News again; Potash Markets Surge on Rising Corn...

News again;

Potash Markets Surge on Rising Corn Price

Historically, potash demand and fertilizer stocks have moved in lock-step with corn prices as farmers typically respond to higher grain prices by planting more corn to meet demand. In turn, fertilizer inputs like potash often see a peak in demand following news of lower than expected yields.

Source: Potash Investing News - Click here

Potash markets are reacting strongly this week to continued forecasts of drought-induced corn and soy bean shortages in fields across North America.

Lower yield forecasts were widespread after the US-based National Oceanic and Atmospheric Administration (NOAA) reported this week that 55 percent of the continental United States was under moderate to extreme drought in June, the largest land area in the United States to be affected by a drought since December 1956.

The resulting conditions have led the USDA to cut its corn yield estimate by 20 bushels to 146 bushels per acre, invoking memories of 1988 when drought also devastated corn crop yields.

Drought-like conditions have carried into grain futures which hit record highs over the past week. Corn futures hit US $7.84 per bushel in intraday trading this week, just shy of the record US $7.99 reached in June 2011 while November deliveries of soy beans topped US $15.92/bushel just shy of its contract high reached earlier this week.

Corn drives potash demand.
The more grain is worth, the more fertilizer is worth

Corn and soy beans’ role as a food, fuel and feedstock have given them an unusual power over potash markets in recent years.

Mosaic (NYSE:MOS) CEO Jim Prokopanko summarized the relationship succinctly this week in an interview with Bloomberg. “The more grain is worth, the more fertilizer is worth.”

North American corn and soy bean prices have pushed shares of Agrium Inc. (TSX:AGU) and Potash Corp (TSX:POT) higher in anticipation of higher potash demand and price for the upcoming planting season.

Investors eager to cash in on the fall round of fertilizer application are expecting higher fertilizer company revenues. The run on fertilizer stocks has also translated into increases in FOB Vancouver KCl spot prices throughout the summer as the drought has developed.

Prices which had hovered around the US $480/metric tonne level earlier this year have begun to pick up moving toward the $500 level....