Fertilizer sector may face falling prices

Distributors are deferring purchases, notes Mosaic, on the hope that supply will increase and prices may subsequently drop.

By Jim J. Jubak Oct 2, 2012 5:42PM
Image: Combines in field (Mark Karrass/Corbis/Corbis)Bad news Wednesday for fertilizer producer Mosaic (MOS) in its fiscal first-quarter earnings report. Earnings of $1.01 per share were significantly worse than the Wall Street consensus of $1.16 a share. Revenue fell 18.7% year over year to $2.5 billion. The consensus projection had been $2.68 billion.

Bad news for the entire fertilizer sector in the company’s conference call. Although Mosaic predicted that demand for potash fertilizer would hit a record 58 million to 60 million metric tons in 2013, in the shorter term distributors are deferring buying. The distributors’ read of the market is that with more production capacity coming online, and with China and India delaying contract purchases, there will be plenty of supply -- perhaps at lower prices -- later in the season.

Shares of Mosaic fell 3.9% Tuesday to close at $55.76.

During the conference call, an analyst asked Mosaic executives why fertilizer prices haven’t moved higher to follow rising grain prices, as they did in 2008. The company’s answer was that farmers and distributors see greater certainty of supply so they are deferring purchases, subsidies for purchases have declined in China and India, and distributors are taking a cautious attitude toward building inventories given economic uncertainties and the possibility of lower prices later in the year.

In other words, despite higher farm prices, this time it’s different. At least in the short run.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did not own shares of Mosaic as of the end of June. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

Tags: MOS
4Comments
Oct 2, 2012 10:06PM
avatar
The problem is that people don't much like to starve. With only a few weeks of food to be found in the all the world's stockpiles. Fertilizer will need to be used at increasing levels. Mosaic can hold it's price longer than farmers can hold off planting 
Oct 3, 2012 12:55PM
avatar
The Republicans and Democrats are both flooding the market........with BS. Who needs fertilizer with unlimited free BS?
Oct 2, 2012 10:22PM
avatar

 

Another fertilizer article.  (Isn't Jubak the Saskatchwan Potash Pimp?)

 

Let's talk about trucks.  I like trucks!

 

 

 

 

Oct 2, 2012 10:27PM
avatar
No kidding the Republicans are flooding the markets.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.