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Which way fertilizer stocks? Look to the corn price

As counterintuitive as it sounds, investors in the fertilizer sector should look to North American corn prices before corporate earnings. The corn price has proven a better indicator of future profits than either trailing earnings or analyst forecasts.

The chart below shows the relationship between the Alternative Investment Analytics’ Corn Spot Index and Potash Corp. stock since 2000, highlighting a remarkable 0.92 correlation. For comparison, Potash’s trailing earnings have only a 0.79 correlation to the stock price.