Fertiliser companies' shares jump on lesser corn crop forecast

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Publish time: 27th June, 2012      Source: www.efeedlink.com
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June 27, 2012

   

   

Fertiliser companies'' shares jump on lesser corn crop forecast

   
   
   

Shares of CF Industries (CF), Potash (POT) and Agrium (AGU) jumped on a government report that this year''s corn yield is apt to be smaller than anticipated.

   

   

If it is, that could lift prices for the grain, and fuel demand for products like fertiliser that will increase crop yield.

   

   

The USDA rated only 56% of the US corn crop as good to excellent as of Sunday (June 24). That''s down seven percentage points from a week earlier and well below the 61% analysts estimated.

   

   

Corn ratings have fallen for three weeks in a row amid hot weather and lack of rain, lowering expectations for a strong crop yield this fall. Corn futures rose as much as 2.8%, to the highest level in more than seven months.

   

   

Paradigm Capital said it thinks the USDA will have no choice but to lower the 2012 forecast for corn production and yield. Among fertiliser makers, CF Industries shares rose 2.9% to US$188.93 Tuesday (June 26) and Potash, the world''s largest fertiliser maker by volume, lifted 3.6% to US$42.50.

   

   

Agrium rose 2.2% to US$87.33, while smaller rivals Terra Nitrogen (TNH) gained 7.1% and Rentech (RNF) 4.1%. Insecticide and fungicide maker American Vanguard (AVD) fell 0.8%.

   

   

CF Industries last month reported first-quarter profit that easily topped Wall Street''s consensus, as demand surged for its nitrogen fertiliser products during the North American spring planting season. The company''s profit climbed 59% to US$6.06 a share, trouncing expectations of US$4.83 per share. Sales rose 30% to US$1.53 billion, also ahead of the Street''s outlook.

   

   

"Long term, we believe tight global grain stocks will sustain high farm profits, plantings and fertiliser demand," CEO Stephen Wilson said in a written statement.

   

   

In April, rival Mosaic also sounded an upbeat note, saying it now expects fertilisersales this year to be at the top end of its forecast, after a strong start to the planting season.

   

   

Canadian fertiliser maker and farm products retailer Agrium on June 12 said it sees profit for the current quarter at the top end of its earlier forecast of US$4.18 to US$4.78 a share. The consensus of analysts at the time was US$4.57 per share, since lifted to US$4.64.

   

   

Agrium CEO Mike Wilson said in a statement that the outlook remained positive, "supported by the strong global grain prices and a balanced-to-tight international nutrient supply demand situation."