle was by far the highest paid CEO in Canada in 2007.

So, why are highly profitable companies laying off their workers? That’s what the Saskatchewan Potash Council wants to know. The council, which represents about 3,000 unionized potash workers, questions the need for massive layoffs in an industry that is both profitable and paying its senior managers millions of dollars in salaries and bonuses.

The answer from each of the potash companies is the same: demand for potash is weakening due to the global economic downturn and financial crisis, which could result in oversupply and softening prices.

“[PCS] has a long history of matching supply to demand,” a company spokesperson has explained. “Right now, as demand has weakened, we are reducing supply.”

That long history dates back to the 1980s, just after the 1976 creation of PCS as a Crown corporation by the NDP government of Allan Blakeney. When potash prices begun to plummet in the early 1980s, PCS, being the low-cost producer, kept on producing potash, hoping to force other producers out of business.

But when your competition is in a country like East Germany, no price is too low. The result was a near-collapse of the industry and hundreds of millions of dollars of losses for the potash companies, especially PCS.

It took years of hard work, the privatization of PCS in 1989 and market discipline to bring the potash industry back into the pink. And the industry vowed never to make the same mistake again. That’s why more than 2,000 potash miners are facing the possibility of pink slips this spring. IE