January 24, 2014
– Comments (2)
any feelings on POT stock has been getting hit good
I would ignore the fallout from the post DAVOS takedown of emerging market currencies. This krap happens every year. Davos sort of a shill for Russian and European held funds that go after currencies. The prior year they were after Italy, Greece and Spain. Its meaningless.
POT looks great. not only did they cut back production rapidly due to the Russian Cartel problem but the Russians put in a base at $305 a ton FOB Russia.
Uralkali OAO agreed on Jan. 20 to a six-month deal to sell Chinese buyers 700,000 tonnes of potash at $305 per tonne.
The Chinese contracts traditionally set a global price floor for potash.
China, the world's biggest grower of wheat and second-largest corn producer, is a key potash importer along with the United States, India and Brazil.
Potash importers have shied away from purchases since late July, when the globe's top potash producer by output, Russia's Uralkali, quit its export partnership with Belaruskali and announced a new emphasis on volume. Potash prices have since slipped, and buyers were gambling that they could fall further.
Canpotex's six-month agreement covering the first half of 2013 was for 1 million tonnes at an estimated $400 per tonne. My guess is the present contract is for $330 a ton. I expect the prices to firm for South East Asia to about $340 a ton.
POT is the North American low cost producer. So they pay a good dividend and this is a nice positive early start.
Also remember in situation where there is a freeze, Famers must use more fertilizer to pay crop catch up.
I maintain that this is an inflection point for POT and for VALE the king of Iron Ore. Inventories are depleted and China has to reload.
Once again Davos is without a doubt a Russian and European hedge fund propaganda party. You have that idiot Roubini prediction for the seventh year in a row, a Chinese hard landing. At some point one would wonder why he has a forum but of course he says outrageous things at Davos and those russian hedge funds and Euro hedges head for the currency pits.
China has over 4 trillion in foreign reserves, they are hardly insolvent. I do think China will reduce rates soon to coincide with the Chinese new year. That is generally their favored time to juice the economy. I believe this will be a huge year for emerging markets in spite of Davos propaganda. The actual contracts and quantities speak for themselves.
And remember even though this years Chinese contracts were aided by the Russian rogue trader, Chinese potash volumes are up substantially. So it really won't prove to be a smart move by Russia since they will have slimmer margins that the other producers. That is a good way to go out of business.
One more point. In spite of the last years predicted "glut" of fertilizer, this usually never manifest itself in a glut status. Global population rise and the emerging markets need more fertilizer.
Understand however that farming requires an enormous amount of diesel fuel. So favorable credit and an abundance of lower cost diesel aids in increasing the number of acres used for production and thus the amount of fertilizer used. I believe these conditions are quit favorable for POT. I think POT has significant upside potential and very limited downside with a div yield of nearly 4.4%.
One other thing I forgot to mention is that Canpotex just announced a 700,000 tonne deal with a Chinese firm on Friday after that close of markets at 8:45PM. Canpotex, which is owned by Potash Corp of Saskatchewan , Mosaic Co and Agrium Inc, said it would supply Sinofert with 700,000 metric tonnes during the first half of 2014.
Interesting timing on the announcement out of Asia after the Friday markets had closed. POT was down about 3% on Friday. Shows you that nobody with any sense was selling. Pretty much chalk it up to ETF shorts rebalancing.
Once again this nutty DAVOS gathering is just a side show; don't let it distract you from considering fertilizer makers and other materials companies. This is an inflection period on a multi year cycle.