Agrium (NYSE: AGU) may be the safest way for investors looking to gain potash exposure while minimizing risk related to low potash prices. Because Agrium's business includes both retail and wholesale, Agrium's stock price is not nearly as tied to global potash prices as peers Potash Corp (POT) and Mosaic (MOS 0.26%). Agrium has a large retail business unit that sells crop protection products, crop nutrients, seeds and services to customers at over 1,200 retail locations and is the largest agricultural input retailer in the United States. Agrium's wholesale unit mines, manufactures and distributes potash and other nutrients, including phosphate and nitrogen.

The quarter
If we look at Agrium's Q3 numbers, we can see that while Agrium's wholesale unit struggled in the third quarter, but its retail unit's strong results helped to offset the weakness in wholesale. In Q3 2013, Agrium's retail division reported third quarter gross profit of $511 million, a $73 million increase from Q3 2012 while the wholesale division reported gross profit of $123 million (of which potash accounted for $27 million), down from $299 million in Q3 2012. The main reason for this drop in gross profit was lower nutrient prices and slower demand.

Of the North American potash majors, Agrium provides investors the opportunity to invest in potash without the stock price being tied too closely to global potash prices. Investors looking for purer potash plays might want to consider either Potash Corp or Mosaic. Potash Corp is mainly focused on potash production but also produces phosphate and nitrogen, while Mosaic's main business lines are potash and phosphate production.

We can see that because of Agrium's diversity across the agricultural spectrum, Agrium was the most insulated from low potash prices of the major potash companies and consequently Agrium experience the least decline in Q3 net earnings. Agrium reported Q3 2013 net earnings of $76 million compared with net earnings of $129 million in Q3 2012. Mosaic reported a much larger drop in net earnings during Q3 2013 with net earnings of $124.4 million compared to $417.4 million in Q3 2012, mainly as a result of lower potash and phosphate prices. Potash Corp's net earnings also suffered with Q3 2013 net earnings of $356 million, down from $645 million earned in the same period last year mainly as a result of weaker prices for all three nutrients and lower potash sales volume.

Potash prices
In July 2013, Russia's Uralkali cancelled its joint venture with Belarus' Belaruskali, which destroyed their gigantic marketing alliance. This joint venture, along with Canpotex, which is an alliance of Potash Corp, Mosaic, and Agrium, controlled roughly 70% of the global potash market before the breakup and had great influence on potash prices. Prior to the breakup, potash was selling for roughly $400 per ton. Following the breakup, potash prices slumped and settled in the $300 per ton range. Earlier this week, Uralkali signed a first-half sales deal with a Chinese consortium at a price of $305 per metric ton. This sales deal will likely give some stability to potash prices and may signify a floor or near floor in global potash prices. 

Final thoughts
With high global potash inventories, demand remains lower than normal and potash prices may stay depressed over the near- to mid-term horizon. In October, Potash Corp announced layoffs of 18% of its workforce, totaling 1,050 employees, in order to cut costs. In the longer term, potash prices should rise due to increasing global demand for the nutrient.

With potash prices at their lowest levels since 2010, Agrium's business model allows investors the opportunity to gain exposure to potash while also minimizing risk from a possible decline in potash prices through Agrium's retail unit and other wholesale products. Agrium has also recently increased its dividend by 50% from $2 per share to $3 per share on an annualized basis giving investors a current yield of 3.20%, and making Agrium all the more attractive.