Views on commodities and energy
Top officials from the world’s largest fertilizer maker were in London this week trying to convince investors their stock has been unjustly thumped.
Potash Corp of Saskatchewan shares at the Toronto Stock Exchange have lost 30 percent of their value since a mid-June peak, even though prices for potash fertilizer continued their meteoric rise.
“Not that I’m whining about it, but we do have the lowest multiples we’ve ever had. Ever. And I’m not sure it reflects the true value of the company,” said Wayne Brownlee, the chief financial officer of Potash Corp, which plans to boost its potash capacity by 80 percent to capture higher prices.
Hedge funds fled commodities and unwound Potash Corp positions since June, Chief Executive Bill Doyle said.
Doyle continued to hold fast to his rosy outlook, noting producers are short on potash and prices should continue to rise this year, although not at the same rate as last year, when they tripled.
Grain prices should remain historically high, Doyle said, leaving farmers flush and able to pay more for fertilizer.
“Farmers will grouse that their costs are up. They are up, about $39 billion, but their receipts are up $50 billion. So the math works,” Doyle said.
And despite recent events rocking the world’s financial capitals, demand for grain will continue to grow, keeping pressure on supplies, Doyle said, unless the world economy slips into a depression.
“A lot of the people (in developing economies) who have this aspiration to eat better, I guarantee you, wouldn’t know what had happened to the investment banking community in New York,” he said. “It’s not high on their priority list, where food is.”
Photo: REUTERS/David Stobbe Potash is piled into a large storage facility which is then loaded into a train car and transported in Saskatoon, Saskatchewan in this December 2006 file photo.