Agoracom

Dear Shareholder,

The following Globe & Mail article discusses the recent developments in the Agriculture industry concerning the price of Potash.

Regards,

AGORACOM

http://www.globeinvestor.com/servlet...

How Potash swung its deal with China

JOHN PARTRIDGE

Friday, April 25, 2008

It is perhaps a mark of how large and powerful Potash Corp. of Saskatchewan Inc. has become in the suddenly sexy world of fertilizers that it feels free to trash the world's largest consumer of the stuff - one of its own best customers - for being a lousy bargainer.

Bill Doyle, chief executive officer of the Saskatoon-based fertilizer giant, didn't hold back as he explained yesterday why, just last week, China had no choice but to agree to pay $576 (U.S.) a tonne for potash (plus shipping), up a startling $400 a tonne from last year's contract.

"China had the best inventory position going into 2008 ... but by not really being in tune with the market, they squandered it ... and really ended up putting themselves behind the eight ball with delayed negotiations," Mr. Doyle said during a conference call with analysts to discuss the record-breaking first-quarter financial results the company released before stock markets opened.

Delay and indecision was caused, he said, by Beijing's involvement in a nine-member consortium negotiating a new contract with Canpotex Ltd., which is the offshore marketing arm for Potash Corp. and two other producers in North America.

This meant, he said, that instead of being first to the bargaining table, as it usually is, China was, in fact, last.

"Not a very smart position," Mr. Doyle said. "It really did a disservice for China and is going to have repercussions for the foreseeable future."

Potash Corp.'s CEO also had some unkind words for critics who have taken to blaming the growth of government-sanctioned ethanol and other biofuels programs for soaring food prices.

"Ethanol is the most popular whipping boy in agriculture at the moment ... but when you look at the numbers, it doesn't add up," he said.

"Ninety-five per cent of the grain crop worldwide this year will go into food, so to call biofuels the culprit ... shows a gross misunderstanding of the world food situation."

And as for governments, particularly in developing nations, that are subsidizing food costs and restricting or even banning food crop exports to keep domestic prices down, they, too, are just dead wrong, Mr. Doyle declared.

"Governments are doing the opposite of that they should, which is to give farmers an incentive to grow more," he said. "Governments finally wake up to the problem, go into a flat panic, full lather, and they make policies that are absolutely wrong headed and are making the situation worse, not better."

Given the strong financial results his company delivered, however, Mr. Doyle could perhaps be forgiven for feeling his oats.

Fuelled by soaring worldwide demand for its products as farmers strive to boost crop yields to capture record prices, Potash Corp. tallied a profit of $566-million (U.S.) in the first quarter, compared with $198-million a year earlier, as revenue leaped to $1.89-billion from $1.15-billion.

This translated to $1.74 a share, fully diluted, up 181 per cent from a year earlier and 50 per cent higher than the previous record of $1.16 a share the company set in the fourth quarter.

It also cranked up its growth forecast for the year, raising its full-year profit guidance to between $9.50 and $10.50 a share from $6.25 to $7.25.

However, despite the strong quarterly numbers and the higher profit guidance, Potash Corp.'s shares, along with those of other Canadian and U.S. fertilizer producers, followed the S&P/TSX composite index down Thursday. They dropped as far as $192.15 before rebounding slightly to close at $196.90.

One analyst said the drop may have been partly due to "momentum" investors, whose technical charts may indicate that after its strong gains, the stock was due to fall.

Another reason could be "pure and simple profit taking," he said.

"The stock's up 35 per cent since the beginning of April," he said.There may also be growing concerns that the long, drawn-out fight to select a Democratic presidential candidate could give U.S. Republican presidential candidate John McCain a leg up in the general election in November.

Senator McCain has committed himself to ending U.S. farm subsidies, especially for corn-based ethanol. That, Scotia Capital analyst Sam Kanes said in a note to clients, would be "negative for U.S. and Canadian fertilizer stocks servicing U.S. farmers."

He also suggested in his note that Potash Corp. and other producers' shares could have been hit by investor interest in an impressive initial public share issue by Intrepid Potash Inc., a seven-year-old potash producer based in Denver.

POTASH CORP. (POT)

Close: $196.90, down $9.60

Potash Corp.

Figures in U.S. dollars