Bad news Wednesday for fertilizer producer Mosaic
) 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.