Tight global food supplies and the need for farmers to plant more crops will outweigh broader economic trends, supporting prices for agricultural commodities and fertilizer, Mosaic Co. (MOS) said Thursday.
The market "frets way too much about the impact of a potential economic slowdown on food demand," said Michael Rahm, vice president of market and strategic analysis for the fertilizer producer. He noted during a conference call with investors that demand for grain and oilseeds remained strong during the global recession.
Stockpiles of key crops, particularly corn, remain historically low, and farmers will need to plant more in 2012 to start replenishing supplies, he said. That would support Mosaic's business, as corn requires more fertilizer than do other crops.
Corn prices will need to climb high enough to compel farmers to plant 93 million to 95 million acres, up from 92.3 million this year.
Rival CF Industries Holdings Inc. (CF) earlier this month projected corn acreage of 93.5 million acres. Market analysts widely agree corn acreage will climb in 2012, but there are questions about how much acreage could reasonably be added. Analysts noted that overall acreage for U.S. crops is finite, and that any additional acres for corn would mean fewer acres for soybeans or other crops.
But Rahm said that the USDA is currently overstating corn acreage for 2011, and that a downward revision will help prices go higher, giving farmers the incentive to plant more corn.
"There's some positive fundamental news still to come from the corn market," Rahm said.
Mosaic shares are falling after reporting a jump in first-quarter earnings that was weaker than expected. Analysts noted concerns about weaker-than-expected guidance on phosphate volumes and potash pricing for the second-quarter.
Mosaic, based in suburban Minneapolis, was recently down 7.1% to $53.11 a share and is at a 52-week low.