Healthy soil and sustainable growing

["Tradingpost" <tradingpost@lobo.net>]

 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.