Can Potash Prices Go Anywhere But Up From Here?

The potash market got a little shaken up last year, but it looks like the bottom may have been reached.

Mar 10, 2014 at 1:29PM

Last year was one that most potash miners would like to forget, as the breakup of a European sales consortium led to a steep drop in the fertilizer's price. It looks like the air is finally starting to clear, according to Potash Corp. (NYSE:POT), Mosaic (NYSE:MOS), and Agrium (NYSE:AGU).

Certainty and uncertainty
Potash is a key crop nutrient, most notable for its assistance in drought protection. Although demand ebbs and flows, the trend has been toward higher use as nations around the world climb up the economic ladder. This, however, is science, not finance. Growing plants deplete the nutrients in soil, potash helps replenish what's been lost.


As the global population grows, more food is needed to feed everyone. Moreover, as countries advance economically, its residents start to eat more crop intensive foods, like meat. As that increases, it will likely keep upward pressure on the demand for potash.

The potash market, however, was hampered by an unusual even in 2013. A European consortium broke apart, leaving the market in a state is confusion. One of the key players in the breakup made overtures that it would seek market share at the expense of price, pushing potash buyers to the sidelines even as prices fell.

During his company's fourth quarter earnings call, Agrium CEO Charles Victor Magro noted the impact: "Prices for all 3 major crop nutrients were down over 25% compared to the fourth quarter of 2012." That pushed results at Agrium, Potash, and Mosaic lower, with each posting full-year 2013 results that were below 2012 levels.

It can only last so long
However, Agrium's Magro went on to say, "The good news is that we have seen a significant rebound in global nitrogen and phosphate markets..." and, "...there has been a definite improvement in the sentiment within the global potash market." This falls on the science that underpins the potash market's long-term prospects—you can delay fertilizing, but you can't stop.

Potash CEO William Doyle summed it up well, "As farmers around the globe look ahead to the upcoming growing season, purchasing activity is strengthened." And, "...we believe that the conditions in place today could support record or near record global [potash] shipments of 55 million to 57 million tonnes in 2014." That would be a welcome turnaround from 2013.

However, don't expect that to drop down to the bottom line right away. While Mosaic CEO Jim Prokopanko believes, "the business cycle is beginning to turn in our favor," he expects, "to see shipping volumes increase before prices turn upward." In other words, demand needs to solidify more before Potash, Agrium, and Mosaic can push through higher prices.

Brighter, but not clear
The outlook for this trio is far brighter in 2014 than it was in 2013. That said, there is still uncertainty in the air. For example, Potash's Doyle notes that, "Even with increased demand in our sites through the first part of the year, the consistency of engagement by key contract markets in the second half will play a pivotal role in determining the extent of the global demand recovery." Basically, demand out of China and India needs to pick up and stay up if prices are going to firm up.

For example, Doyle explains that, "incremental domestic capacity gains [in China] have largely kept pace with... rising needs." That said, Rick McLellan, a senior vice president at Mosaic, sees the opportunity for India to, "come in and probably move more volumes than they have in the past..." in the second half of the year. If that comes to pass and/or China steps in to import potash, 2014 could turn into a good year. If neither happens, 2014 will likely be better than 2013, but it will hardly be one for the record books.

The long, long-term
Fertilizer demand is on a long-term upward path. That should support long-term growth at Potash, Mosaic, and Agrium. However, the big picture doesn't resolve the short-term issues still facing this trio. As the haze is beginning to clear, though, more aggressive investors may still have an opportunity to buy key potash suppliers at discounted prices.

POT Chart

POT data by YCharts

Finding the right stocks is only one part of the retirement story...

Social Security plays a key role in your financial security. In our brand-new free report, "Make Social Security Work Harder For You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers