Reportedly, Potash (POT) is considering joining forces with global firms that would be able to present an offer to compete with BHP Billiton's (BHP) $38.6 billion bid.

According to The Wall Street Journal, people "familiar with the matter" stated that there could be a global consortium in the works to make a counteroffer for Potash. BHP has gone straight to Potash shareholders with its offer of $130 per share.

In the wake of the BHP Billiton's (BHP) failed $39 billion offer and its new hostile $40 billion takeover bid for Potash Corp. of Saskatchewan (POT), agricultural fertilizer companies, including CF Industries Holdings (CF), are starting to look pretty juicy to investors.

Fertilizer companies have been struggling during the past few years as cash-strapped farmers have been pulling back on their purchases, but the tide appears to be changing.

With rising prices for crops like wheat and corn, it is starting to look like it is going to be a really good year for U.S. farmers, which means they are going to have plenty of money to reinvest in new machinery and more fertilizer.

I was reading through some articles this weekend, when I found one from BusinessWeek, questioning the viability of herbicide producer Monsanto Co. (NYSE: MON).

The article focuses on the past six months, a period when MON shares have lagged behind the broader market, and then wonders if the stock is still a viable long-term investment. The story was prompted by last Thursday's earnings forecast for $3.10 to $3.30 per share in fiscal 2010, which was well short of the $4.10 that the Street expects.

Weak quarterly sales led to a substantial drop in third-quarter earnings for fertilizer firm Mosaic (NYSE: MOS). After the closing bell yesterday, the phosphate and potash producer reported third-quarter earnings of 13 cents per share, far lower than last year's same-quarter earnings of $1.17 per share.

Not only were the results far worse than a year ago, but they missed the Street's expectations for earnings of 24 cents per share. The current results did include a gain of $47.1 million (seven cents per share) for foreign currency transactions.

The Mosaic Company (NYSE: MOS), the combined Cargill Crop Nutrition and IMC Global Inc., began trading as a Fortune 500 company immediately after its 2004 IPO, and became a dominant player in the fertilizer business.

In just a few short years, Mosaic would be in prime position to ride a global boom in agricultural crop demand that resulted in its shares skyrocketing more than $130 from trough to peak.

From a valuation standpoint, the move higher was completely justified and rational -- up to a point. When the hedge fund momentum investors climbed aboard, astute investors knew that the rapid rise was due for a correction.

The stock sold off hard during the summer, which culminated in a complete washout due to the credit crisis and global economic meltdown. MOS shares fell back to the mid-$30s.

As is often the case, the selling went too far and had more to do with forced liquidations instead of rational valuation metrics.

With crude oil prices soaring, shares in coal and fertilizer companies have also been climbing for the past year. Barron's offers a survey of the momentum plays, pointing out some opportunities and risks when investing in coal and fertilizer stocks.

Talking about risks, Barron's underlines the fact that it can be difficult for investors to put their hard earned money into a stock that is already trading near its highs. But as they say, the trend is up unless proven otherwise, and we might take this into account when picking our trades. For example, back in April, it looked like Mosaic Co. (NYSE: MOS) was facing technical weakness, but this did not last long and the company was able to rebound.

Now let's take a took at the coal sector. Data shows that the Dow Jones U.S. coal index gas gained more than 50% for the past year. While James River Coal Co. (NASDAQ: JRCC) has quadrupled this year, Peabody Energy Corp. (NYSE: BTU) has been seeing some weakness, and this might be a sign that the sector could face tough times ahead. The first concern tied to supply and demand appeared for Peabody when we began to notice that volume on rally days slipped, while volume on declining days has increased.

Mosaic (NYSE: MOS) shares are falling with other fertilizer-makers after an article in The Wall Street Journal this morning detailed skyrocketing fertilizer prices that are squeezing small farmers. The article said that Sen. Byron L. Dorgan (D-ND) will ask the Federal Trade Commission to scrutinize the industry's business practices. It also quoted the president of the North Dakota Farmers Union accusing fertilizer producers of price-gouging. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MOS.

After hitting a one-year low of $32.23 last May, the stock hit a one-year high of $143.32 in April. This morning, MOS opened at $118.96. So far today the stock has hit a low of $113.64 and a high of $119.79. As of 12:00, MOS is trading at $113.74, down $6.12 (-5.1%). The chart for MOS looks bullish and deteriorating slightly.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $150 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in eight weeks as long as MOS is below $150 at July expiration. Mosaic would have to rise by more than 31% before we would start to lose money. Learn more about this type of trade here.