Latest article on Potash pricing confirms again that TRH and others in sector must be poised to adjust sp in line with commodity price. I expect next announcement from company will have to reflect revised positive outlook and effect on underlying cashflow potential:
Article as follows:
Analysts expect more potash price gains despite floods
Mininig weekly.com |
By: Matthew Hill 24th May 2011
Updated 4 hours ago TORONTO (miningweekly.com)
� As Belarussian Potash Company announced a $30/t price increase for deliveries of the crop nutrient to Brazil, North American analysts are upbeat on the price for the rest of the year.
�I think they�ll rise by single digits, but maybe strong single digits,� Indiana-based Boenning & Scattergood analyst Charlie Rentschler said in an interview.
Desjardine Securities analyst John Redstone said the bank had forecast prices of around $500/t this year and $600/t in 2012.
�It certainly looks like we�re going to get there sooner rather than later,� he said.
The agreement between Belarussian and Brazilian buyers pegged the spot price at $550/t for July, from $520/t.
While flooding in the US and Canada had delayed some planting, high corn and soya bean prices were providing sufficient incentive to farmers to plant later, where they could.
�The economics are so tantalising they�re gonna plant something, and use more fertiliser,� Rentschler said.
He added that the flooding could even lead some farmers to apply potash to their fields twice, as the first application got washed down the Mississippi river.
On May 20, Potash Corp CEO Bill Doyle said the wet weather in the US could remove three-million acres, or around 1%, of US farmland this season, though he didn�t think this would have a major impact on potash demand and prices.
Potash Corp is the biggest fertiliser maker globally.
�GOOD� YEAR, NOT �EXCEPTIONAL�
Montreal-based T.S. Ortslan & Associates analyst Terence Ortslan said in a phone interview that 2011 was likely to be a �good year for potash demand and prices, not an exceptional one�, mainly because of the havoc the weather was wreaking on farmers.
He said that the wet weather had persisted since Doyle made his comments earlier this month, which would hit demand.
Rentschler said that his neighbour�s farm was still flooded, with rain forecast for four out of the next five days.
Generally, May 20 was seen as the �magical date� for having planted fields by in the US to maximise crop yields, but high food prices would incentivise farmers to plant beyond this time, he added.
INDIAN NEGOTIATIONS
Doyle said in April that Canadian potash producers, who negotiate with buyers through the Canpotex cartel, would likely reach a new supply agreement with Indian companies in May or June.
The Indians had previously said they had enough inventories and would refuse to buy additional potash until prices eased.
Doyle disputed this, saying inventories were low and Indian soil was so poor it needed potash for crops to flourish.
Ortslan said that a worst case outcome for Canpotex, whose members include Potash Corp, Mosaic Company and Agrium, would be a marginal price increase.
The best case scenario, and the more likely outcome, would be a double-digit price increase, he said.
According to Rentschler, it was positive that negotiations with Indian and Chinese buyers had become more �businesslike� and not �just whimsical random tenders�.
�It�s confirmation that demand exceeds supply, so guess who wins.�
Current North American spot prices were between $530/t and $560/t, which were up 25% to 40% compared to a year ago, Ortslan said.
Potash Corp rose 2,3% on Tuesday to close at C$51,75 a share in Toronto.
TRH Price at posting:
69.5¢ Sentiment: LT Buy Disclosure: Held
