Investment update: This potash stock’s fertilizer operations could benefit from BHP Billiton’s takeover bid

As a member of TSI Network, you’re likely aware that we’ve just released a new free special report, Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand. (If you haven’t seen this new free report, click here to download your copy right away.)

We wrote Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand in response to rising investor interest in agricultural commodities. This interest is largely the result of BHP Billiton’s (symbol BHP on New York) $38.6-billion takeover bid for Potash Corp. (symbol POT on Toronto), as well as sharp increases in commodity prices, notably wheat.

Successful takeover could boost this potash stock’s fertilizer operations

Agrium Inc. (symbol AGU on Toronto) recently said that it would be interested in buying some of Potash Corp.’s businesses — particularly its nitrogen and phosphate operations — should BHP sell any of these assets after a successful takeover of Potash Corp.

Agrium is one of the stocks we analyze in Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand.

It’s too early to tell which, if any, of Potash Corp.’s assets would be put up for sale. However, if they did become available, these businesses would be a good fit for Agrium, which makes fertilizers at 10 plants in North America and Argentina. It also produces other fertilizers, including phosphate and potash, from mines in Ontario, Alberta, Saskatchewan and Idaho.

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The company sells its products to industrial users and individual farmers through 1,000 retail stores in Canada, the U.S., Argentina and Chile. Agrium’s retail outlets cut its exposure to volatile fertilizer prices.

Right now, nitrogen supplies 25% of Agrium’s earnings, and phosphate accounts for 3%. The company’s retail stores supply most of its earnings (39%), and most of the remaining 33% comes from potash.

Agrium has already been active on the acquisitions front this year: it recently offered to buy AWB Ltd., which operates over 400 farm-supply stores in Australia and New Zealand. AWB is also Australia’s largest wheat exporter. Agrium is now awaiting the necessary approvals to complete the purchase.

Potash stocks: Long-term outlook for fertilizer looks bright

Fertilizer prices continue to be highly volatile. That’s because demand varies with weather conditions and a number of other factors. Moreover, many farmers cut their fertilizer use in response to the global economic slowdown.

However, more important for long-term fertilizer prices is the rising use of fertilizer in countries such as China and India, as well as Latin American countries, such as Brazil. Rising incomes in these countries are helping fuel global food demand, and driving up fertilizer use as farmers respond by increasing their crop yields. That’s a big plus for potash stocks, including Agrium.

As well, Agrium’s presence in Argentina and Chile puts it in a good position to profit from rising fertilizer use in South America. Moreover, AWB’s location in the Asia-Pacific region would help Agrium profit from rising food demand in this area.

As a member of TSI Network, you may have already seen Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand. If you haven’t yet read this free report, click here to download your copy today. I’d also encourage you to share the report with a friend. It’s my “thank you” just for signing up for my free daily updates.