Fertilizer May Not Measure Up to the Hype

August 1, 2012 07:35 AM

Rising corn prices have investors bullish on fertilizer stocks. We saw something similar in 2008 when the price of corn skyrocketed, and pulled the price of fertilizer up. But when it came time for farmers to decide whether or not to reapply potash the following year, most passed and waited for fertilizer costs to come back down.

It is said, "a bullish market must eat everyday," and that fact may make it difficult for fertilizer to measure up to the market hype. We reported in an earlier article that world demand for potash is expected to rise by up to 3% in the coming year. But that level of increase does not necessarily indicate a boom for potash markets. It certainly does not guarantee that farmers will rush to reapply. In fact, high fertilizer prices at the retail level will likely convince growers to wait on potash application until the market becomes more stable, driving demand downward. Corn prices are at an all-time high, and the value of fertilizer stocks have followed. But many speculate that the time to make money on these markets -- at least in the short term -- has come and gone.

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