Potash is the favorite nutrient in a generally positive environment for fertilizers, with farmer economics growing three to four times higher than the 10-year average, while fertilizers remain at half the levels of 2008, says Ben Isaacson, Director of Scotia Capital.
“We’re focused more on the outlook of potash, which we believe will be the only one of the three nutrients, the others being phosphate and nitrogen, that will see continued positive price development through the next several years, until new supply comes on in the back half of the decade,” Isaacson said.
Isaacson points to Potash Corp. of Saskatchewan (POT) as the best potash play in the market, and he rates it an “outperform.” He also says PotashCorp was one of the few producers that invested in new capacity during the financial downturn, which will allow if to have the lowest cost per ton as the markets recover.
“About two-thirds of its EBITDA is potash, half of which represents offshore potash exposure. We think there’s more upside in the offshore potash market than domestically,” Isaacson said. “It’s bringing on 50% of all new brownfield capacity over the next half decade, which we like that a lot.”