Agrium reports second quarter earnings bringing net earnings up to $860 million, $5.44/share. Last year's numbers for the same period were $718 million net at $4.54/share. The value of input related products and services have all done well as drought pushes the price of grain higher. But the same drought that is fueling grain prices may turn out to be the sharp stick in the inputs bubble. Farmers are already looking for ways to cut production costs in the second half of this year and retail prices of nutrients will have to come down before growers will spend scarce dollars on fertilizer.
World demand for nutrients is expected to rise in the coming year as growers all over the world are thought to be gearing up to cultivate more and more acres. Inputs companies will likely find new markets in places like the West African cocoa belt, and China is reported to be on the lookout for deals on inputs, so worldwide demand may show a rise after the first of the year.
But on the heels of the announcement of Agrium's 20% increase, analysts advise caution and have even downgraded key input stocks to "hold" from "buy".