Potash is Bullish On Brazil

Recently we highlighted the difficulties agro-chemical companies were facing in Brazil. We wondered here whether some of these other companies/industries should be counting so heavily on growth in Brazil.

Potash Corp. (POT) says things were dramatically bad for Brazil late in 2008, but their outlook is positive. From Potash Corp.'s (POT) Q408 conference call:

There's no country more impacted by the financial crisis than Brazil... What the financial crisis did is the retail players in the Brazilian market stopped their credit lending policies... [At] one time about 25% of all the credit in Brazil came from the local Brazilian industry.

They stopped doing that last year once this credit crisis took hold, and I think very smartly. I think that's the bank's job and it's the government's job and the industry shouldn't be doing that, so I take my hat off to them for making that change. But unfortunately, the government wasn't ready and they didn't position themselves to step into the gap and there was definitely credit shortage in Brazil. That impacted planting, it impacted fertilizer applications, and so Brazil, as I said in my formal remarks, Brazil is going to be down 3%, this USDA forecast, for beans and 9% for corn.

And, you know, when you see $10 soybeans today and the real of 2.32 now to the dollar the real has weakened the motivation for Brazilian farmers because of profitability has increased dramatically since the fall. They will respond to that and, in addition, Brazil has the poorest soils in the world, very potassium deficient soils, and we're going to see major destocking here during the first few months of the year. We had Brazil actually penciled in not until a second half start, but it looks like now Brazil's going to get going here in the April - May period because they just won't be able to wait. So we see a very strong second half and then a terrific 2010 shaping up for Brazil.

So overall about flat, potash in Brazil, 2009 versus 2008.

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Comments

[Chris B:]

"So overall about flat, potash in Brazil, 2009 versus 2008."

Flat's not bad!

Jan 28 03:23 PM