Economic Woes Slow Food Demand, But Potash Prices Should Stay Strong

The fertilizer market has ground to a halt over the past couple of months as economic woes put a clamp on global food demand, but according to a co-authored report from UBS, investors in the sector can rest assured the downturn will be minor.

Analysts at UBS wrote in a research note to clients:

Clearly the world needs to eat and while the global economic crisis will impact food consumption growth rates we expect both meat and grain consumption to be flat to negative 1% year on year versus 2008.

They added that meat consumption during past recessions has grown at 0 to 1% during past recessions.

The analysts said potash volumes are likely to be down 5% year on year with consumption in urea and phosphate expected to grow respectively by 1.5% and 3%.

Potash prices, meanwhile, are expected to stay strong at $700 per tonne, while urea and phosphate prices remain under pressure due to supply/demand weakness. The analysts forecast urea at $250 to $300 per tonne and phosphate at $250 per tonne.

As such, the investment firm prefers potash producers over urea producers, naming Potash Corp. of Saskatchewan Inc. (POT) and Agrium Inc. (AGU) among its favourite stocks.

Comments

[attenuation:]

China and India being the biggest consumers of fertilizers should hardly be in a position to dictate prices even in the present economic environment, and therefore investment in fertilizer sector stocks is highly recommended for decent rewards in the present "unattractive" market conditions.
from
"attenuation31"

Feb 02 04:29 PM

[Deltaxray7:]

Hey attenuation31, thats what they said in October 08 when it was 70% higher than it is now.....

Feb 04 10:02 AM

[mr clark:]

that POT is looking like a great short, fert prices are dropping in general, should continue

Feb 04 12:41 PM

[ZX:]

I'm hearing dealer wharehouses are full and owe the owners high prices... how will it get moved to farmers with an impasse like that ? no shipments until there's space... and corn acerage (heavy potash user) will be offset by beans (less potash used). will all farmers fully fertilise ? frugal times everyone makes do with less... penny wise pound foolish perhaps, but neither the first nor the last to engage in such practice.... Soros owns it so we're all bullish ? at lower prices, to be sure. not a market to buy at any level and shut your eyes.

Feb 26 12:25 PM