Potash Says Everything's Coming Up Roses

The Canadian fertilizer company says expansion plans add value since demand exceeds supply

It's prime time for expansion, Potash Corp of Saskatchewan said on Wednesday, saying that demand will likely outpace supply in the next few years.

Chief Executive Bill Doyle told attendees of an industry conference in New York that Potash Corp. of Saskatchewan (nyse: POT - news - people ) is well-positioned to capitalize on increasing fertilizer demand by moving forward with expansion plans.

Although crop and grain prices have fallen from record prices reached this summer as investors bet that growing global populations and increased ethanol production would pressure limited world food supplies, the agribusiness sector contends that it won't be as hurt by the global economic slowdown and credit crisis as other industries since consumers won't stop eating. (See "U.S. Farms: Fecund In '09.") Fertilizer companies, supported by high food prices, bolstered product prices and reported staggering earnings in recent quarters. (See "Bountiful Times For Fertilizer Sector.") Although tightened credit conditions may delay fertilizer sales in the short term, farmers aren't likely to cancel orders since fertilizer is vital to achieving optimal crop yields. (See "Bleak Fall For Mosaic.")

Potash acknowledged that some of its rivals are also aiming to ramp up capacity in response to a supply that's expected to remain steady or fall short in the coming years but Doyle said, "global potash supply from other producers will not grow as quickly as consumption forecasts and weak credit markets are expected to pressure competitors' growth plans.

Shares of the Canadian fertilizer and feed products company closed Wednesday's session down by $2.39, or 4.3%, at $52.81.

Also during the conference, Agrium (nyse: AGU - news - people ), another Canadian fertilizer company, said cost savings from its UAP Holdings acquisition are slated to be higher and quicker than previously expected, although the company didn't issue new estimates. Agrium previously forecast savings of $115.0 million by 2010