Russia-India Deal a Boon for Potash

Funny to suddenly hear the commodities are dead crowd going silent? Three days of cheerleading on CNBC and now they hid back under the desks? Hmm....

We discussed the analyst commentary a few days back on the upgrade of Potash (POT) [Potash and Monsanto Upgraded] re: the prices coming out of India. Here is a more in depth story but bottom line, visibility, visibility, visibility combined with price increases, price increases, price increases - I just cannot find a better story out there. (and I search daily). At some point the analysts who have been SO far behind, the curve will push up earnings estimates to the appropriate level and the companies will "miss", but from everything I read they still seem to be well behind the curve.

I will be very interested to see what prices China is forced to pay after being pushed kicking and screaming - near monopolies (Potash) are cool like that. Even a $500+ price for China with the amount they need to buy would be huge...

p.s thanks to my 3 person team of fertilizer "analysts" who email me stories almost daily on the fertilizer stocks ;)

• North American potash producers are eyeing even higher prices in the hot world fertilizer market after Russian competitors signed a major deal with India last week, analysts said on Monday.
• "It's significant news for the potash market around the world," said Ashley Harris, manager of investor relations with Agrium Inc. "It definitely sets a precedent about the types of increases expected," Harris said.
• India typically negotiates yearly deals after China, the world's largest volume importer, inks its annual contract. China normally buys at a discount to prices paid by importers in other markets like Brazil and southeast Asia.
• But tight world potash supplies combined with pressures to control food inflation this year have prompted India to leapfrog ahead of China to secure annual supplies with Belarussian Potash Co, which trades for Uralkali (URKA) and Belaruskali.
• The deal was done at the going spot market price of $625 per tonne (delivered) -- more than double last year's contract price of $270 per tonne.
• Canadian producers Potash Corp (POT), Mosaic Co (MOS) and Agrium negotiate export deals to India and China jointly at values that are usually similar or higher to the Russians.
• JP Morgan analyst David Silver said he now expects potash producers to negotiate a price hike of $200 to $250 per tonne to China from his 2007 estimated price of $260 per tonne -- up from his earlier estimate of a $150-$200 per tonne increase.
• "North American potash stocks remain near record lows, and major suppliers are essentially sold out," Silver said in a research note.

Disclosure: Long Mosaic, Potash in fund and personal account

Comments

[Mr. Peanuts]

Global recessions fears (pro: inflation/defensive stocks), and a weakening US$ is what is really driving MOS,POT & Co.

Sure that on a global scale there is strong demand and thin supply for fertilizer, but THE MARKET is looking at the two points I mentioned above, which equals to momentum, not business deals with India and what not.

The price hikes per tonne is nothing new. It is actually old news. The analysts I know of are not "behind the curve". It is the blind retail speculation that is ahead of it.

Look to a weakening US$ for price appreciation opportunities in MOS & POT; not China's expected per tonne transaction.

[TraderMark]

Analysts are not behind the curve? Have you been following the earnings revisions the past year? They've been behind constantly behind the curve

www.fundmymutualfund.c...

I disagree that defense or inflation hedge is what is running these stocks - otherwise they'd trade with health care stocks or gold. The supply/demand dynamics are 90% of the reason.

Whatever the reason the trend is up, but I heartily disagree with your analysis of analysts - I've been watching the earnings estimates for a year and theyve been off by a factor of 100% from where they were a year ago. Across the board. They totally missed the boat. And continue to.