Look POT came out with a statement to repurchase shares; they will only purchase them to keep the stock up if it happens to go down. I suspect the magic number in their head is slightly any price near $130. They need to prove to their shareholders that $130 was an inadequate offer. Until then POT will not be purchasing any shares, the market is working on its own fuel...
I spoke to my tennant farmer and asked him about his plans for the new year, what he was thinking in terms of the acreage he intended to plant and what kind of decisions other farmers were making at this time.
1). I asked whether farmers in boycotting last year because of high input prices for fertilizer and potash would they be increasing their orders for the next growing year?
He indicated, some and that inventories were drawn down across the board for all inputs from machinery to application products. He says farmers have the money to spend and there's just not the product on the shelves to buy. Grain prices firmed so fast and high that the market place is still adjusting.
2). I asked him about a big increase in acreage planted? Farmers are already planting "fence row to fence row" and have put in motion the plans for next year. They have money to spend at the end of the year and they will buy what's available for the tax benefits for 2010 which are quite significant because of increased income levels.
3). I asked about current price levels and his feeling about whether they would stick? Now remember this was the guy that when I sought his opinion about price levels back in early November he thought prices had gotten way overheated and they did come down. He felt a lot of the decline was farmers selling to "lock" in profits and generating cash flow to begin purchases for next year. He felt the farm community is really concerned about the volatility of prices and how prices were moving all over the map and it was a little scary in terms of the potential for a correction.
We concluded our conversation with an idea and fundamental expectation I had for commodity, material and other important input prices decoupling from the dollar as overall demand outstrips supply. He could see that happening already...
You're probably right in that they haven't as of yet purchased many, if any shares.
I don't believe they want to just protect $130 per share necessarily or they would purchase any at current prices.
I will say the longer POT management waits the more compressed the time frame becomes for the stock buy-back program and the bigger the appreciation.
I would like to see the fundamentals for grain, and spot prices for potash continue to firm where the stock buy-back occurs going into a stronger fundamental outlook so that there isn't a distribution period on the downside after the stock buy-back is completed.
I do agree, but remember that the buy back is not guarantee. The dollars are committed but they can choose not to purchase and then reinstate it again. They are not looking to make money on the deal, but preserve their stock price.