Shares of Mosaic Co. and Potash Corp. of Saskatchewan Inc. gained Monday as the broader market rose and a Goldman Sachs analyst said now is a good time to buy stock in the fertilizer makers.
In a weekend research note, analyst Robert Koort added Potash Corp. to his "Conviction Buy" list and upgraded shares of Mosaic to "Buy" from "Neutral." A recent sell-off in fertilizer shares amid a looming recovery in demand for potash fertilizer in 2010 makes the two stocks good bets for investors, he said.
Potash shares dropped nearly 12 percent last week, while Mosaic stock shed more than 6 percent. News that a China contract for potash from the Belarusian Potash Co. could be as low as $300 per ton drove the shares lower. Koort said he believed prices would be closer to $350 per ton for that contract.
Moreover, the settlement of the contract, likely in January, would "kick start global demand" for potash, he said, "as buyers have been waiting for the effective price floor set by this contract." Analysts consider China to be the lowest-price purchaser.
In midday trading Monday, Potash Corp. shares rose $4.11, or 3.9 percent, to $109.12, while Mosaic shares added $2.95, or 5.4 percent, to $58.17.
In the U.S., Koort said he thinks farmers will have strong demand for potash in 2010 after weak demand in 2009. They have cut down on potash applications for the past two years and are "eager to replenish their soils," he said.
In other news Monday, fertilizer maker Agrium Inc. once again extended its offer to acquire rival fertilizer company CF Industries Holdings Inc. until Jan. 22. The latest proposal expired on Friday.
Agrium has pursued CF for nearly a year in order to block it from pursuing an acquisition of fertilizer maker Terra Industries Inc.
CF said "Agrium's offer is further away from being compelling than it ever has been."
Agrium's shares rose $1.15, or 2 percent, to $59.73, Intrepid Potash Inc. added 74 cents, or 2.7 percent, to $28.28; and Terra gained 94 cents, or 3 percent, to $32.84.
CF dipped 69 cents to $85.75.