Update Potash of Saskatchewan (POT)
Listening to the Potash of Saskatchewan (POT) conference call today, July 29, I kept thinking that some one was going to yell, “Cue the plague of locusts.”
In Russia grain production will fall by 20% because of drought, the company said. Canadian wheat production is forecast to be down 20% because of flooding during planting season. In India, after a string of bad harvests from insufficient monsoon rains, too much rain is rotting crops in storage.
The company forecast that China will have to import about 75% of its soybean needs in 2010 and 1.7 million tons of corn. India could hit record levels of grain imports.
Food commodity prices are likely to rise as 2010 goes on and next year, so farmers in countries such as Brazil and the United States that did have good harvests to export should have plenty of cash to increase purchases of fertilizer.
That will make 2010-2011 a tight year for fertilizer supplies.
Sell Potash of Saskatchewan (POT)
So was that good news or bad news that Potash of Saskatchewan (POT) announced this morning, April 28?
For the first quarter of 2010 the company reported earnings of $1.47 a share and revenue of $1.71 billion. Both numbers beat Wall Street projections of $1.32 per share for earnings and $1.48 for revenue.
Clearly good news.
Update Potash of Saskatchewan (POT)
Potash of Saskatchewan (POT) has been telling investors for more than a month that it believes that demand is picking up and that prices for potash fertilizer would start to climb in the first quarter of 2010.
I guess the company really meant it.
Yesterday, March 11, after the close of trading Potash raised earnings guidance for the first quarter to a range of $1.30 to $1.50 a share. That is a huge leap from prior guidance of 70 cents to $1 a share set only on January 28. The Wall Street consensus had been for earnings of 94 cents a share. The company said it would make any revisions to guidance for the full year when it reported first quarter earnings on April 29.
The increase in guidance follows hard on the heels of news from Canpotex, the export arm of Canada’s fertilizer producers, that it was increasing export prices for potash. The price increase, effective immediately on all new sales, took prices to $415 a ton for standard and $430 a ton for granular grade.
In the January 28 guidance that accompanied fourth quarter earnings, the company had projected potash prices of just $365 a ton for 2010. At the time I called first quarter 2010 guidance laughably low. “The numbers don’t make a whole lot of sense except as a reaction by the company to seeing its guidance get smashed to the downside in quarter after quarter,” I wrote.
The jump to $415 to $430 a ton in March, however, is a bigger increase than I’d expected this early in the year.
Update Potash of Saskatchewan (POT)
Potash of Saskatchewan (POT) has been doing a lot of talking recently at private dinners with Wall Street analysts and Wall Street conference calls.
The picture that emerges is of a company a lot more confident that it can see the turn in the fertilizer market.
Update Potash of Saskatchewan (POT)
Just before Christmas Belarussian Potash finally signed its long-awaited deal to sell potash fertilizer to China for $350 a metric ton (including freight). That put a floor under potash prices and gave investors the certainty they’ve been waiting for. The result was today’s (January 5, 2010) upgrade for Potash of Saskatchewan (POT) and several other North American potash producers to “outperform” by Credit Suisse. That has sent fertilizer shares soaring today. Potash of Saskatchewan shares were up 5.7% for the day as of noon on January 5.
At $350 a metric ton the price was lower than many had hoped—prices hit $520 a ton in 2008—but higher than the $300 a ton some had feared. The deal did indeed lead Potash of Saskatchewan to cut prices on December 28. But the signing will remove a major log-jam holding up other sales. Nobody wants to buy if prices are about to head lower. China normally gets a rock bottom price because it buys so much potash and other fertilizers. India and Brazil, for example, normally pay a premium to China’s price even though they huge customers. The upshot is that after Belarussian Potash/China deal customers can buy with knowledge of where the floor is.
In its upgrade Credit Suisse forecast that global potash sales would climb to 45 million metric tons in 2010. That would be a huge increase from the 25 million to 30 million tons in demand in 2009.
But the jump in demand isn’t likely to bring a big increase in potash prices. At least not immediately.
