Potash Corporation of Saskatchewan (POT)

Recently, the needs of foods increase dramatically especially in Emerging countries such as China. As a result, the demand is much more than supply. POT's products , a fertilizer, are critical for agriculture businesses.

The Saskatoon, Canada-based Potash posted stellar results for the second quarter. Gross margins and earnings tripled to 68% and $905 million, respectively, from the same quarter last year on the back of huge gains in the prices of potash, phosphate and nitrogen, which in the past 12 months increased more than 160%, 130% and 55%, respectively. And the company raised its earnings outlook by about 30% for the year.

This stellar financial performance came on the back of increased global demand for grains, which drove grain prices to record highs and caused the head of the United Nation’s World Food Programme to warn that soaring food prices are causing a “silent tsunami” of hunger to sweep the globe.

Emerging-market urbanization, and the accompanying consumer boom (all driven by strong growth in real incomes) is alive and well and will continue unabated for the long-term. So, at some point, Potash and its competitors will become a compelling long-term “Buy.” But the uncertainty regarding the U.S. ethanol subsidies, which originally helped fuel the demand for fertilizer, is too difficult to call at this point.

The food supply has to rely even more on the potash etc that enhance crop yields .

This is not a short run problem .

Forty years ago, a giant development effort known as the Green Revolution drove hunger from an India synonymous with famine and want. Now, after a decade of neglect, this country is growing faster than its ability to produce more rice and wheat.

The problem has grown so dire that Prime Minister Manmohan Singh has called for a Second Green Revolution “so that the specter of food shortages is banished from the horizon once again.”

And while Mr. Singh worries about feeding the poor, India’s growing affluent population demands not only more food but also a greater variety.

Today Indian agriculture is a double tragedy. “Both in rice and wheat, India has a large untapped reservoir. It can make a major contribution to the world food crisis,” said M. S. Swaminathan, a plant geneticist who helped bring the Green Revolution to India.

India’s own people are paying as well. Farmers, most subsisting on small, rain-fed plots, are disproportionately poor, and inflation has soared past 11 percent, the highest in 13 years

PotashCorp announced plans July 17th to add 2.7 million tonnes of potash capacity at three of its Saskatchewan facilities by 2012.

These projects will carry a combined cost of $1.6 billion and will raise operational capacity to 18 million tonnes by the end of 2012. The additional capacity will be achieved through a new debottlenecking project at Allan, increasing the scope of projects announced in 2007 for Cory and Rocanville.

Moreover, the long-term story of escalating worldwide demand for grains due to the large and sustained growth of real incomes in the emerging markets – especially in China, India and Brazil – remains intact. The price actions in all these markets have been greatly exacerbated by profit-taking and panic selling and all represent superb buying opportunities today. Global growth is not suffering in the way that financial markets would lead you to believe. The effect on the real economies of these countries has so far been minimal.

And Potash is superbly positioned to use its own strong cash flow to reinvest in “the world’s best potash assets – our company – at an attractive price,” William J. “Bill” Doyle, the company’s president and CEO said recently.

Economics says: crop demand will rise in the LR, amount of land available for farming will fall. That means people will buy more fertilizer, which will boost Potash's stock price.

Some numbers: USA citizens consume 24+ barrels of oil per year. Chinese/Indian citizens consume less than 2 barrels per year. When China and India fully industrialize, gas prices will shoot through the roof due to demand. At the same time, people there will start demanding higher protein foods. It takes 16 pounds of grain to produce 1 pound of meat. That means more fertilizer. Higher gas prices will also mean more demand for bio-fuel. It takes 26 pounds of corn to make a gallon of ethanol. I'm not sure if I have eaten 26 pounds of corn in the past 5 years.

Price target: $147.00 within 2 years.

Disclosure: I own this.

Increased demand could pressure prices keeping them elevated maximizing Potash profits.

Potash Corp is investing $8.4 billion in potash mine expansions to increase total production capacity by 15.4 million tonnes within the next 10 years. Total production capacity will increase by 75% from capacity in the mid 2000s and will reach 36.3 million tonnes. If expansion proceeds as planned, Potash Corp will possess 50% of the world's potash production capacity.

This expansion project is meant to meet the food and fertilizer needs of a world population that is growing by approximately 75 million people each year. Despite recent fluctuations as a result of the world economic downturn, long-term trends point towards increased demand for potash to supply a growing world population. Developing nations have driven this growth in particular; fertilizer consumption in such nations has increased by approximately 60-70% since the mid-1990s.

This stock should see a little surge this week with the tentative deal that will soon be voted in.Everything is hush hush on the union side,no members being allowed to see anything on the proposed deal until the ratification meeting this Thurs. night. It appears this closely guarded info is not being shared and the members have every right to know what kind of deal it is before Thursdays meeting.

When Potash released its results in April 2008, the CEO said that the management came close to make a take over bid on the company at the end of January 2008, when the stock dropped near $100 US.

Potash, the commodity, was selling at around $500 per ton (not $1 000 like it is the case now).

Now the stock trades at $68 and the fundamentals of the commodity are still strong (the fertile land per person is still decreasing around the world, population is still increasing, developing world people are still changing their food habits and water is still getting scarcer).

Don't you think that the management could be looking at this great buying opportunity ?

Don't you think that any billionaire or rich corporation with a lot cash is not thinking about switching its soon worthless US dollars for 75% or the world potash reserves in the world ?

I would think about it big time...it smells the TAKE OVER BID at $120 !!!

Canpotex, the offshore marketing company owned by three Saskatchewan potash producing companies – Agrium, Mosaic and Potash Corp. – has concluded significant volumes for shipment to Southeast Asian spot markets in Q4/08 at US$1,000/tonne for standard grade potash (US$1,025/tonne for granular grade) on a delivered basis.

The new pricing, which is 20% higher, will apply to all new sales for shipment through the balance of 2008 in Latin America and Southeast Asia.

As the largest potash producer, Potash holds the power to undermine potashes to maintain high prices.