For her optimism, the analyst, Elaine Yip, pointed to the recent settling of contracts between a Russian potash consortium and Chinese agricultural buyers -- contracts that will serve as the potash industry's de facto price floor for 2010.
"We had previously been cautious on the potash-exposed names owing to the lack of pricing visibility in the market," Yip wrote in her research note. "Now, with the Chinese contracts finally settling, we believe investors have a solid entry point to buy into the industry's solid long-term fundamentals."
Yip lifted her rating on Potash to outperform from neutral, and on the smaller U.S. player
to neutral from underperform.
She also raised her price targets on Potash shares to $135 from $118, on Intrepid to $30 from $28 and on
to $67 from $64.
Investors will receive further data on the status of the fertilizer industry when Mosaic reports its fourth-quarter results after the closing bell Tuesday.
Last week, the Russian consortium,
, which controls about 30% of the global potash market, signed a contract with the Chinese for $350 a ton. That's well below the $460 a ton that potash had been fetching in India previously, and $50 below Yip's own forecast for the China contracts. Nevertheless, she wrote in her report, "Our proprietary surveys suggest that demand will be robust in upcoming months" as suppliers and farmers restock their depleted inventories.
"Prices are also likely to move higher from current levels," she added, "as Chinese contract prices have historically established the floor for the market and buyers have been waiting on the sidelines for the contracts to settle."
Potash and its brethren in the agricultural business have received
over the last few months. But shares of the companies that dominate the world of potash -- an ultra high-margin business that was nonetheless devastated by the recession -- have fluctuated wildly as investors
against word that
In midday trading Tuesday, Potash shares were trading at $118.24, up $6.04, or 5.4%, on volume of 5.6 million shares. The stock's average daily turnover is 7.6 million. Potash notched its 52-week high in early December.
Mosaic's stock price, meanwhile, set a new 52-week high intraday Tuesday when it touched $63.79. The shares have since eased back, changing hands recently at $63.05, up $1.34, or 2.2%.
-- Written by Scott Eden in New York
Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.