Potash Corporation: The 'Google of Fertilizer' Hits Record Highs

Potash Corp (POT) is hitting new 52-week highs. The stock is on a RAMPAGE and its other competitors like Mosaic (MOS) and Euro leader BASF AG are also at record high historical prices. Pardon these Canadians, but I like Potash based of its unprecedented sustainable pricing power in potash. On Wednesday night, Goldman set a new target price for the stock of $180, which is much above the current levels. Despite the insane run-up in the stock, there is further upside potential, based on the constant upward earnings revisions Potash'es ability to raise prices due to strong demand and tight supply are well recorded. With global grain prices at record levels, the stock might trend higher into 2008. However, volume does not confirm the trend up completely, so in event of a pullback, it will be a good entry.

• People in the industry believe POT is the best-managed fertilizer company. The firm has a great exposure (22% of global capacity and 75% of excess capacity) to the best positioned nutrient, potash.
• The current agricultural cycle is demand-driven. Emerging middle classes and global govermental biofuel incentives are pushing demand higher
• Upcoming Chinese contract for potash will determine market tightness. Prices should increase at least $100/mt. Analysts say, given the $250/mt discount that China enjoys relative to global spot prices, the potential increase will inch higher the longer the negotiations last.
• Up until the 20th century, potash was one of the most important industrial chemicals in Europe. It was refined from the ashes of broadleaved trees and produced primarily in the forested areas of Europe, Russia, and North America. Canada is the largest producer of potash with almost one-fourth of the world share followed by Russia and Belarus.

Risks

Weather and a steep decline in crop prices leading to lower nutrient prices.

Disclosure: I do not own any Potash securities.