Out Fox The $treet

Summary Potash stocks have rebounded too much in the last year. Demand regularly fails to meet growth forecasts. Mining giants continue to explore entering the potash market. Following a year rebounding from the collapse of the Belarusian marketing arrangement, the potash stocks of Potash Corp. ( POT ) and Mosaic ( MOS ) sit in a precarious position. Investors are now bullish on the stocks, yet several market situations suggest the market doesn't have the long-term potential most continue to project. Read the full article at Seeking Alpha. Disclosure: No positions mentioend. Please review the disclaimer page for more details. 

The highly profitable fertilizer business continues to remain under pressure as the thesis is that the supply/demand equation remains challenged. To address its substantially lower earnings during the first quarter,  Mosaic  ( NYSE: MOS     ) rehashed its intent to eliminate 500 positions as part of a long-term plan to cut costs by $500 million. This follows the recently implemented plan by Potash Corp ( NYSE: POT     ) to reduce costs following the crash in potash prices after the Belarusian marketing arrangement between Belarus and Russia broke up. With margins still relatively high in the potash market and the prime additional customers in the emerging markets of China and India unable to afford high prices, one has to wonder if the fundamental growth prospects aren't flawed. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The fertilizer industry continues to struggle as the long-term demand thesis is under pressure. Investors are learning the lesson that price matters in the commodity business. In the case of potash fertilizer, the substantial gross margins of the past may never return after to the breakup of the Belarusian marketing arrangement. First quarter earnings for The Mosaic Company ( NYSE: MOS     ) were mostly disappointing, with declining prices for phosphate and potash pushing down operating income. The numbers follow those of PotashCorp ( NYSE: POT     ) , where analysts continue to forecast a substantial drop in earnings for this year. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The recent potash deals with China provided the market some hope for a floor in pricing, but investors shouldn't confuse that with a recovery. The pricing for potash slumped during 2013 due to a disagreement between the Belarusian partners of Belaruskali and OAO Uralkali. The high margins afforded North American potash producers were smashed, sending shares of PotashCorp  ( NYSE: POT     ) , Mosaic ( NYSE: MOS     ) , and Intrepid Potash ( NYSE: IPI     ) down to multi-year lows. Last week, agreements from both Canpotex (the North American marketing partnership between Potash, Mosaic, and Agrium ) and Uralkali were for 700,000 metric tons of potash in the first half of 2014 at market prices. Canpotex didn't disclose the price, while Uralkali accepted a settlement of $305 per metric ton. The pricing possibly provides for a global floor for potash prices, but it in no way indicates any recovery in pricing. Read the full article ...

After several weak months of potash pricing caused by the collapse of the Belarusian Potash marketing arrangement, Potash Corp. ( NYSE: POT     ) made a decision last month to cut costs in just about every corner of the company. Considering the apparent pricing advantage of Russian producer OAO Uralkali, will those cost cuts be enough to matter? Potash is a Canadian-based fertilizer stock that controls a majority of the Canpotex marketing partnership. Both Mosaic ( NYSE: MOS     ) and Agrium ( NYSE: AGU     ) provide a smaller level of potash to what is commonly referred to as the Canadian potash 'cartel.' Besides potash, Potash Corp. mines other fertilizers including phosphates and nitrogen, but previously potash was the most important by far, providing gross margins approaching 60% and a majority of the gross profit generated by the company. Read the full article here . Disclosure: No positions mentioned. Please review the disclaim...

Last summer, fertilizer stocks plummeted on fears that the Russia-Belarus potash dispute would flood the market with cheap potash. The issue sent shares of Mosaic ( NYSE: MOS     ) and Potash ( NYSE: POT     ) plunging and didn't help Agrium ( NYSE: AGU     ) either. Fertilizer stocks have been interesting investments over the last few years with the long-term theme of demand from emerging markets not playing out. On the flip side, the dispute between Russia and Belarus brought to the surface the pricing structure in the potash market that might not be sustainable. Read the full article here . Disclosure: No position mentioned. Please review the disclaimer page for more details. 

The fertilizer sector still appears ready for a breakout year in 2013, as strong crop demand merges with weak production due to the severe drought in the U.S and various other weather issues around the world. About a month ago, this article focused on the potential at Mosaic (MOS) as the company reported strong demand in Q4. Since that report, many competitors have curtailed production and cancelled expansion projects due to a weak demand environment. The company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. While Mosaic was very bullish on that earnings call in a similar tone as competitor Potash (POT) (see article here), the actual Q1 report released yesterday disappointed analysts. The company reported $1.01 per share versus analyst estimates at $1.15. The stock dropped 4% on the day, yet investors should've been aware of the potential weakness with all the weak demand notices during the quarter. Read the full a...

The fertilizer sector appears ready for a breakout year in 2013, as strong crop demand merges with weak production due to the severe drought in the U.S. An earlier article focused on Potash (POT) , which reported strong fertilizer demand, yet had recently curtailed production due to a surprising declining demand environment. Another interesting fertilizer company is The Mosaic Company (MOS) . It reported earnings back in July and has a stock approaching breakout levels around $60. The company has a similar focus on potash, but it has a more diverse mix, with a higher revenue base from phosphates. Mosaic is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Not surprisingly, Mosaic was very bullish as well on the earnings call in a similar tone as Potash. The company though has a better balance sheet with $2.8B of net cash, placing it in a stronger position to take advantage of any weakness during the fall. Read the full art...

Very interesting article at Economist.com about the huge transactions taking place in Farmland mainly surrounding Middle Eastern or China buyers of affordable, unproductive farmland in Africa. Most striking is the deal where Saudia Arabia is leasing land from Ethiopia and shipping the food back home. Some day this trend will likely reverse as Ethiopia catches onto the game and grows the food themselves and ships it to the Middle East for huge profits. Food is likely to be more scarce then oil/energy supplies in the future. Not to mention that the World Food Program provides Ethiopia with food that could just as easily get from the land they've just leased out. What about using that money for it instead as well? Hmm... All of these deals highlight the need for food in parts of the world and the available land in other parts. The investment increases in Sudan alone are enourmous. Stocks from farm equipment companies like Deere (DE), fertilizers like Potash (POT) and Mosiac (MOS), al...