Sept. 4 (Bloomberg) -- Western governments pushing China to use clean-coal technology may need to lower their expectations for the world’s largest producer of greenhouse gases.
Costs will total as much as $400 billion over 30 years to install systems to capture carbon dioxide from power plant smokestacks in China and bury it underground, said Richard Morse, a Stanford University research associate and author of a study on the technology. China has little incentive to use carbon capture because it will raise power prices and it’s unclear if wealthier nations will pick up the bill, Morse said in an interview.
"Investing in the fertilizer business may not sound sexy, but the dynamics and fundamentals of the food business will turn it into one of the most profitable sectors you could find.," explains global expert Tony Sagami.
In his The Asia Stock Alert he suggests, "Every farmer needs to use fertilizer -- and the most used and most important fertilizer is potash. And Potash Corporation of Saskatchewan (NYSE: POT) is set to make a bundle supplying potash to the world."
"There are approximately 6.6 billion people on our planet today, but that number is expected to grow to 8.2 billion by 2030. That's a lot of mouths to feed. Plus, the amount of food each mouth is eating is also increasing.
" The world's population isn't the only thing that's growing. So are incomes in most parts of the world, especially China. What's the first thing you would buy if your income went from subsistence to middle class? A Mercedes? A Rolex? Probably not. For most people, it's better food ... and more of it.
"And that's exactly what's happening in China. The country's rising income is causing a dramatic change in Chinese eating habits. Since 1980, per-capita meat consumption in China has nearly tripled. In short, the wealthier a nation becomes, the more calories its citizens consume - and that translates into more fertilizer demand to produce all that food.
"China's agriculture technology is also far behind that of the U.S. - and one of the keys to improving its agricultural productivity is to use more fertilizer. That's because potash helps Chinese farmers grow more and better food ... which, in turn, makes it possible to supply more food to Chinese consumers.
"China is the largest consumer of potash in the world. And Postash Corp. is by far the world's largest potash producer. The company currently gets 12% of its sales from China, but here too, that number is going to grow, grow, grow.
"Recently, the company agreed to sell potash to India for $460 a ton. Now, that bothered the Wall Street crowd because it is 26% below last year's price. But what they don't understand is that it's still 40% higher than early 2007 prices.
"In fact, last year saw the price of potash peak at $650 a ton. But I can easily see prices rebounding to new highs in the next 12 to 18 months, and ultimately surpassing $1,000 a ton within five years. When that happens, the company's profits will skyrocket."
Bumper crop projected in U.S., China, puts pressure on demand
The potash market won't recover until 2011, CIBC World Markets warned on Tuesday as it cut its price target on Potash Corp. of Saskatchewan POT-T - the industry's largest producer of the fertilizer component.
"We continue to see pressure on potash demand given the bumper crop being projected in the U.S. and China," analyst Jacob Bout wrote in a morning note to clients. "Grain pricing and weather will be the key determinants of potash demand but there has been no strong relationship between the lack of potash application and 2009 crop production."
Analysts have been suggesting that demand would return in 2010, because farmers can skip a year and still get strong yields from their fields. But with a bumper crop this year, Mr. Bout said they may be inclined to go another season without the nutrient. Prices have come down from about $1,000 (U.S.) a tonne last year to closer to $650 this year.
He left his price target and rating unchanged for Agrium Inc. AGU-T unchanged at $60 and "sector outperform," saying the company's retail operations help to shield it from potash price fluctuations.
For Potash Corp., he lowered his target by $10 to $110, while leaving his "sector outperform" rating in place. He said the possibility of a takeover should help the company's shares retain their value.
"Potash's valuation should benefit from a takeover premium with diversified mining and various entities looking to enter the potash industry," he said. "Potash is the crown jewel of the industry due to its collection of potash assets in a politically stable environment."
