Potash results lift sector

William Doyle, chief executive officer of Potash Corp. of Saskatchewan Inc., has always insisted it was only a matter of time before farmers finally started buying potash again. It looks like he may be right.

After a year in which farmers around the world cut back sharply on fertilizer purchases, mainly because it cost too much and agriculture markets had slumped, growers have come roaring back, driven largely by strengthening prices for several crops, including corn, soybeans and rice, that require a lot of fertilizer.

Potash Corp.'s North American sales in January were the highest in 15 years and Mr. Doyle expects worldwide potash demand to reach about 50 million tonnes this year, up from less than 30 million in 2009.

Late Thursday, the company dramatically increased its forecast for first-quarter earnings, boosting the estimate to between $1.30 and $1.50 a share, from a range of 70 cents to $1 announced in January.

The news sent shares of Potash up almost 7 per cent on the Toronto Stock Exchange yesterday. Shares of other fertilizer companies also increased, including Intrepid Potash Inc., up 12 per cent, and Mosaic Co., up more than 7 per cent. Calgary-based Agrium Inc. was also up more than 8 per cent, but the stock was also affected by the company's decision to drop a takeover bid for CF Industries Holdings Inc.

"I am not surprised that Potash Corporation is adjusting its earnings outlook up," said Bank of Nova Scotia economist and commodity market specialist Patricia Mohr.

"U.S. farmers had record soybean and corn yields last year, but did not apply much fertilizer [of any kind], and have 'mined' the nutrients out of the soil. A reasonable crop in 2010 will require increased fertilizer application. ... Current prices for corn, sugar cane and palm oil - the three crops using the most potash per hectare planted - all justify potash application."

POTASH CORP. OF SASK. (POT)

Close: $128.03 (Can.), up $8.30