TheStreet.com Bullish on Potash and Archers

Two members of TheStreet.com’s staff made bullish comments towards the Potash and agriculture stocks on March 25th.

Jim Cramer, the founder and head honcho of The Street said the following about Potash on Mad Money:

“I think that (Potash) works, I think that the fertilizer bull market is alive and well… we saw an unbelievable quarter from them.. the pullback, even as miniscule as it might be vs. $122 stock, makes it a buy, buy, buy… I think the fertilizer industry is strong…

Realmoney.com writer Tim Melvin made some bullish comments about the agricultural sector this past week but he likes to target some of the food processor’s instead of the pure Potash plays.

The main play he focusses on is Archers Daniel Midland (ADM).

His reasoning for this play:

It might be better to look at indirect plays on the global rise in demand for agriculture products. Keep in mind that during the gold rush, only some miners got rich. Everyone who sold the picks, shovels and supplies to the prospectors made a fortune. In the agriculture trade, the pick and shovel picks are probably the food processors

Melvin’s comments towards Archers:

The company is one of the largest grain processors in the world today. In addition to getting a boost from rising food demand, the company is going to benefit from the continuing and growing government mandates for the use of ethanol.

Archers is currently trading at a P/E of 15.96, has a market cap of 18.26B. Analysts have a high one year target of $37.00.

On friday 1,000 lots of June10 $30 strike call options changed hands. Currently shares are trading at $28.42

Canpotex Inks 600,000 Tonne Deal with India

Canpotex, the export arm of Canadian potash producers Agrium, Mosaic and Potash, reported on Friday (Feb 19th) that it had inked a deal with Indian Buyers to the tune of 600,000 tones at a price level of $370 per tonne.

The prior week Canpotex signed a deal to sell 350,000 tonnes to China at an undisclosed price. Analysts estimated the per tonne price of the China contract to be in the $350-$360 range.

Last week, Canpotex signed a deal to sell 350,000 tonnes of potash to China’s Sinofert at an undisclosed price. This lead to a 5% jump on increased volume for all three Canpotex stocks (AGU, MOS, POT).

Potash prices have plunged from near $1000 per tonne highs down to the current $350-$400 range due to global economic difficulties, lowering grain prices and producers using up all of their back-stock of Potash fertilizer.

Friday’s news (Indian contract) itself did little to pop the stock or increase the volume, as both stayed near the levels of Wednesday and Thursday’s sessions. A rough start to the week has pushed POT back below the $110 level, where it was beginning to set up a short-term resistance level.

Potash Option Volume Spike – Results from Jan 4th – 11th

Option buyers certainly came out winners following last weeks article. Last week (monday, Jan 4th) we pointed out some bullish call buying on front-month (jan) option contracts at and around the current share price. Here’s the screen capture we used for volume and pricing of the options in question:

The following day shares took a 5% jump based upon a price upgrade (up to $135) by Credit Suisse. Here’s a quote from the analyst:

“We had previously been cautious on the potash-exposed names owing to the lack of pricing visibility in the market,” Yip wrote in her research note. “Now, with the Chinese contracts finally settling, we believe investors have a solid entry point to buy into the industry’s solid long-term fundamentals.”

Shares continued to rise over the next few sessions, helped as well by Russian Potash sales to China at $350 per tonne. Many see this sale as setting the market for the upcoming year.

Potash shares reached a weekly of $126.47 during Monday’s (11th) trading session. Option buyers on the 4th hit a ‘triple’ if they sold at the high on the 11th. Not a bad return. We’ll keep our eyes glued to upcoming option volume swings to see if another possible ‘tell’ occurs.