Tuesday, January 5, 2010

Credit Suisse: "Potash Headed for ‘Robust’ Rebound as Farmers Replenish Stocks" More Upgrades to Come? (POT)

The stock jumped $6.19 to $118.39. In early after hours trade it's given back 69 cents.
A twofer. First up, Bloomberg:
Potash Corp. of Saskatchewan Inc. and Uralkali of Russia will lead a rebound among suppliers of the crop nutrient, with sales volumes in the industry potentially doubling in 2010, according to Credit Suisse.

A contract settlement with China at $350 a metric ton provides a “long awaited” price floor in the market, analysts Lars Kjellberg, Rohan Gallagher and colleagues said in a note today. After abstaining for two years, farmers have depleted stocks and are keen to increase applications this year to revitalize soils, the analysts said.

“We are now turning bullish on potash exposure,” the analysts said in the note. “Our global view has been to stay on the sidelines for the potash names owing to the lack of pricing visibility, poor demand and downside risk to estimates.”

Corn rose to a six-month high in Chicago trading yesterday and higher crop prices combined with lower input costs will buoy fertilizer consumption in 2010. Global demand dropped by as much as half last year as farmers baulked at prices that had earlier exceeded $1,000 a ton in some regions. At $350 a ton, dealers and farmers see potash as attractively priced, Kjellberg said.

Unfavorable weather in North America helped push up corn prices, adding to the pent-up demand among farmers unable to apply fertilizer in the fall because of the late harvest, Credit Suisse said....MORE

From Schaeffer's Research:

Are Additional Upgrades on the Horizon for Potash Corp. of Saskatchewan?

The shares of Potash Corp. of Saskatchewan (POT: View sentiment for POTsentiment, chart, options) have defied the broad-market trend into the red today, thanks to an optimistic endorsement from Credit Suisse. More specifically, the brokerage firm boosted its rating on the stock to "outperform" from "neutral," predicting "solid demand recovery" for potash in the wake of China's recent agreement to buy over 1 million tones of the nutrient from exporting giant BPC.

In late-morning trading, the shares of POT have added more than 5% to hang out in the $118 neighborhood. However, the equity's status as an outperformer is nothing new, as the stock has bested the broader S&P 500 Index (SPX) by 13.5% during the past 60 sessions, extending its string of higher lows. What's more, though it's still too early to call, the security is now poised to close the month atop its 20-month moving average for the first time since September 2008.

Monthly chart of POT since September 2008 with 20-month moving average

Checking in on POT's sentiment backdrop indicates that option traders have taken note of the stock's recent run higher....MORE