Potash Stocks Sinking on Uralkali News

Just another example of how quick and nimble one must be to lock in fleeting gains - Potash (POT), Mosaic (MOS), and Intrepid Potash (IPI) are all reversing (from very large gains) on news Russian miner Uralkali has cut prices to Brazil by 25% in 2009.

Via UK Reuters (emphasis mine)

• Russian potash miner Uralkali said on Wednesday its Belarusian export joint venture has cut the price of supplies of the soil nutrient to Brazil by about 25 percent from March to May 2009.
• Belarusian Potash Co (BPC), a joint venture between Uralkali and Belaruskali, will charge $750 per tonne for potash deliveries to large Brazilian importers and $765 per tonne for shipments to smaller customers. The previous prices, applied since July 1, were $1,000 and $1,010 per tonne, respectively.

I added to POT on this news; I'm thankful I took a large slug of Mosaic out this morning at much higher prices. Bulls want to see Potash hold $75 and Mosaic $37s (50 day moving averages) - Potash is right at $75 now. Aggressive buyers can enter Potash here with tight stop loss...

Disclosure: Long Potash, Mosaic in fund; no personal position

Comments

[Jake2:]

At 12:29pm Eastern MOS is up 6%.

Mar 04 12:31 PM

[TraderMark:]

Yep Jake
But fell from $44 to $41 on news

kind of ironic - I guess most traders dont realize potash exposure in MOS ;)

Mar 04 12:48 PM

[DucPho:]

"tight stop loss"? in this market? Are you nuts? If you are going to step a stop loss you might as well sell now.

Mar 04 01:47 PM

[groty:]

Seems like alot more downside risk than upside potential until after 1Q earnings are announced.

The MOS CEO said warehouses and distribution centers are packed with excess inventory, so 1Q shipment volumes are probably going to come in lighter than the analysts have modeled. Now factor in price declines in Brazil, and 1Q estimate are amost certainly still too high and have to come down more.

I want to own the stock for 2010 and beyond, but I think there's more downside to come. I know Doyle thinks the inventory overhang will be worked off after 1Q or 2Q at the latest, so he's expecting a very robust second half. Its been my experience that CEOs generally underestimate how long it takes to work off excess channel inventory. I hope Doyle is right, we'll see.

Good luck. I'm going to wait for more color on the 1Q conference calls before jumping in.

Mar 04 02:41 PM

[Paulo:]

My experience with tight stop losses over the past year has been the same as DucPho's -- you might as well sell.
There have literally been times when coming back from an appointment, or whatever, the stuff was gone (currencies, equities, and even indexes).

Mar 04 02:59 PM

[neta:]

most of the drop is due to lower freight

Mar 04 03:00 PM

[Think-About-It:]

Can you estimate how much of the price drop is due to reduced shipping costs?

Mar 04 03:43 PM

[R. Nathan:]

Since when is shipping included in a price quote?

And what does 'from March to May 2009' mean? We haven't even gotten through March yet...

I wouldn't bank on a Belorussian company, so I plan on buying POT tomorrow if it is still over-reacting.

Mar 04 04:44 PM

[phfsarah1:]

the only problem Pot has a current ratio of 0.85....too much debt
Mos is loaded with cash...current ratio 3.4....today cash is king

Mar 04 05:11 PM

[nova:]

Russians are desperate. Consequently, they are hungry to sell at any price.

There is a caveat to it: Russians are very unreliable and very often dishonest suppliers.

Mar 04 07:48 PM

[nova:]

The most important parameter, every investor must look at, is the company management.

Most of the major US banks went bust because their management was dishonest, incompetent, arrogant and greedy.

It appears that POT has a good management.

Mar 04 07:56 PM

[2houndz:]

Geez this stuff was volatile yesterday. I got whipped out of MOS twice and decided to leave the sector for someone else.

Mar 05 07:11 AM

[Conan the B...:]

Just picked up 400 IPI at $17 and change. There isn't a lot of Potash to strew around, besides, if it drops below $13, I can double up.

You can ride a bicycle to work, but to have the energy to do so, you have to eat.

Infrastructure is energy intensive, in calories as well.

IMO

Mar 05 12:59 PM

[Conan the B...:]

Thanks Justin, you just reminded me of a company in the Public Venture Capital area: TINY.

Mar 05 04:18 PM

[wauthier:]

Kali und Salz, the biggest european producer of potash, was already decreasing his prices to various destinations.
All the other fertilizers prices went down drastically while potash was still in the clouds. You cannot go for months against the demand/offer law...and this is good.

Mar 05 05:31 PM

[Yohei:]

Duc Pho? Remember the place well. Long ago and far away, and yet as near as today.

Mar 06 02:47 PM