Strong Earnings for Mosaic, But Questions About Demand

July 30, 2012 09:20 AM

Urban investors would do well to step cautiously into fertilizer markets. In recent years, the fertilizer market has become extremely volatile and has attracted a lot of investor interest. Recent gains posted by Mosaic Co. (MOS) topped adjusted fiscal fourth quarter earnings projections coming in at $1.19 rather than the predicted $1.15.

These earnings, along with the rising price of corn, has some investors clammering to get in on the action. But at the other end of the supply chain, American farmers face a dilemma. Drought has brought yield potentials into question and most growers are apt to wait until soil tests before determining how much fertilizer they will need. In addition, investors may find that demand for fertilizer on the farm could be dictated by crop insurance returns, and just how much the American grower can afford to spend this fall.

Meanwhile, Mosaic Co. doubled quarterly dividends to 25 cents per share. This is great for shareholders, but the resulting feeding frenzy may end up costing growers in the fall and put undue pressure on MOS's bottom line.

Click here for a related item on Mosaic's earnings.


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