PotashCorp Pulls More Production

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If you just read the press releases that make it onto the financial news feeds, you're not getting the full story on PotashCorp (NYSE: POT). Don't get me wrong, the fertilizer champ provides a lot of information for investors to chew on. It just doesn't put all of it out on the business wires.

If you're an Ag fan, do yourself a favor and sign up for the company's e-mail alerts. All of 'em. That way, you'll know when Potash announces a production curtailment, as it did yesterday evening.

This 0.8 million metric ton potash production cut for 2009 follows a series of curtailments that began last August, and it brings the grand total to 5.5 million metric tons. This decision stems from PotashCorp's continued belief that cutting price, rather than volume, is the wrong way to address periods of weak demand. We saw what little impact the discounting approach had for Mosaic (NYSE: MOS) and Terra Industries (NYSE: TRA) in other product areas.

At the time of the March curtailment, I pointed out that North American potash producer inventories sat 39% above their five-year average. That figure (also gleaned from a PotashCorp e-mail update) had blown out to 99% above average by the end of May.

Given that inventory glut, it's no surprise that PotashCorp characterized the U.S. spring season as "extremely slow." The company is still holding out for a stronger back half of 2009, though, as it waits for Indian and Chinese negotiations to work themselves out. India, in particular, is believed to be running low on wholesale potash inventories by now and should be the first to settle on a contract price. Still, for the full year of 2009, it's conceivable that Potash could end up producing at an average rate below 50% of capacity, which obviously weighs on the short-term earnings outlook.

While I still favor PotashCorp over folks like Intrepid Potash (NYSE: IPI) and Agrium (NYSE: AGU), this is shaping up to be a pretty lean year for the company. Of course, weak planting years have a habit of sewing the seeds for a rebound, and 2010 will roll in soon enough. If you can look out that far, the situation appears considerably less grim for the fertilizer crowd.