Fertilizer Stock Bubble Bursts

By Andrea Klosterman Harris|2 October 2008

Shares of Mosaic Co. – one of the two largest fertilizer makers by sales – were off 31.4% to $46.33. Mosaic stock has lost two-thirds of its value since mid-June. However, Mosaic remains optimistic: “I would counsel investors to keep their cool and focus on the outstanding fundamentals of this business,” said Larry Stranghoener, the company’s chief financial officer. “We believe we have a very positive outlook and are going to generate a lot of cash throughout this financial year.”

Potash Corp. of Saskatchewan, Canada, the other major player in the fertilizer industry, was down 20.1% at $102.31, less than half of its summer peak. Another peer, Bunge Ltd. (BG), fell 19% to $51.01, down about 60% from its high point. Chemical giant Monsanto Co.’s stock was recently down 13% to $85.89, putting it 41% below its high.

Agrium Inc. suffered when the price of urea fell sharply last week, causing shares to decline; at the time of this writing, they were off 21% to $43.35. Others ag industry companies are following, such as farm-equipment manufacturer Deere Co., off 9.3% at $42.

Merrill Lynch cut its investment rating on the agricultural chemicals sector based on signs of weakness in phosphate and potash. With credit scarce, farmers may struggle to get funding needed for seeds, fertilizer, and other farm inputs.