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Potash producer’s share prices rallied this week on the expectation that corn and soybean futures will extend their gains into the New Year.
By Leia Michele Toovey-Exclusive to Potash Investing News
Potash Corp. of Saskatchewan (NYSE:POT), who this year managed to fend off a takeover bid from BHP Billiton (NYSE:BHP), has seen its shares rise 40 percent in 2010. This is a welcome development for shareholders, and the company, who were warned by analysts that if the bid were not allowed there would be a pullback in share values. Since the Canadian government rejected the proposed takeover, share prices have managed to post consistent gains. On Wednesday, Potash Corp. stock enjoyed its largest rally since August 17th. Share prices are currently trading around $152.
Mosaic (NYSE:MOS), another potash miner and the world’s largest producer of phosphate-based fertilizers rallied to a 52-week peak of $75.70 Wednesday, surpassing the $75 per share level for the first time since Sept 2008. Analysts are expecting Mosaic to post a profit of 91 cents per share for the first quarter of 2011. The stock has a 52 week low of $37.68 and a 52 week high of $74.25.
Agrium Inc., the largest retailer to U.S. farmers, gained 4.5 percent on Wednesday am, touching $90.16 per share. In the afternoon, the stock gained almost and extra dollar, to trade at $91.15 per share. $91.15 was a 52-week high for the stock. Analysts covering Agrium Inc. stock give it a consensus price target of $95.78 per share. Stock trading volumes were high, with 3 million shares exchanging hands. The daily average volume of Agrium stock is 1.8 million shares.
Shares of Intrepid Potash (AMEX: IPI) traded at a new 52-week high today of $37.01. Approximately 295,000 shares have traded hands today vs. average 30-day volume of 630,000 shares. Intrepid Potash is currently trading at $36.98, approximately 14.5 percent above its 50-day moving average of $32.30.
The rally in fertilizer stocks is a direct result to climbing crop prices. On Wednesday, corn and soybeans both climbed to 28-month records in Chicago. World supplies of grain are likely to be tight until well into 2011, according to Alberto Weisser, chief executive officer of Bunge Ltd., the Financial Times reported. Weisser predicted in an interview with the newspaper that grain prices will stay volatile in the next 12 months. Rising crop prices will lead farmers to plant more acreage and spend more on fertilizer and the best-available seeds to maximize crop yields,” Hueniken said.
Corn and soybeans, which both climbed to 28-month records this week in Chicago, are among the world’s most fertilizer- intensive crops. While 2010 was a good year for corn prices, the rally is expected to continue into 2011 with analysts already likening the 2010/2011 corn market to the one seen in 2008. In July 2008 the March 2009 futures contract traded at $7.27 per bushel, but tumbled down in less than a month. In late December 2010, the March 2011 future traded at $6.09 per bushel, but the market had moved higher for several months. The March future remained below a contract high of $6.17 1/2 per bushel reached on Nov.9.
The current rally, which has been taking place for approximately six months, is more sustainable, at least according to s Darrell Good, University of Illinois Extension grain marketing economist. “It’s hard to see beyond six to 12 months out, but we have tight stocks, good demand, and some problems in Argentina with both corn and soybean crops, and potential Chinese demand for corn,” Good said. “There are a lot of things that suggest that prices are going to be supported at current levels for a while,” added Good.