Thursday, April 23, 2009

Potash: Sales Reached "Virtual Halt"

Interesting news today out of Potash Corp. (POT):

Potash Corp of Saskatchewan Inc., the world’s largest fertilizer producer by market value, said 2009 profit will be less than it previously expected after North American sales of the crop nutrient reached “a virtual halt.”

Earnings this year will be $7 to $8 a share, Saskatoon, Saskatchewan-based Potash Corp. said today in a statement. That’s less than the $10 to $12 a share the company forecast in January and trails the $9.33 average estimate of 14 analysts surveyed by Bloomberg.

We know the global slowdown would cut demand, but this is still a bit surprising. With prices under pressure, Potash will be cutting production.

“The potash companies are cutting production to prop up their prices, and we’re cutting our usage to bring them down,” David Kruse, president of CommStock Investment Inc. in Royal, Iowa, and a grower of corn and soybeans on 640 acres, said before the results were released. “It’s a battle.”

We're seeing this battle take place all over the commodity sector. A couple of days ago, I discussed how natural gas producers can't make money with gas at $3.50. So they are cutting production so demand can catch up with supply. Similar situation here, except the farmers know it and purposely aren't buying. We'll have to monitor this situation.

I'm a believer in this sector long term, but recently sold my position in Mosaic (MOS) as it wasn't moving how I'd like it to.

No positions in stocks mentioned.

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