Potash is -4% on the open after reporting 4Q numbers that
missed by a penny but more importantly were accompanied by a 2014
forecast that substantially trailed estimates.
Potash Corp. (
) said that 2014 profts will be between $1.40-$1.80 share vs the
$2.00 average of the street.
What is not surprising is that there is a wide range in their
forecast as the industry is in the middle of an unclear and
volatile pricing environment.
What is surprising is that they are as conservative as they
are on pricing despite the fact that there has been some rational
behavior by producers, notably the Russians and Belarussians that
recently put a floor into spot prices.
Potash is basically telling us that lower prices for potash
has not led to any increase in demand. In fact, they have
indicated a downshift in the global shipments forecast.
This announcement is the most perplexing and has more to do
with the price move in the stock today.
It is very difficult to explain such a falloff in demand when
buyers had been delaying purchases through the summer based on
the price wars that would benefit them for waiting.
The company said on their statement "we believe conditions are
supportive for record potash demand", but they also said this
depends on the buyers following through with more consistent
As we say in fertilizer land, "you can delay, but you can't
deny" the crop nutrients required. Farmers will have to
step up and buy.
Demand will return to the table. The stock has dropped to a
key level of support around $30.25. This appears a decent
level to, at a minimum, trade the range to $33.00 or re-engage
with a longer term investment.
The latter makes a lot of sense to me, but I also think
today's move is overdone. The industry has endured
significant volatility and price discovery in the last few
The worst of the news is in the price.