POT MOS IPI AGU...FYI, just saw this...Additional color on strength in potash fertilizer names
As mentioned earlier, the potash stocks are showing notable strength today following reports that Russian potash producer Uralkali is boosting prices by 20% for domestic chemical producers (see 10:18 comment).
In addition to today's Russian news, popular industry website, agriculture.com, made positive comments about the International Fertilizer Association's (IFA) 2009-2013 fertilizer outlook that was released earlier this week. The site reported that "The recently released results of a study from a global fertilizer industry organization show that even though a demand downturn has led to lower prices in the last few months, demand is seen rebounding, sending prices back to levels that were familiar just a year ago."
The site also said "IFA's reports show market conditions could be improving steadily for 2009-10 because of the stable growth trends that have been experienced so far in the agricultural sector. But, a gradual rebound might be felt as early as in the next six months. IFA officials anticipate a 3.6% growth for 2009-10, representing 165.4 Mt of nutrients."...
Today's positive newsflow contrasts with the recent production cuts from German potash producer K+S, which weighed on the potash producers in the third week of June. K+S reduced production by 17-20% to 40-50 million metric tons and potash pricing by ~22% to $600/US ton...
Currently, potash prices are ~18-32% lower year/year in major global markets including the U.S. Midwest, Brazil, Southeast Asia and Vancouver Canada, so upside price potential is notable. In the immediate-term, the largest catalyst to move potash prices will be the finalized annual potash price contracts with India and China though Canpotex (the world's largest exporter of potash). The timing of negotiations this year remains uncertain, but last year, both countries settled in April. When these contracts settle, potash-related names, Potash (POT), Mosaic (MOS) and Agrium (AGU)) will be the most affected. The move may be even more notable because Canpotex is wholly owned by POT, MOS and AGU. India is likely to settle first because it has much less inventory levels of potash compared to China. In 2008, India was paying ~$625/ton for potash, while China was paying $575 with Southeast prices up at $1,000/ton. Clearly, if negotiations are settled below these prices, potash stocks are likely to take a hit.
AI
