USDA’s Corn Forecast Boosts Potash Shares

- January 12th, 2011

The shares of potash producers rallied Wednesday, following the US Department of Agriculture’s forecast that corn stock would fall to its lowest level since 1996. The news sent grain futures higher, lifting demand for potash and other fertilizers.

By Leia Michele Toovey- Exclusive to Potash Investing News

The shares of potash producers rallied Wednesday, following the US Department of Agriculture’s forecast that corn stock would fall to its lowest level since 1996. The news sent grain futures higher, lifting demand for potash and other fertilizers.

Potash prices and the shares of companies that produce the nutrient, have already staged an impressive recovery on improved demand. Farmers are buying more fertilizer to boost production and take advantage of higher prices for crops such as corn and soybeans, which have soared after bad weather destroyed crops around the world in recent months.

“We believe potash pricing will have a larger increase in 2011 as it was the last of the three nutrients to begin price increases in 2010,” Canaccord Genuity analyst Keith Carpenter wrote in a recent note. “We also believe producers are united on higher pricing ideas into 2011.”

Under the current rally, Potash Corp of Sask. (NYSE:POT) CEO appears to be right on the money when it comes to his company’s value. Last year, Mr. Doyle scoffed at BHP Billiton’s (NYSE:BHP) (ASX: BHP) $130 per share takeover offer, claiming that his company’s stock value far exceeds $170. Currently, potash stock is selling for just under $170, with analysts targeting the 12-month target at $185. In fact, the stock has risen more than 20 percent since Ottawa blocked the BHP bid. The rise has calmed the fears that Potash Corp.’s shares would plummet on the knowledge that the company is “takeover-proof.”

Company News

On Monday, Compass Minerals (NYSE:CMP) announced that it had completed an all cash purchase of fellow sulfate of potash producer Big Quill Resources for $56.3 million. Big Quill makes “high-purity” SOP for nutrients used by crop and turf growers, as well as for non-agricultural specialty applications. The Company’s Wynyard site, which can process up to 40,000 short tons per year, produces much of its SOP by extracting naturally-occurring sulfate from the brine of Big Quill Lake and combining it with potassium chloride. Big Quill sources its potassium chloride through a “very long-term, advantaged supply agreement,” Compass said in its release. Angelo Brisimitzakis, Compass’ CEO, described the Wynyard Company as “an innovative, entrepreneurial business with unique production capabilities, technical expertise and non-seasonal applications that will both broaden and strengthen Compass Minerals’ specialty fertilizer segment.” Compass, he added, expects the acquisition to be “immediately accretive. In addition, we plan to expand Big Quill’s production and sales of high-value specialty products over time. “Compass is already a producer of “organic-approved” SOP, which it markets to crop, fruit, vegetable and tree nut growers in the Americas and Pacific Rim. According to Compass, Big Quill’s 2010 revenues are expected to be about $23 million with EBITDA of about $7 million.

Allana Potash Corp. (TSXV:AAA) is pleased to announce that its latest drill hole at its potash project in Ethiopia has intersected the highest grade potash mineralization to date. Drill hole DK-10-07, located in the northern section of Allana’s property, intersected two significant zones of potash mineralization including 37.8% KCl over 2 meters, and 22.0% KCl over 6.7 meters at shallow depths beginning at 136 meters. The upper interval occurs within a thick potash sequence that returned 23.4% KCl over 9.2 meters. Farhad Abasov, President and CEO, commented: “Allana is very pleased to have identified high grade zones of potash mineralization at very shallow depths and to have extended the Musley deposit an additional 700m to the east. Hole DK-10-07 is situated close to the newly acquired Haro concession and we believe that these positive results indicate significant potential for the Musley Deposit to extend to the Haro concession.” Hole DK-10-07 was collared in the northeastern portion of the Allana property near the newly acquired Haro concession. Hole 07 was drilled vertically and may represent a further extension of the Musley Deposit east onto the Haro concession. True widths of the potash zones are estimated to be very similar to drilled widths due to the flat-lying nature of the potash horizons. In addition, the Company announced that it has granted a total of 2,110,000 stock options pursuant to the Stock Option Plan of the Company to various officers, directors and consultants of the Company. The options will be exercisable for $0.69 per option and shall expire on January 10, 2016. Such options shall vest immediately subject to the applicable regulatory hold period. The grant of options remains subject to receipt of all required regulatory approvals.

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