Potash CEO: The Best is Yet to Come

As reported from Reuters, the CEO of Potash (POT) has recently stated that he believes that the next five years could be "the greatest period of growth" for the company in its history. He goes on to say: "We have a lot of pricing power. We're nowhere near peak pricing."

Given recent fertilizer price increases, demand, and stock price activity, this certainly seems like a bold statement. As seen in the daily and weekly charts below (from stockchar ts.com), the price activity for Potash has been outstanding.

The weekly chart shows a nearly perfect 45 degree line uptrend for both the weekly price and its 50 and 200 week averages.

Charts like this are both exciting and scary. While the chart looks good technically, logic tells us that what goes up must surly come down - or at least take a breather. While not apparent on the weekly chart, the daily chart does show some consolidation before moving back up, albeit somewhat volatile. If the stock can hold above the $210-215 level, then investors may have a little more confidence that the uptrend will continue.

Recent comments from the Potash CEO should certainly help provide some short-term buying interest in the stock. If he is correct, and fertilizer prices truly are going up and demand does stay strong, than Potash and its competitors (Mosaic (MOS) and Agrium (AGU)) should continue to outperform.

Disclosure: none

 

Comments

[Jase:]

Anyone who has read the business section or watched a business news channel over the past while has surely heard this same story pounded out over and over again. Potash and Agrium, blah blah blah. Yes, they are on one hell of a run. Yes, it's a compelling story. Yes, it seems that the end is nowhere in sight for this sector. But many people, myself included, have watched this train leave the station long ago and are rather spooked into entering a long position in these companies at this point. My question to insightful fellow readers is this: what could possibly turn the Potash story around? What event or change would have negative affect on the sector? Thoughts?

2008 Jun 12 02:54 AM

[scoots:]

It is hard to imagine market or external events which could derail the feretilizer express, except for occasional pullbacks, even a couple of severe ones if the market itself collapses. However, I have an unvoiced, until recently, fear--collective national action to freeze fertilizer prices or contol their rate of increase. The world community will not put up with prices which threaten world hunger. Also, don't be suprised if the UN doesn't employ "moral suasion" to hold prices down.

2008 Jun 12 03:29 AM

[asagefield:]

There are geopolitical implications for rising fertilizer costs especially in developing countries where a much larger proportion of production costs go into raising crops. Potash is only one of three that include phosphorus and nitrogen...nitrogen being the most energy intensive (consumes 1%-1.5% of energy used worldwide).

As scoots above mentioned, I would not be surprised at all if world governmental bodies got together to cap prices.

Fertilizer is necessary to sustain the world population. I don't think any government will allow prices to get to the point where there will be civil unrest.

2008 Jun 12 01:56 PM

[ReadyToGo:]

Fertilizer has a long long ways to go before its financial impact will begn to equal the commodity market shock of poor farming, high oil prices and geopolitical hording. The cost of food issue is really a planting issue and a geopolitical hording issue.

Fertilizer may run into a head wind later; but not now.

The UN is not an organization that has the track record to issue a serious moral argument to any country, company or individual.

2008 Jun 12 04:56 PM

[Clavis:]

Think about new plays, i.e. TSX:HMI today
Only a starter in this field but they have spent 10 years quietly putting their operation together.

2008 Jun 18 04:44 PM