Potash Boosts MOO, PAGG

by on March 12, 2010 | ETFs Mentioned:

Agribusiness ETFs got a boost in Friday trading as good news from Potash Corporation of Saskatchewan (POT) helped to lift the sector higher as the week came to a close. The Canadian producer of fertilizer and feed significantly raised its earnings guidance range to $1.30 to $1.50 a share, up from an earlier forecast of 70 cents to $1 a share. The average estimate of 23 analysts in a Bloomberg survey was 93 cents. This bullish outlook boosted the hopes of the industry and sent POT soaring higher by nearly 8%. “While we know that growth does not follow a straight upward line, we believe the increase in potash volumes this quarter represents the beginning of a return to long-term growth in demand,” said Potash president and CEO Bill Doyle, suggesting that the worst may finally be behind the fertilizer and agribusiness industry at large.

In other news for the industry, fertilizer maker CF Industries Holdings Inc. (CF) said it will buy rival Terra Industries Inc. (TRA) for more than $4.6 billion in cash. This came after CF beat out rival Yara for the firm, which helped to send CF shares higher by close to 8%. This recent bidding war has led to increased speculation over further consolidation in the fragmented industry, which has helped to boost shares across the fertilizer sector. According to Chief Executive Joergen Ole Haslestad “consolidation of the fertilizer industry worldwide is far from over,” which should be good for agribusiness shareholders in the short to medium-term.

Agribusiness ETFs On The Move

Currently, there are two ETFs that focus on the agribusiness sector, including the Market Vectors Agribusiness ETF (MOO) and PowerShares Global Agriculture Portfolio (PAGG). Both of these funds have significant allocations to the agricultural chemical industry. MOO allocates roughly 44% of its assets to the sector while PAGG currently has a similar amount in the  broader industrial materials sector. For individual holdings, MOO has 7.7% in POT while PAGG has almost 8% in the firm. MOO finished Friday up 2.0%, while PAGG gained 1.9%.

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Disclosure: No positions at time of writing.