Stock Strategist Industry Reports

Digging Into Ag Companies' Results

Seth Goldstein, CFA

Unfavorable weather weighed on the most recent quarterly results for many of the agriculture companies we cover, as a delayed start to the U.S. planting season reduced sales across every crop input category. While seed sales should bounce back in the next quarter, we expect lower quantities of nitrogen and crop chemicals will be used in 2018 as the late start reduces midseason applications. However, stronger potash demand outside North America should more than offset stagnant or slightly reduced demand in North America.

So far this year, potash and phosphate prices have been supported by reduced supply. In potash, new supply delays via lower-than-expected potash production from  SQM (SQM) and  K+S (SDF) have led to a tighter market. We expect this dynamic to continue throughout the year, and we’ve raised our 2018 potash price forecast to $270 per metric ton. Phosphate prices have also been supported by reduced supply as production has decreased in both the United States (from  Mosaic (MOS)) and China. Accordingly, we’ve raised our 2018 phosphate price forecast to $380 per metric ton. Our long-term price forecasts for potash and phosphate are unchanged at $270 and $350 per metric ton, respectively, in real terms.

Seth Goldstein, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.

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