April 26, 2012
Mosaic's 2012 shares up 5% on high fertiliser demand
After the fertiliser giant Mosaic said that the world demand for nutrients had "increased sharply", its shares jumped 5%, stemming jitters for the market stoked by a soft start to 2012.
The US-based group, which had opened the door to falls of some 20% in sales of phosphate and potash in the March-May period, said that market conditions had "strengthened significantly" over the past month, "resulting in an improved near-term outlook".
The recovery meant that sale volumes for the quarter would come in at the "upper end" of the range Mosaic guided too, implying only a small drop in phosphate sales for the quarter and a flat potash performance.
"Global demand for crop nutrients has increased sharply," Jim Prokopanko, the Mosaic chief executive, said.
The comments follow a weak close to 2011 for fertiliser groups, and weak start to 2012, after a pullback in crop prices late last year and world economy concerns prompted farmers to put nutrient purchases on ice.
Mosaic cut production of both phospates and potash in response to the weaker market conditions. Earlier this week, Credit Suisse analysts cut forecasts for potash prices by up to US$80 a tonne, warning that distributors "remain extremely cautious, given the uncertain grain price outlook, and are looking to defer new purchases until there is greater clarity around the US crop size and grain prices".
However, Prokopanko said that North America had been at the heart of the "rapid acceleration" in fertiliser markets over the past month, with the early US spring sowing season stocking demand.
He also flagged the boost from expectation of "another year of high farm income in North America", with takings set to prove the second highest on record.
The USDA has forecast US net farm income hitting US$91.7 billion this year, a fall of 6.5% but well above the US$79.1 billion reported for 2010.
Analysts at IHS Global Insight have pegged this year's figure at US$98.5 billion.
Prokopanko also flagged "increasing shipments to South America", where, in Brazil, farmers are expecting a bumper harvest of second-crop corn.
The silver lining to growers of a weak, drought-hit main harvests early in the year is that it allowed them to clear area quickly for the so-called safrinha, or winter, crop.
He added that, with demand for fertilisers set to "continue to grow", the group's long-term outlook was "positive".
Mosaic shares closed 5.4% higher at US$53.20 in New York.