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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Fertilizer Maker Grows As Farmers Struggle To Meet Global Demand
  • Date: Wed, 23 Apr 2008 08:11:11 -0600



Fertilizer Maker Grows As Farmers Struggle To Meet Global Demand
http://news.yahoo.com/s/ibd/20080422/bs_ibd_ibd/20080422newamer

Kevin Harlin Tue Apr 22, 6:08 PM ET

Farmers may be planting less corn this year, but there's still plenty of
fertile ground for agriculture companies like CF Industries.


The Deerfield, Ill.-based fertilizer maker and distributor put up a record
fourth quarter as farmers applied its chemicals in the fall and stocked up
for spring planting.

Even if those farmers plant fewer acres of corn, as the government projects,
acreage for other crops should grow.

CF (NYSE:CF - News) said the weather so far hasn't been perfect everywhere --
it was too wet in some places, too dry in others -- but the overall picture
is good.

"The worldwide market for grain, and the fertilizer to grow it, is robust,"
CF's chief executive, Stephen Wilson, told analysts in an investor conference
earlier this month.

"If we can get by the current weather problems in a reasonable amount of
time, the overall planting this spring should reflect that general strength."

Earnings Report

The company will report first-quarter results after the market closes
Thursday.

Officials declined to comment in advance of earnings. Analysts polled by
Thomson Reuters expect earnings of $2.13 a share, up from $1.02 a year ago.

They expect almost $751 million in revenue, up 59% from the year-ago period.

In the fourth quarter -- CF's best as a public company -- it posted earnings
of $2.38 a share, up from 14 cents a year earlier. Sales were up 62% to
$852.5 million.

The company cited the usual factors that have made agribusinesses bulls amid
a bearish economy. Global grain stocks are low, and demand is rising as
populations grow. Rising wealth also creates demand for meat, which requires
grains for feed.

That pushes food prices up, which encourages farmers to plant more and to use
more fertilizers.

The ethanol boom, which is diverting corn and other grains for fuel, is
merely adding more fuel to the fire.

"Arable landmass is finite," said Edwin Chee, a chemical and fertilizer
analyst with BMO Capital Markets, speaking at a fertilizer conference this
month. "And obviously, in order to alleviate these high prices that everybody
is fearful about, you need to increase supply. You need to raise your yields."

That means more demand for the nitrogen and phosphate fertilizers CF produces.

The company formed in 1946 as a cooperative fertilizer brokerage. Over the
years, it expanded its distribution and branched into fertilizer
manufacturing. It went public in 2005.

Now, it's branching out overseas. Last year, it bought a 50% stake in
Keytrade, a Zurich, Switzerland-based global fertilizer trader. The company
now markets fertilizers in 65 nations.

Also last year, the company won the rights to build fertilizer operations in
Peru. It would use excess natural gas there to supply Peru and neighboring
markets with nitrogen fertilizers. The plants could be running by 2012.

Back at home, CF says it's managing its distribution and storage networks
efficiently and keeping plants running at or near capacity. That helps it
deliver to American farmers quickly during times of peak demand.

CF says it has 26% of the nitrogen market and 19% of the phosphate market
across the North American Corn Belt.

But it remains to be seen how the reduction in corn planting this year will
affect CF.

Corn Production Forecasts

The Agriculture Department says U.S. farmers will plant about 86 million
acres of corn, down from the peak last year of 93.6 million. The high cost
for producing corn and the attractive prices for alternatives, such as
soybeans, caused the shift, the government says.

But CF says those early projections could be off. The economics still favor
higher corn planting, the company says.

Even if the lower figures hold, corn acreage will still far exceed the
79-million-acre average that farmers planted between 1997 and 2006.

And if farmers do plant less, they won't leave their fields idle. The
government expects them to plant more wheat, sorghum and other crops that
demand nitrogen.

Globally, demand is high for phosphate fertilizers too, and the company says
supply is tight.

Prices for phosphate fertilizers have skyrocketed as the price for phosphate
rock rises. And no major new capacity is expected in the next two or three
years, the company says.

But CF has its own phosphate mine in Florida, which keeps its costs down.
"We're in heady times in this business," CEO Wilson told analysts.

Uranium Possibilities

Long term, the company is looking for ways to extract uranium from its
phosphate fertilizers, which it could then sell to utilities.

On the nitrogen side, the company is considering converting part of one of
its nitrogen plants to coal, to reduce its reliance on natural gas in North
America.

Credit Suisse analyst Mark Connelly thinks the company's might have been
burned earlier this year by steep increases in the price for sulfur, another
key ingredient in phosphate fertilizers.

CF has longer-term deals with some customers that lock in prices.

That might have crimped margins in the short term, Connelly wrote in an
analyst note. But he thinks the long-term prospects are good.

"Phosphate demand remains high and inventories are low, which has helped
producers raise prices," he wrote.





  • [Livingontheland] Fertilizer Maker Grows As Farmers Struggle To Meet Global Demand, Tradingpost, 04/23/2008

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