Mosaic Tips Hand -- Higher P&K Ahead

February 11, 2014 04:01 AM

MosaicCo. today reported its 4th quarter and full year 2013 results and the falloff in P&K pricing had had a dramatic impact on the numbers. Most notable were fourth quarter 2013 net earnings of $129 million, compared to $616 million a year ago. But shipments over the quarter were strong suggesting the buttress for higher P&K prices is in place.mosaic logo kelsea

“While our results for the fourth quarter reflect the low market prices for potash and phosphates, current market conditions are improving,” said Jim Prokopanko, President and Chief Executive Officer. “Market dynamics are unfolding as we expected they would, with sales volumes increasing before prices; in fact, we shipped a record volume of phosphates during the quarter, and potash volumes increased significantly."

There is nothing in the above quote to suggest lower P&K ahead and as the market looks to correct the Soviet led price crash, robust sendout volumes have led the way. Tweets from this morning following the announcements noted marked improvements in phosphate and potash pricing, a trend Mosaic expects to see continue through spring.

Since January 1, 2014, retail DAP prices are up 4%, MAP is up 2 1/4% during the same period, and potash actually lost some ground falling 2 1/4%. The news from MosaicCo. and CEO Prokopanko's admission that the table is set for higher prices is expected to accelerate the P&K price recovery.

Adding to the upside risk are transport difficulties. Propane deliveries have been plagued by weather and now the same is true of P&K shipments. Prokopanko notes, "We're facing transportation issues and backlogs like we never have before."

We are currently 80% filled on phosphate and yesterday recommended to increase potash coverage to 80% as well. We will leave the other 20% to gambling stocks, but if you are in no mood to gamble, go ahead and fill for spring at today's prices.

“We’ve seen volumes increase. We’re seeing meaningful price escalation in phosphates, and we believe the stage is set for improving potash prices later this year,” Prokopanko said.

Between accelerated sales volumes, earnings well below year-ago and transport issues large enough to have been a topic of conversation, we expect phosphate and potash to move higher from here.

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