Is Your Favorite Stock About to Fizzle? – Potash Corp./Saskatchewan (USA) (POT), Mosaic Co (MOS), Agrium Inc. (USA) (AGU)

Page 1 of 2

One industry that grabbed eyeballs as 2013 kicked off was fertilizers. Companies dealing in potash were at the forefront as deals flew in from two of the most important markets for the nutrient. The contracts that the cartel Canpotex, which includes Potash Corp./Saskatchewan (USA) (NYSE:POT), Mosaic Co (NYSE:MOS), and Agrium Inc. (USA) (NYSE:AGU), bagged from China and India early this year is kind of old news by now. But its repercussions still aren’t.

Most are pegging it to be a good year for potash players as these deals perk up sales volumes. But what about prices? If Potash Corp./Saskatchewan (USA) (NYSE:POT) prices fail to look up, the euphoria might be short lived.

Losing ground?

Potash prices have been on a downward spiral since the second half of 2011, hitting the top lines of all the companies thriving on the nutrient hard, including Intrepid Potash, Inc. (NYSE:IPI).



POT Revenue Quarterly YoY Growth data by YCharts

Each of these companies realized lower selling prices in their last quarters. I have pulled out the average selling price data for the companies for their third and fourth quarters for both 2012 and 2011 to give you an idea. The first table reflects prices in North America while the second shows offshore realized prices. Look closely, and you’ll realize where the real problem is – it’s the offshore markets where the price drop was steeper in the last quarter.

North America
Company Q4 2012 Q32012 Q4 2011 Q3 2011
Potash 447 466 514 533
Mosaic Co (NYSE:MOS) 472 479 433 520
Agrium Inc. (USA) (NYSE:AGU) 491 564 581 597
Intrepid Potash 479 489 548 539

Prices in $ per metric tonne

Offshore markets
Company Q4 2012 Q32012 Q4 2011 Q3 2011
Potash 339 398 401 406
Mosaic 352 404 393 400
Agrium 326 333 386 401

Prices in $ per metric tonne
(Note: Agrium reports per tonne basis. 1 metric tonne= 2205 pounds and 1 tonne=2240 pounds)

Both Potash Corp./Saskatchewan (USA) (NYSE:POT) and Mosaic Co (NYSE:MOS) reported sharp falls in offshore selling prices in their last quarters. Intrepid Potash is not a part of Table 2 because it sells almost the entire produce in domestic markets. Of these, Agrium Inc. (USA) (NYSE:AGU) is least affected because as much as 80% of its business comes from nitrogen. But you can see how painful global markets have been.

Where’s it headed?

The recent Canpotex deals should improve situations. Both China and India waited for several quarters to let potash prices ease before signing fresh deals. The latest contract with China entails supply of 1 million tonnes of potash averaging $400 per tonne through June 2013. With India, it’s 1.1 million tonnes at $427 per tonne through January 2014. As these prices are a decent upside to what potash companies sold at last quarter, they could well act as a support. So the downside appears limited here.

Prices in the U.S. should also find support in the upcoming spring season. Here’s some quick January data to give you an idea of what’s going on in the North American potash market:

Production was 5% lower sequentially and 18% lower year-on-year, while inventory declined 1% sequentially.

Domestic sales climbed 3% sequentially and a significant 67% year-on-year.

Potash exports inched 13% and 38% higher sequentially and year-on-year, respectively.

In short, demand is strong ahead of the U.S. spring planting season. At the same time, companies aren’t working at full capacity. This should balance out demand and supply better, thereby supporting potash prices.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!