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.

News of Chinese Potash Purchase Pushes Stocks Higher

Reuters released a story on October 16th outlining a possible deal between Belarusian Potash Company and China for 860,000 tons of Potash.

The pricing has not been released but according to the article it will be in the ballpark of $500 per ton. This news has pushed all of the major North American potash producers higher.

Will this deal signal a comeback for Potash demand? The ever present story from various Potash CEO’s and market reports is Potash demand has been down due to the economy, forcing agricultural companies to use up all of their Potash inventories before outlaying increased expenditures to maintain inventory ratios. If indeed this is the case the Potash industry will be able to charge an increased price due to the inventory shortage.

Trading volume has increased due to the news. Option contracts have also benefited from the news, as many of the late 2010 and 2011 contracts have risen in price.