Mosaic Plunges in ‘Depressing Day’ for Crop Nutrient Stocks

(Bloomberg) -- Mosaic Co. fell the most in almost six years on bets the world’s biggest phosphate producer is overestimating its prospects amid weather, regulatory and trade disruptions and weaker crop-nutrient prices.

While Mosaic lowered its full-year earnings guidance, citing costs associated with new regulations in Brazil and higher taxes in Canada, Bank of Montreal analyst Joel Jackson said the revised forecast may still be optimistic given phosphate price declines. Investors may also question the company’s expectation that the North American spring fertilizer season will be relatively unchanged, Morgan Stanley analyst Vincent Andrews wrote.

American farmers are faced with oversupplied markets and the prospect of a prolonged trade war between the U.S. and China, while wet weather has slowed planting across the Midwest and interrupted river transport.

A trade deal would be “a shot in the arm,” although it won’t immediately resolve market gluts, Pat Bowe, chief executive officer of U.S. grain handler The Andersons Inc., told analysts on an earnings call Tuesday.

The main driver for stocks appears to be lower commodity prices amid escalating trade tensions, Sanford C. Bernstein analysts including Jonas Oxgaard said in a note. But crop prices have fallen much less than fertilizer shares, signaling equity investors overacted, especially given the fairly weak fundamental link between farm inputs and crop prices, they wrote.

Read More: Farmer-Sentiment Index Tumbles

Shares in Plymouth, Minnesota-based Mosaic lost as much as 9.6 percent on Tuesday, the steepest intraday drop since July 2013. Other fertilizer suppliers also fell, with Nutrien Ltd. losing as much as 3.9 percent and CF Industries Holdings Inc. down as much as 5.3 percent.

“Pretty depressing day if you own fertilizer stock,” said Alexis Maxwell, research director for Bloomberg Green Markets. Combining weather disruptions with Mosaic’s forecast and the on-again-off-again trade war “and the whole thing just kind of crumbled today.”

--With assistance from Mario Parker.

To contact the reporters on this story: Ashley Robinson in Winnipeg (Non BLP Loc) at arobinson193@bloomberg.net;Aoyon Ashraf in Toronto at aashraf7@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Patrick McKiernan

©2019 Bloomberg L.P.