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					ab                                                                                                                                                                                  Global Equity Research

                                                                                                                                                                                     Americas
 UBS Investment Research
                                                                                                                                                                                     Chemicals
 Fertilizer Weekly
                                                                                                                                                                                     Sector Comment



 Potash Prices Rise on Higher Volumes
                                                                                                                                                                                                                          8 February 2010
     BPC raises spot potash prices $25/mt in Asia and Brazil
                                                                                                                                                                                                          www.ubs.com/investmentresearch
 In response to firming demand BPC raised spot list prices by $25/mt cfr to $410-
 425/mt in Asia and Brazil. The move comes a week after POT criticized BPC for
 selling potash at too low a price. US prices are also set to rise $30/st this month to
 $420/st cfr. Higher potash list prices helped fertilizer shares rally over 3% last                                                                                                                                                Don Carson
 week despite a decline in corn prices and a weak overall equity market.                                                                                                                                                              Analyst
                                                                                                                                                                                                                         don.carson@ubs.com
    DAP prices post modest gains, but tight sulphur threatens production                                                                                                                                                     +1-212-713 2491
 DAP price increases slowed last week after their $90 rise over the last month to                                                                                                                                 Sandy Klugman, CFA
 $470/mt fob Tampa. Margins have risen less than prices due to higher sulphur and                                                                                                                                             Associate Analyst
 ammonia costs. Sulphur availability is also starting to constrain DAP production.                                                                                                                                    sandy.klugman@ubs.com
                                                                                                                                                                                                                              +1-212-713 8973
    Nitrogen markets firm ahead of the Spring planting season                                                                                                                                                Arun Viswanathan, CFA
 Nitrogen prices have firmed recently and we expect them to move higher given our                                                                                                                                        Associate Analyst
 above-consensus forecast of 90mm corn planted acres and increased industrial                                                                                                                                  arun.viswanathan@ubs.com
 demand. The global nitrogen floor price is set to rise with the pending                                                                                                                                                 +1-212-713 9413
 $2.50+/mmbtu increase in Gazprom’s gas contract with Ukrainian N producers.                                                                                                                                                   Philip Kirkman
                                                                                                                                                                                                                               Associate Analyst
     Larger S. American crop to pressure both corn and soy prices                                                                                                                                                      philip.kirkman@ubs.com
 We expect the USDA to raise its 2009/10 corn and soy supply estimates in the                                                                                                                                                   +1-212-713 4105
 February 9 WASDE report. Favourable weather and increased use of biotech traits
 by South American corn growers is driving the improved outlook. Buy-Rated
 Agrium also reports on Feb 9. AGU does not typically issue guidance until their
 Q1 call but we expect them to have a positive outlook given the recent rebound in
 fertilizer demand which will benefit both their retail and wholesale businessess.

 Chart 1: NPK prices were relatively flat for the week ($/st)                                                                                   Chart 2: Harvest month corn prices fell 1% last week

     450                                                                                                                                  775       490
                                                                                                                                                                                      Corn (L)             Soy
     400                                                                                                                                            470                                                                               1020
                                                                                                                                          675
     350                                                                                                                                            450
                                                                                                                                          575                                                                                         970
     300                                                                                                                                            430

     250                                                                                                                                  475       410                                                                               920
                                                                                                                                                    390
     200                                                                                                                                  375
                                                                                                                                                                                                                                      870
                                                                                                                                                    370
                                                                                             Oct-09


                                                                                                               Dec-09
           Jan-09
                     Feb-09
                              Mar-09
                                       Apr-09


                                                         Jun-09
                                                                  Jul-09
                                                                           Aug-09
                                                                                    Sep-09




                                                                                                                        Jan-10
                                                                                                                                 Feb-10
                                                May-09




                                                                                                      Nov-09




                                                                                                                                                    350                                                                               820
                                                                                                                                                          Jan-09


                                                                                                                                                                   Mar-09


                                                                                                                                                                            May-09


                                                                                                                                                                                        Jul-09


                                                                                                                                                                                                 Sep-09


                                                                                                                                                                                                             Nov-09


                                                                                                                                                                                                                          Jan-10




                    Urea                         DAP                           Potash (right scale)


 Source: Green Markets. Prices refer to NOLA Urea , Tampa DAP, Cornbelt Potash.                                                                 Source: USDA. ***Cents/bushel.




 This report has been prepared by UBS Securities LLC
 ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 11.
 UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
 have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making
 their investment decision.
Fertilizer Weekly 8 February 2010


Corn/Soybean Update
Corn prices fell 1.0% during the week as the strengthening US$ has continued
to place downward pressure on corn prices. Corn prices are typically inversely                                                    .
correlated with the US$ as a cheaper dollar stimulates exports and also makes
grains an attractive dollar hedge. In the upcoming WASDE report (Tuesday, Feb.
9th), the USDA is expected to reduce its US corn export estimate as a result of
increased export competition from South America, stemming from trade                                                              The USDA will leave US corn
forecasts for an increase in South American corn production estimates. Reduced                                                    production estimates unchanged in the
US corn exports are expected to be offset by a likely increase in estimates for                                                   February WASDE and will issue its final
US corn for ethanol use, leading to a slight decline in US stocks to use from                                                     2009 corn production estimate in March
13.5% to 13.1%. Soybean prices declined 0.9% this week. Soy prices were                                                           as a result of a recent resurvey of
pushed lower this week due to the aforementioned stronger dollar and continued                                                    harvested acreage and yield
talk about the possibility for a record soy crop in Brazil and Argentina. This
week, Informa raised its Brazilian soybean production estimate to 66.5mm
tonnes versus their previous estimate of 66.0mm tonnes and the USDA estimate
of 65.0mm tonnes. Informa also raised its Argentine soy production forecast by
1mm tonnes to 54.0mm tonnes versus the USDA estimate of 53mm tonnes.

After another week of a pullback in corn prices, projected 2010 grower
corn margins fell from $217/acre to $210/acre since last week, which is now
roughly $73/acre below Spring 2009 levels. The grower return advantage for
corn vs. soy remains negative (currently -$6/acre vs. +$50/acre pre-WASDE), as
corn prices have fallen more than that of soy since January’s bearish WASDE
report (-13.5% vs. -8.8%). The soy to corn ratio was flat from last week (2.33)
due to the identical fall in corn and soy prices. As a market rule of thumb, a
soy/corn ratio below 2.4 is beneficial for corn plantings.

Chart 3: Harvest month corn prices fell 1% last week                               Chart 4: 2010E corn planting season margins below 2009

    490                                                                                                      525
                                     Corn (L)            Soy
    470                                                                     1020                             425
                                                                                     cash margins per acre




    450                                                                                                      325
                                                                            970
    430                                                                                                      225
    410                                                                     920                              125
    390                                                                                                       25
                                                                            870
    370                                                                                                      -75
    350                                                                     820                                           Corn          Soy beans        Difference
          Jan-09


                   Mar-09


                            May-09


                                       Jul-09


                                                Sep-09


                                                          Nov-09


                                                                   Jan-10




                                                                                                                   2004   2005   2006   2007   2008   2009    2010E


Source: USDA. ***Cents/bushel.                                                     Source: Doane, Factset, Green Markets, USDA and UBS estimates. Grower cash
                                                                                   margins exclude land rent costs. Crop price assumptions based on Mar. & Apr. avg.


Our above consensus 2010/11 corn acreage estimate of 90mm planted acres
compares to Doane’s recently revised estimate of 87.4mm acres (down from
89mm). We project that 2010/11 corn production will increase by 438mm
bushels versus 2009/10 based on our projection for 90 million acres, an average
yield of 165 bu/acre, and harvested acreage equal to 91.5% of planted acreage.
A 6 million acre decline in winter wheat plantings, as reported in the January
WASDE acreage, coupled with a 2.97mm acre release from the CRP in 2010


                                                                                                                                                                      UBS 2
Fertilizer Weekly 8 February 2010


makes significant additional acreage available for planting to other crops. Our
analysis of the states posting declines in winter wheat acreage and the states
where acreage will be released from the CRP, suggest that corn acreage could
increase this Spring by as much as 4-5mm acres from 2009/10’s 86.5mm acres.
While nearly two-thirds of the acreage released from the CRP and available
from reduced winter wheat plantings will come from states yielding below the
national average, corn production could rise as much as 700mm bushels (vs. our
current 438mm bushel estimate) from 2009/10’s record level, thus more than
outstripping the projected 400+mm bu increase in demand.

Table 1: Reduced winter wheat plantings and CRP acreage could substantially
increase corn acreage this Spring

                                        Additional                       Corn Production

                                      Corn Acreage         2009 Yield Data       3-Yr Avg Yield Data

                                       (million acres)     (million bushels)        (million bushels)

CRP Acreage                                 1.20               180.30                   172.35

Winter Wheat Acreage                        3.47               534.93                   505.66

Total                                       4.68               715.23                   678.02



                                    Avg. Yield (bu/acre)        152.9                      145.0

Source: USDA




                                                                                                        UBS 3
Fertilizer Weekly 8 February 2010


Nitrogen: Market Firms Ahead of Spring Demand
Ammonia market firms ahead of the Spring planting season. With the direct                                                                                                                                  A pending increase in the Gazprom
application season not yet underway, the domestic nitrogen market has been                                                                                                                                 natural gas contract price for Ukrainian
supported by a rebound in industrial consumption and strong demand for                                                                                                                                     nitrogen producers supports our
DAP/MAP production. Prices have been flat for several weeks, but we project                                                                                                                                expectation for higher prices
that they will move higher as the Spring planting season approaches and new
UAN capacity in Trinidad reduces merchant ammonia supplies. In the
international markets, Black Sea prices of $305/mt fob are only modestly higher
than the $282/mt January average, despite rapidly improving demand and supply
constraints that prompted Yara to purchase 40,000/mt NH3 from PCC/Iran last
week. We expect international prices to move higher due to tight inventories,
improving industrial demand, and a pending increase in Gazprom’s natural gas
contract to Ukrainian nitrogen producers which will raise the floor price for
global ammonia particularly in light of an anticipated high level of import
demand from the US.
Urea prices flat. NOLA urea prices were flat at $321/st fob, and have remained
                                                                                                                                                                                                           China’s urea export tax will rise to
in a tight $310-$320/st fob trading range since mid-December. While declining
                                                                                                                                                                                                           110% from 7% on Feb 1
corn futures continue to present an obstacle to near-term price gains, we expect
demand to increase meaningfully ahead of the Spring planting season,
particularly if unfavorable weather conditions limit direct applications of
ammonia, thereby shifting demand to urea and UAN. In the international
markets, Black Sea prices increased to $305/mt fob versus $285/mt in the prior
week as demand out of Turkey and Latin America supported higher realizations.
With Latin American demand likely satiated for now, near-term price levels
could hinge on when India returns to the market for additional tonnage.
However, with limited supplies expected out of China, given the Feb 1 increase
in the urea export tax to 110% from 7%, we expect Black Sea and Middle
Eastern prices to remain firm.
UAN posts modest increase. NOLA UAN prices increased to $200-$205/st fob                                                                                                                                   New UAN capacity in Trinidad will be
versus $195-$197/st in the prior week, albeit on slight volumes. The new UAN                                                                                                                               able to supply 1mm short tons, or 9% of
capacity in Trinidad is having operational issues with its nitric acid plant that                                                                                                                          the US 11mm st UAN market
will likely delay initial shipments into the latter half of February at the earliest.
UAN currently trades at a 14% discount to urea on a nitrogen equivalent basis.
Chart 5: Domestic urea flat, international urea posts gains                                                                                      Chart 6: Ammonia prices flat

             400                                                                                                                                              550
                                                                                                                                                              500
             350                                                                                                                                              450
                                                                                                                                                              400
             300
                                                                                                                                                   $ per st
  $ per st




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                                                                                                                                                              300
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             200
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                                      U.S.Gulf                           Cornbelt                      Mid-East                         FSU                                                    Tampa                       Cornbelt                      Mid-East                         FSU

Source: Green Markets                                                                                                                            Source: Green Markets




                                                                                                                                                                                                                                                                                           UBS 4
Fertilizer Weekly 8 February 2010


Spot nitrogen margins declined modestly versus the prior week, as average
NYMEX natural gas prices increased 1.9% to $5.45/mmBTU versus
$5.35/mmBTU in the prior week. A $1.00/mmBTU increase in natural gas costs
raises nitrogen production costs for a domestic producer by approximately
$37/mt.
Chart 7: Urea provides the highest margins on a nitrogen                                                                                                      Chart 8: Natural gas costs increased ~1.9% on average versus
equivalent basis ($ per short ton of Nitrogen Content)                                                                                                        the prior week ($/mmBTU)

                                                                                                                                                                 6.5
                         450
                         350
  $ per short ton of N




                                                                                                                                                                 5.5
                         250
                         150                                                                                                                                     4.5

                          50
                                                                                                                                                                 3.5
                          -50
                         -150                                                                                                                                    2.5
                                                                                                                 Oct-09


                                                                                                                                   Dec-09
                                Jan-09
                                         Feb-09
                                                  Mar-09
                                                           Apr-09


                                                                             Jun-09
                                                                                      Jul-09
                                                                                               Aug-09
                                                                                                        Sep-09




                                                                                                                                            Jan-10
                                                                                                                                                     Feb-10
                                                                    May-09




                                                                                                                          Nov-09




                                                                                                                                                                 1.5
                                                                                                                                                                   Jan-09 Mar-09 May -09   Jul-09   Sep-09 Nov -09 Jan-10
                                             NH3, US Gulf                               Urea, US Gulf                              UAN, US Gulf

Source: Green Markets and UBS estimates                                                                                                                       Source: Bloomberg




                                                                                                                                                                                                                            UBS 5
Fertilizer Weekly 8 February 2010


Phosphate: Sulphur Supplies Continue to Tighten
DAP prices post modest gains. Central Florida DAP prices increased modestly                                                                                                    DAP prices are likely to come under
to $390-$400/st fob from $380-$390/st in the prior week, as the pace of price                                                                                                  sharp pressure in 2H 2010 from the
gains continues to moderate following the $130/st run-up that began in early                                                                                                   startup of the Vale rock mine in Peru
December. Domestic DAP inventories are extremely tight with sulphur                                                                                                            and the growing prospect of limited
shortages limiting the extent to which producers can meet current market                                                                                                       DAP production from the Ma’aden
demand. The international market continues to exhibit widespread strength with                                                                                                 project in Saudi Arabia.
PhosChem completing a sale to Mexico at $465/mt fob versus sales to Latin
                                                                                                                                                                               Global sulphur supplies are tightening
America and Southeast Asia of $455-$460/mt fob in the prior week. India’s
                                                                                                                                                                               increasing the risk of DAP/MAP
failure to reach an agreement with OCP for February phosacid deliveries (OCP
                                                                                                                                                                               production curtailments
proposed a $750/mt cfr price vs. Jan levels of $610/mt cfr) will likely increase
the regions need to import finished product which will be beneficial to domestic
DAP producers as India accounted for ~60% of 2009 export demand.


Spot DAP margins increased $10/mt, or 7.6%, versus the prior week, on the
back of a modest increase in Central Florida DAP prices. While Q1 sulphur
contracts have been settled at $90/lt, sulphur prices are likely to move much                                                                                                  A $10/lt increase in sulphur raises DAP
higher given that (1) spot market prices are at a significant premium to contract                                                                                              production costs by $4/mt; a $10/mt
prices, and (2) international prices have escalated into the $150-$200/mt cfr                                                                                                  increase in Tampa Ammonia raises
range depending upon the region. While continued momentum in the DAP                                                                                                           DAP production costs by $2/mt
market will provide producers with an ability to share some of the cost increase
with customers, more critical, is the potential for rapidly declining sulphur
supplies to lead to production curtailments.
Chart 9: DAP prices posted a modest gain ($/st)                                                                                      Chart 10: Spot DAP margins increased 7.6% last week

                 Tampa                               FLA Railcar                                 NOLA Barge                                               500
 425                                                                                                                                                      400
                                                                                                                                       $/st (fob Tampa)




 400
 375                                                                                                                                                      300
 350                                                                                                                                                      200
 325
 300                                                                                                                                                      100
 275                                                                                                                                                       0
 250
 225                                                                                                                                                        Jan-09           May -09          Sep-09             Jan-10
                                                                                                                                                            Phosphate Rock      Ammonia Costs     Sulfur Costs
                                                                                        Oct-09


                                                                                                          Dec-09
       Jan-09
                Feb-09
                         Mar-09
                                  Apr-09


                                                    Jun-09
                                                             Jul-09
                                                                      Aug-09

                                                                               Sep-09




                                                                                                                   Jan-10
                                                                                                                            Feb-10
                                           May-09




                                                                                                 Nov-09




                                                                                                                                                            Variable Costs      Cash Margin

Source: Green Markets and UBS estimates                                                                                              Source: Green Markets and UBS estimates




                                                                                                                                                                                                                          UBS 6
Fertilizer Weekly 8 February 2010


Potash: Prices Rise on Higher Volumes
BPC raises potash prices $25/mt cfr. Citing a significant increase in demand                                                                                                             Canpotex met with China this week, but
in Asia (ex India), Latin America, and Europe subsequent to the settlement of                                                                                                            the two sides were unable to reach an
the China contract, BPC will implement a $25/mt cfr increase for spot sales of                                                                                                           agreement as Canpotex continues to
granular and standard grade product in Asia and Brazil, lifting prices into a                                                                                                            view BPC’s $350/mt cfr settlement as
$410-$435/mt cfr range. Similar to the $30/st price increase announced by AGU                                                                                                            being too low
and MOS last week for domestic shipments, the price increase came a month
earlier than anticipated as surging volumes have emboldened producers to push
for price increases sooner rather than later. The recent tightness in the market
notwithstanding, we see considerable downside to the upcoming negotiations
with India given the spread between its current $460/mt cfr contract, which
expires in March, and the recently signed BPC-China $350/mt cfr contract.
Chart 11: Domestic potash prices are bouncing on renewed                                                                                                    Chart 12: Lower prices in international markets are leading to
demand (US$ per short ton)                                                                                                                                  higher shipments (US$ per metric ton)

                                                                                                                                                                950                                                                  965
 800
 750                                                                                                                                                            850                                                                  865
 700                                                                                                                                                            750                                                                  765
 650
 600                                                                                                                                                            650                                                                  665
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                                                                                                     Oct-09



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       Jan-09

                Feb-09
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                                     Apr-09



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                                                                                                                                    Jan-10

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                                                                                                               Nov-09




                                                                                                                                                                     Jan-07     Jul   Jan-08      Jul       Jan-09     Jul     Jan-10


                                                         Cornbelt price                          Sask list price                                                              Asia      Brazil          China        Corn Belt (R)


Source: Green Markets                                                                                                                                       Source: Green Markets, FMB, and UBS Estimates


Barring an unforeseen collapse in grain prices, we believe the biggest threat
to the long-term outlook for potash producers comes from potential new
                                                                                                                                                                                         Despite a significant fall in the last year,
entrants. Vale and BHP Billiton are both expected to decide this year whether
                                                                                                                                                                                         global potash prices are still well above
to proceed with Greenfield projects which would have a significant negative
                                                                                                                                                                                         the cash costs of the high cost
impact on global operating rates. With global potash prices significantly higher
                                                                                                                                                                                         producer.
than cash costs of the high cost producers, which we estimate at $190-$215/mt
fob mine for New Mexico and German mines, we believe sizeable increases in
capacity could drive long-term potash prices lower.
Chart 13: Potash prices remain above fob mine cash costs of the high costs producer

    250

    200

    150

    100

       50

        0
                                                                                                                                                                          IPI
                                                                      ICL




                                                                                                              MOS




                                                                                                                                                               K+S
                                                                                                                                                      AGU
                                              Uralkali




                                                                                          POT




                                                                                                                                 Qinghai
                     Silvinit




Source: Co. reports and UBS ests. Costs for Canadian producers include royalties. (cash costs per mt, fob mine)




                                                                                                                                                                                                                                     UBS 7
Fertilizer Weekly 8 February 2010


Valuation and Price Target Basis
Fertilizer share prices have collectively fallen 4.2% year-to-date. After                                        Table 2: Share Price Performance
posting a 15% increase in Q4:09, fertilizer share prices have declined 4.2% year-                                Ticker         Rating        YTD       Curr Wk
to-date, roughly in-line with the S&P 500’s 4.4% drop, and sharply better than                                   AGU               B            -4.2%      4.6%
                                                                                                                 CF                N             3.8%      1.5%
the 12.2% decline in harvest month corn prices to which fertilizer share prices                                  IPI               N           -12.2%      4.5%
are typically highly correlated. On average, fertilizer shares rose 3.2% this week,                              MOS               N            -7.6%      3.1%
                                                                                                                 POT               N            -4.6%      4.2%
after falling 7.0% in the prior week. Potash levered names (POT, MOS, AGU,                                       TRA               N            -0.5%      1.3%
and IPI) which posted the largest declines in the prior week subsequent to POT’s                                 Avg. Ferts                     -4.2%      3.2%
                                                                                                                 Corn                          -12.2%     -1.0%
below-consensus guidance, rallied 4.1% on average. CF and TRA, both of                                           S&P 500                        -4.4%     -1.3%
which lack potash exposure, increased 1.5% and 1.3%, respectively. With the
S&P 500 falling 1.3% on the week, corn prices dropping 1.0%, and a                                               Source: Bloomberg
strengthening USD and continued concerns about a slowing Asian economy
denting the outlook for commodities in general, the share price performance was
modestly encouraging.

Table 3: UBS North American Fertilizer Stock Coverage Universe
                                                                   AGU               CF                IPI          MOS               POT                TRA
                          Rating                                   Buy             Neutral           Neutral       Neutral           Neutral            Neutral
                        Stock price                               $58.93           $94.22            $25.60        $55.18            $103.48            $32.02

                       Price Target                                $72               $97              $30            $64              $116                $34
                     Upside/Downside                              22.2%             3.0%             17.2%          16.0%            12.1%               6.2%

                       52-Week Low                                $29.59           $49.49            $13.99         $35.75           $63.65             $21.32
                       52-Week High                               $71.11           $102.89           $34.56         $68.28           $126.47            $43.13

                     Diluted Shares                                157                49               75            447               304               100
                       Market Value                               9,252             4,645            1,921         24,638            31,450             3,203
             Net Debt (Cash) (Most Recent Q)                      1,612              -698             -93           -663              3,663              130
                    Enterprise Value                             $10,864            $3,947           $1,829        $23,975           $35,113            $3,333

                    UBS EPS Estimates
                          2008                                    $8.61             $12.15               $1.61      $3.95            $10.97             $6.12
                         2009E                                    $2.37             $7.50                $0.81      $2.93            $2.43              $2.03
                         2010E                                    $5.15             $7.55                $1.35      $3.56            $5.70              $2.79
                         2011E                                    $7.00             $8.41                $2.00      $4.87            $8.75              $4.05

                       UBS EBITDA
                          2008                                    2,183             1,063                212        3,145             4,987             1,066
                         2009E                                     778               629                 118        2,438             1,389              410
                         2010E                                    1,405              740                 185        2,790             2,804              529
                         2011E                                    1,757              706                 269        3,693             4,274              703

                         P/E Ratio
                           2008                                    6.8x             7.8x                 15.9x      14.0x             9.4x               5.2x
                          2009E                                    24.9x            12.6x                31.5x      18.8x             42.6x              15.8x
                          2010E                                    11.4x            12.5x                18.9x      15.5x             18.2x              11.5x
                          2011E                                    8.4x             11.2x                12.8x      11.3x             11.8x              7.9x

                        EV/EBITDA
                           2008                                    5.0x              3.7x                8.6x        7.6x             7.0x               3.1x
                          2009E                                    14.0x             6.3x                15.5x       9.8x             25.3x              8.1x
                          2010E                                    7.7x              5.3x                9.9x        8.6x             12.5x              6.3x
                          2011E                                    6.2x              5.6x                6.8x        6.5x             8.2x               4.7x

Source: Factset, company reports, UBS estimates. **Mosaic EPS and EBITDA are on a calendar year basis.




Our primary valuation method for fertilizer stocks is an EV/EBITDA                                               We typically use an EV/EBITDA multiple
multiple valuation which varies by nutrient, and is based on 2011 EBITDA                                         of 8-9 times for potash, 4-5 times for
projections. We have historically used the highest EV/EBITDA multiple for                                        nitrogen, 6-7 for phosphate, and 8-9 for
potash and the lowest for nitrogen, with phosphate in the middle. This multiple                                  retail.
differentiation reflects our views on the long-term attractiveness of each nutrient.


                                                                                                                                                             UBS 8
Fertilizer Weekly 8 February 2010


We are now using 2011 EBITDA in our sum-of-parts analysis as the market
appears to view 2010 as a transition year to a more normalized level of demand
in 2011.
We use different multiples for NPK to reflect our view on the long-term
attractiveness of each nutrient. Potash has the most concentrated industry
structure, the least amount of raw material volatility, and the greatest barriers to
entry from a resource, time, and cost standpoint. Nitrogen has the most
fragmented industry structure and the greatest raw material volatility as volatile-
priced hydrocarbons like natural gas and naphtha comprise 75% of the cash cost
of production. Phosphates rank between nitrogen and potash in terms of raw
material volatility and industry fragmentation but like potash, phosphate is an
industrial mineral and the quality and life of the producer’s reserve is the key
driver of competitive position.


Fertilizer producers have significant operating leverage

Fertilizer producers have significant operating leverage as summarized in the
following chart and table.

Chart 14: Earnings leverage to fertilizer margins (EPS impact per $10/stmargin increase)

 $0.80
 $0.70
 $0.60
 $0.50
 $0.40
 $0.30
 $0.20
 $0.10
 $0.00
                     Nitrogen                       Phosphate                          Potash
                                    IPI    POT      MOS       AGU      CF        TRA


Source: UBS estimates. EPS impact for MOS is reflected on a fiscal year basis.




                                                                                                UBS 9
Fertilizer Weekly 8 February 2010


Table 4: Earnings leverage to fertilizer margins and natural gas consumption

                                     2010E Volume                  EPS Impact of                    % of

                                         (k mt)                $10/mt Margin Change              2010E EPS
          Ammonia
            Agrium                       1,200                          $0.05                        1%
             Terra                       1,500                          $0.10                        4%
         Potash Corp                     1,790                          $0.04                        1%
              CF                         1,141                          $0.15                        2%
             Urea
            Agrium                       1,480                          $0.07                        1%
              CF                         2,445                          $0.33                        4%
         Potash Corp                     1,490                          $0.04                        1%
             Terra                        318                           $0.02                        1%
             UAN
             Terra                       3,273                          $0.23                        8%
              CF                         2,195                          $0.30                        4%
         Potash Corp                     1,880                          $0.05                        1%
            Agrium                        950                           $0.04                        1%
     Phosphate Fertilizer
            Mosaic                       8,000                          $0.13                        5%
         Potash Corp                     2,330                          $0.06                        1%
              CF                         1,886                          $0.25                        3%
            Agrium                       1,110                          $0.05                        1%
            Potash
         Potash Corp                     8,100                          $0.17                        3%
            Mosaic                       6,150                          $0.08                        3%
            Agrium                       1,500                          $0.05                        1%
            Intrepid                      680                           $0.05                        4%
                                     Consumption                   EPS Impact of                    % of
         Natural Gas                (mm mmBTUs)                  $1/mmBTU Change                 2010E EPS
             Terra                        142                           $0.98                       35%
              CF                          119                           $1.62                       21%
            Agrium                        105                           $0.66                       13%
         Potash Corp                      141                           $0.35                        6%
            Mosaic                         35                           $0.05                        2%

Source: UBS estimates. EPS impact for MOS is reflected on a fiscal year basis. Natural gas consumption based on
2008 estimates, MOS FY2009.




                                                                                                                  UBS 10
Fertilizer Weekly 8 February 2010




   Statement of Risk

We point to investors the potential risks including, but not limited to, the volatile
nature of commodities prices which could potentially be significantly different
from expectations. Other risks include political, financial and operational risks,
which all have the potential of significantly impacting company/industry
performance.



   Analyst Certification

Each research analyst primarily responsible for the content of this research
report, in whole or in part, certifies that with respect to each security or issuer
that the analyst covered in this report: (1) all of the views expressed accurately
reflect his or her personal views about those securities or issuers; and (2) no part
of his or her compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed by that research analyst in the
research report.




                                                                                        UBS 11
Fertilizer Weekly 8 February 2010


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UBS Investment Research: Global Equity Rating Allocations
                                                                                                  1                                2
 UBS 12-Month Rating                Rating Category                                     Coverage                      IB Services
 Buy                                Buy                                                       48%                             40%
 Neutral                            Hold/Neutral                                              40%                             35%
 Sell                               Sell                                                      13%                             26%
                                                                                                  3                               4
 UBS Short-Term Rating              Rating Category                                     Coverage                      IB Services
 Buy                                Buy                                               less than 1%                            17%
 Sell                               Sell                                              less than 1%                            67%
1:Percentage of companies under coverage globally within the 12-month rating category.
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Source: UBS. Rating allocations are as of 31 December 2009.
UBS Investment Research: Global Equity Rating Definitions
 UBS 12-Month Rating                Definition
 Buy                                FSR is > 6% above the MRA.
 Neutral                            FSR is between -6% and 6% of the MRA.
 Sell                               FSR is > 6% below the MRA.
 UBS Short-Term Rating              Definition
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 Buy
                                    because of a specific catalyst or event.
                                    Sell: Stock price expected to fall within three months from the time the rating was assigned
 Sell
                                    because of a specific catalyst or event.




                                                                                                                             UBS 12
Fertilizer Weekly 8 February 2010


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Company Disclosures
 Company Name                                         Reuters   12-mo rating Short-term rating          Price         Price date
             5, 16, 20, 22
 Agrium Inc.                                           AGU.N       Buy (CBE)               N/A       US$58.93        05 Feb 2010
                                         13, 16, 19
 CF Industries Holdings, Inc.                           CF.N    Neutral (CBE)              N/A       US$94.22        05 Feb 2010
                         16
 Intrepid Potash Inc                                    IPI.N         Neutral              N/A       US$25.60        05 Feb 2010
                 16
 Monsanto Co.                                          MON.N              Buy              N/A       US$76.74        05 Feb 2010
            16
 Mosaic Co                                             MOS.N          Neutral              N/A       US$55.18        05 Feb 2010
 Potash Corporation of
                         2, 4a, 4b, 6a, 6c, 16, 20,
 Saskatchewan Inc.                                     POT.N    Neutral (CBE)             N/A       US$103.48        05 Feb 2010
 22

                              6b, 7, 16
 Terra Industries Inc.                                 TRA.N          Neutral             N/A        US$32.02        05 Feb 2010
Source: UBS. All prices as of local market close.
Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing
date

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        banking securities-related services are being, or have been, provided.



                                                                                                                             UBS 13
Fertilizer Weekly 8 February 2010


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                                                                                                                                 UBS 14
Fertilizer Weekly 8 February 2010




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