Food inflation, bad weather lift Potash shares

By Reuters
Posted Jan. 12 at 5:28 p.m.

Shares of North American agricultural companies, from fertilizer makers to grain handlers, will likely surge this year as weather-related crop damage causes global food price inflation.

Potash Corp. shares in New York have shot up more than 20 percent since mid-December to about $168, far exceeding the $130 per share offer it rejected last year in a hostile takeover bid by BHP Billiton.

With grain prices already around two-year highs to start the year, fertilizer makers like Potash and Mosaic Co. are among the big winners, since the more money farmers make, the more they can spend on crop nutrients.

This month’s surge by shares of grain handlers, equipment makers and fertilizer dealers, which are traditionally tied closely to crop prices, comes after wheat, corn and soybeans soared for much of 2010.

That drove up farm incomes, and made fears of food-price inflation into a headline story.

The United Nations’ food agency said on Jan. 5 that food prices had hit record highs in December and that key grains could climb even further.

“Food inflation has moved from the 30th page of the newspaper to the third or fourth page,” said Robert Winslow, an analyst at Wellington West Capital Markets in Toronto, who covers Canadian agricultural companies such as grain handler Viterra.

“There’s some tipping point where investors realize there’s a theme here.”

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