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Goldman Sachs on Potash: “Buy”

By Matt Phillips(Wall Street Journal

Potash Corp. shares jumped more than 4% Monday, after Goldman Sachs upgraded the company, citing — among other things — improved outlook for demand for the fertilizer ingredient the company produces.

In 2009, U.S. farmers dramatically ratcheted back their use of Potash, the third straight year of declines in using the fertilizer, Goldman analysts note. Even so, average yields on corn set a new record. As a result, “we sensed growing investor worries about 2010 fertilizer demand and skepticism about the very science around crop nutrient needs that fertilizer producers routinely cited,” Goldman analysts noted.

Still, Goldman analysts argue that farmers are aware that three years without the fertilizer means they’ve been taking nutrients out of the ground. “one farmer in Missouri told us he could visibly see areas of his fields that lacked potash (yellow discoloration in corn) and another in Ohio referred to not replenishing potash in the soil in 2010 as ‘rolling the dice.’ These comments, along with many others, validate our view that farmers fundamentally want to apply potash next year.”

While being bullish, Goldman analysts acknowledge that they missed a bit of the run-up in price for Potash. Since Oct. 13, when Goldman analysts expressed some optimism about the sector but stopped short of upgrading individual names, Potash is up more than 30%.


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Sales Director of Henan Harvest Chem Co.,Ltd


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