Thursday, March 27, 2008

Canpotex Potash Contracts Secured with India @ $625

Canpotex [in English that means Mosaic (MOS), Potash (POT), and Agrium (AGU)] has secured a contract with India with identical pricing as the Russians [Mar 26: Russia-India Deal Boosts Potash Price Forecasts] with a 30% volume increase as the cherry on top. The last frontier is China, and as I stated I'll be thrilled with even a $500 price point with the volume China will bring to the table.

Frankly, the numbers being tossed around astound me and surpassed all my earlier expectations. I can't tell you where these stocks will be tomorrow, or 2 weeks, or 2 months - but I look at this Mosaic 2009 EPS forecast of $7.40 and I still think its blatantly short of reality. With this type of pricing we should be talking $9.00+ and tag that with a 20-25 P/E ratio and you have yourself a double in 12-18 months. Even after the huge gains in this name since last spring. Hopefully they remain independent until late 2009. ;)

Serious upside to the other 2 names as well, but since I overweight Mosaic as my horse of choice this is the one I am mentioning. Just a flabbergasting secular bull market here with plenty of governments desperate for the product due to agflation. The perfect storm just continues - sometimes easy to forget the big picture when CNBC crams the "Commodities are dead" headline down your throat every hour on the hour (i.e. last week). I'll continue to be a buyer of these names on each dip, recognizing the fund takes a hit that week in performance but cognizant of the long term benefits. So far it's worked like a charm.

Now we await China...
  • The Mosaic Company (NYSE: MOS - News) announced today that Canpotex Limited, the export association of Saskatchewan potash producers, has reached an agreement to supply 1.3 million metric tonnes of potash to its key Indian customers at $625 per metric tonne CFR. This represents a volume increase of 350,000 metric tonnes and a price increase of $355 per metric tonne from the prior year contract. Shipments will occur during the period between May 2008 and March 2009.
  • "In this period of unprecedented demand, we are very pleased to have concluded these negotiations and this purchase demonstrates the importance of a timely settlement to ensure supply of potash for the upcoming planting season. India continues to be an important partner of Canpotex and we highly value our relationship with these strategic customers," stated Jim Prokopanko, Mosaic's President and Chief Executive Officer.
Long Mosaic, Potash in fund; long Mosaic in personal account

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