Canpotex Eyes Expansion of Port Facilities

I have not written about fertilizer for a while since the stocks have been digesting some huge gains (and we've been making money in other sectors such as infrastructure, coal, solar, metals). These potash producers still remain as my top holdings, although in reduced exposure. When the charts indicate they are ready to go, I'll be increasing exposure. For now I'm keeping that allocation in cash, although the stocks are showing relative strength today. I've been waiting patiently for a larger selloff in this group that never seems to happen. Hopefully soon. This is still a 5+ year story, until meaningful expansion of potash production occurs HOWEVER there will be multiple nearer terms risks chiefly (a) Western governments eventually pushing away from biofuels under public pressure as others on the globe starve (b) increased input costs hurting margins and (c) price increases cannot continue at the pace it has in the past or else fertilizer will be more valuable than Roger Maris baseball cards within a few years. None of these are game changers, but they can (and will) affect sentiment. And if (b) and (c) happen in the right combination you will begin to see degrading margins which will also cause panic among the masses. In the end after a period of hyper growth, these companies are going to be cash flow machines. But lemmings will still panic during that conversion.

However, interesting news continues to percolate and like much of the world's ports, it appears expansion is necessary to take on the increase in global trade (i.e. voracious appetite of the Far East) I don't have much to add to this story but there are some interesting quotes within.

Note Canpotex is a consortium of Potash (POT), Mosaic (MOS), and Agrium (AGU).

• Canpotex Ltd, the export marketing consortium for Canadian potash fertilizer producers, is looking at expanding its Pacific coast port facilities, the National Post newspaper said on Tuesday....is considering a project to almost double its shipping capacity with a $300 million to $500 million project, the paper said.
• "We feel the fundamentals of our business have changed," said Steven Dechka, Canpotex's chief executive, cited in the report. "We feel we now have to be ready for the next 20 to 50 years," Dechka said at a fertilizer conference in Vienna.
• Canpotex is considering 10 million tonnes of new capacity by expanding its terminal in Vancouver, British Columbia, or building a new terminal at the northern port of Prince Rupert or at Cherry Point in Washington state.
• Potash Corp has announced plans to boost its production capacity to 17.2 million tonnes by 2015 from current levels of 10 million tonnes. (7 years to get 70% increase)
• Mosaic plans to have 15.5 million tonnes of capacity over the next 12 years, an increase of 5.1 million tonnes. (12 years to get 50% increase)
• Agrium wants to add about 800,000 tonnes of capacity to its 2.05 million tonnes of production in Saskatchewan, and is also examining whether to build a new mine.

Due to barriers of entry, and slow (and costly) expansion [Nov 16: Potash Expands Mine for $2 Billion], this still remains the widest moat in any "commodity" that I can find. But it's not quite the easy stock story it was a year ago before everyone jumped on board the fertilizer train.

Long Mosaic, Potash in fund; long Mosaic in personal account