Potash Corp. (POT), an integrated fertilizer and related industrial and feed products company, has declined alongside broader commodities for the past several months. Fear that the U.S. economy would double dip as a consequence of a European banking crisis has weighed heavily on the market, particularly on commodities and agricultural ETFs, which had enjoyed soaring highs in earlier quarters. The latest pledge from France and Germany to offer the necessary support to maintain the health of European banks has lifted attitudes toward the sector and assured investors that a recession is not as close as it could have been. With waning antagonistic pressures on the sector, analysts are once again expressing enthusiasm for Potash, which has had a rollercoaster year amid fears global slowing would destroy the company's momentum. Now the world's largest crop-nutrient maker in terms of market value is out of the muck, a notion supported by the Credit Suisse Group AG, which increased its projection for nutrient prices on “robust” grain demand.
The rise of Potash was originally related to farmers needing to increase their yields as a means of account for a steep rise in demand. The emerging economies around the globe, especially the growing middle class, have begun to consider meat a middle class necessity. The amount of energy, in the form of feed, it takes to sustain beef until it is ready for butchering, pushes up the price of commodities and puts greater stress on farmers to produce strong yields.
This, in turn, is good for business for Potash. The recent decline in the price of corn has damaged shares and sent them to their 52-week low, but many feel the extent of the losses is indicative of over correcting and the renewed demands will help rocket nutrient companies.
Shares of Potash are on their way higher, but remain depleted, meaning the company looks like a buy right now. Corn is expected to be on its way back up now that the threat of a double dip is on the back burner. Shares of Potash will follow as farmers once again have a heightened incentive to expand their yield via the mineral enriched fertilizer.
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