Fertilizer Markets and Finance

The U.S. is in the grips of its worst drought in 25 years, farmers are considering pulling out their corn crop early to feed the stalks to cattle, and the World Bank is watching global food supplies.

And fertilizer companies are set to reap huge profits.

The pounding heat and dry conditions that are crippling corn crops are wreaking havoc with supplies. That’s driving prices for the commodity higher.

This growing season is already a write-off, but for the next one, farmers will plant more seed and use more fertilizer and insecticide as they chase those higher corn prices.

That means bigger profits – and soaring stock prices – for companies such as Agrium Inc., Potash Corp., and Mosaic Co.

“It was only six weeks ago that most observers were fearful of a blockbuster U.S. plan and record yield forecast that suggested domestic corn stocks (inventories) were poised the surge. Corn prices were in sharp retreat as a result – until Mother Nature turned up the head,” Steve Hansen, an analyst at Raymond James who covers Potash Corp, wrote in a research report issued last week.

Prices for corn have increased dramatically – 38 per cent since June 1. The price of a bushel now stands at $7.88 (U.S.)

“Sharply higher corn prices should incentivize farmers to maximize their fertilizer applications (this fall and next spring) in order to reap the highest possible return on their future crop.”

Read more at Thestar.com

Corn that has missed pollination due to high temperatures and little rain stands in Geff., Ill. The field is considered a total loss by the farmer. The nation’s widest drought in decades is spreading.                ROBERT RAY/AP