potashbullmarketcontinues

As markets have continued to be weak over the past few weeks, there has been one sector which
continues to stand out among the leaders: Agriculture Stocks. Potash Corporation of Saskatchewan,
The Mosaic Company, and Agrium Incorporated have powered forward and continued their bullish
uptrends. In bear markets, equities which continue higher have serious momentum and legitimate
businesses behind them. For the past two years it has been nothing but good news for the North
American potash producers, and for the foreseeable future it appears that this trend will continue.

Potash Corp. of Saskatchewan, the largest potash producer in the world, has risen to the $160 level
once again and still looks cheap relative to the market using forward earnings. If you were to look at the
trailing twelve months earnings and do a price-to-earnings, the stock would look expensive. However,
when factoring in that the company is able to now sell the potash it mines at approximately $413/tonne
as well as the fact that they are to increase capacity in 2008 by an estimated 15%.

Also helping propel the group higher is the fact that we are now burning corn to power our vehicles. By
burning our "extra" or surplus corn the market is left in a very tight supply/demand ratio which provides
serious ammunition to the bulls. Currently we are seeing all grains headed higher, which is obviously
bullish for fertilizer stocks, especially potash stocks as it is necessary for fertilizers and it itself is reaching
a very tight supply/demand ratio. For 2007 the market is estimated to be at about 88% utilization, and
the more acres that farmers plant next year, the higher that utilization will go (plus do not forget that
some of this utilization will also be increased due to POT adding to their output next year from capacity
not being utilized).

According to the United States Department of Agriculture, the two crops which are the largest consumers
of potash on a per acres basis are corn and soybeans. Cotton is the third most potash intense crop,
however many predict that farmers will plant less cotton acreage in the next season as it is labor and
time intensive (much work is required to keep the plants productive and in good shape), but in its place
more corn should be substituted according to these experts. So if the experts are correct, each acre
which farmers switch from cotton to corn would increase potash use by approximately 8.97%. Suppose
that instead of corn, those farmers instead chose to plant soybeans (a substitute for corn and likely if
crop rotation was being used as it should), which would leave a net increase of 2.56% per acre
converted. This simply looks at the United States' production and does not factor in that farmers around
the world would have to pick up the dropped acreage of cotton because around the world in the
developing countries it is a known fact that they use far less of the suggested, and in many cases the
needed, fertilizers.