Barry Isaacs

Potash's Negative Price Implications

Silvinit is a desperate, near bankrupt company that could be the subject of a takeover within the next 3 months which, as it happens, is the time period during which they cannot make any more potash sales at any price because they have committed themselves to delivering all that they can deliver during such period. If they deliver.
The timing of all this has to make one wonder. I am not even sure how real it is but assuming it is a 'reality' that must be taken into account, I remain doubtful that it will affect Canpotex or BPC pricing as far as negotiations with India, China and Brazil are concerned. Canpotex closed contract deals already with Korea, Taiwan and Japan at roughly $700 per ton and I will therefore be surprised if the price can be pushed much lower. Also, keep in mind that Silvinit has the lowest quality potash in the industry resulting in about 30% less yield than say a comparable amount of KCl coming out of Saskatchewan. I am a long term holder and am looking forward to at least the next 6 years during which time I believe investments like POT will vastly outperform the market.

The Real Reasons Fertilizer Stocks Are In the Dirt

SB-tiger sounds as if he has his finger on the pulse of what is going on with the AG stocks but it turns out his finger is finding a pulse in jello. Conflating commodity prices with nutrient prices sounds reasonable but has no actual correlation; to wit: nutrient prices have not come down but share prices of the nutrient companies have plummeted. This is exactly the opposite of what we were told to expect with the share price decline FOLLOWING a decline in the relevant commodity prices. So we really need to look elsewhere for a coherent explanation. All this 'bubble' talk is so much blah, blah; sounds are trying to come out but nothing is being said. There is no reduction in the demand for key nutrients like potash as customers are all on allocation. Supply increases are years away if at all and then largely a result of expansion by the very companies whose shares were blown away.

I am not saying 'buy,buy,buy' in this sick environment. Just that companies, say, like Mosaic, that now trade at less than 3 times earnings but are sitting on billions of cash and generating billions more with no end in sight given their current growth rate, are companies more likely than not to make their shareholders richer, not poorer, in years to come.

The Real Reasons Fertilizer Stocks Are In the Dirt

Free cash flow. Nothing fancy. Just walking around money. The AG stocks that have gotten their share prices destroyed nevertheless essentially print money and they will continue to. Every one of them could just buy back their public stock relentlessly followed by massive dividend payouts when the growth slows. PCA has already begun to do this with successive 5% repurchases and Agrium has just announced its 5% program. MOS will likely follow. What better use of their money can there be when their stocks are so dirt cheap? I believe these stocks will be back, big time.

The Agriculture Boom Goes Bust

Andrew, read again what you quoted on page 29 of Mosaic's annual report where they said IF they could not recover increases in energy costs through higher prices, THEN there could be a material effect on their business. Well, there have been huge price increases in their nutrients sold that should more than offset the higher energy prices. So you are right. Page 29 said it all. You just have to know what you are reading.

UBS Raises PotashCorp and Agrium's Price Targets - Again

Author correct and JP incorrect with regard to current potash selling prices:

Canpotex Announces Higher Spot Market Pricing
Canpotex confirms that it has now concluded significant volumes for shipment to Asian spot markets in the fourth quarter at a price level of USD 1000 for standard grade material ($1025 for granular grade). As a result, Canpotex is advising it's customers that all new sales for shipment through the balance of 2008 will be priced at these new and higher levels. The new pricing will also apply to all new sales to customers in Brazil and Latin America.

These new and higher price levels are supported by continued strong offshore potash demand and by the historically low potash working inventories that have resulted from record demand this year. These factors have created an extremely tight supply situation for potash and this supply/demand scenario is expected to continue into 2009.

Perhaps JP would now like to revise and extend his remarks.

Potash Setting Up to Rally?

Looks like you called this one, Matthew.

Barry