Tight supplies and high prices of agricultural products including corn and wheat are expected to increase demand for fertilizers, through the near future, however, sometime past 2012, more plentiful supplies should halt potential shortages.
Last week Potash Corporation of Saskatchewan announced doubled quarterly earnings, however, the statement resulted in some negative sentiment regarding the fertilizer market reaching maximum output.
Recently, record-setting earnings have been the norm for fertilizer producers, however, late last month the markets were roiled by a quarterly earnings report by Mosaic, the world’s largest phosphate producer, which showed that profits missed analyst’s earnings per share (EPS) expectations.
India is just one of the many nations in the world dealing with a food crisis. While the country is experiencing unprecedented population growth, the amount of arable land is shrinking, thereby increasing the need for fertilizers.
When applied to phosphorus, the Hubbert Peak Theory has created quite a stir in phosphate market, spawning a great deal of animated discussion and scientific analysis into the implications of peak phosphate.
Low inventories have granted potash and phosphate producers plenty of reasons to hike prices, and purchasers have been bearing these increases, fearing that if they don’t agree to contracts in a timely manner they may miss out on securing supplies.
Despite uncertainty over the stability of the global economic recovery, the fertilizer market is holding up very well, and will be buoyed over the coming years by supply shortages.
The recent earnings season was record-setting for many fertilizer producers, and despite a shaky global economy analysts expect that high-profits will continue into the foreseeable future.
According to market experts high food prices are likely to persist for the next few years. However, high food prices are good news for potash prices, because as the price that farmers can sell their crops for rises, so does their cash flow to spend on fertilizer.
Fertilizer producer stocks were hit by last week’s sell-off; however, investment firms are maintaining their bullish stance on the sector’s outlook.
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