Three Fertilizer Stocks To Grow Your Portfolio

| July 26, 2011

Last week North American potash producers dropped a bomb on the global fertilizer markets.

Potash is a potassium compound that’s mined primarily for use as a fertilizer.  Around 30 million tons of potash are produced every year.  And about 90% of it is used as a soil fertilizer.

It’s important because proper levels of potassium make crops healthier. And healthier crops produce more food.  With benefits like these, it’s no wonder demand for potash is surging.

But there’s an even bigger catalyst behind surging potash demand… The world needs more food!

According to the US Department of Agriculture, the world’s population is increasing by 75 million people each year.  And they’ve all got to eat…

But that’s not all.  Rising incomes in emerging markets have shifted diets to include more meat and dairy.  And it takes a lot more grain to feed the animals producing these staples of a high end diet.

As a result, potash prices have soared.

However, it’s not so easy to meet surging demand for potash.

The problem is areas with high enough concentrations of potash to mine economically are hard to find.  More than 80% of global reserves are found in just two countries… Canada and Russia.

And these two heavyweights dominate global production as well.  Last year they produced 16.3 million tons or about 50% of all global production.

But that’s just part of the story… The global export market is even more lopsided.

Global exports of potash are dominated by two major players… Canpotex (Canadian Potash Exporters) and Belarussian Potash Corp.  These two companies control 70% of global potash exports!

So when Canpotex said last week their “cupboard is bare,” I knew it was a major development.

According to Bloomberg, Canpotex only has enough potash to supply farmers in China or India… but not both!

Last month Canpotex agreed to sell 630,000 tons of potash to China in the second half of the year.  This deal essentially shut the door on Indian farmers.

Or as CEO of Mosaic (MOS), Jim Prokopanko put it, “This isn’t a matter of price discussion.  This is a matter of supply.”

No doubt about it, potash producers are poised to reap huge profits!

Simply put, nothing drives prices up faster than when demand outpaces supply.  And right now that’s clearly the case.

How can you profit from this imbalance of supply and demand?

Unfortunately, Canpotex is privately owned.  So, you can’t invest directly in them.

The good news is Canpotex is wholly owned by the three largest potash producers in North America… Potash (POT), Mosaic (MOS), and Agrium (AGU).  And all three happen to be publicly traded!

Take a look at POT, MOS, and AGU for your portfolio.  The coming boom in fertilizer stocks will be just the thing to get your portfolio growing this summer.

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Category: Stocks

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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