This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

8 Fertilizer Stocks Primed for Growth

Stocks in this article: CF POT MOS AGU TNH UAN IPI CVI

BOSTON (TheStreet) -- Don't turn up your nose at fertilizer.

As we enter the spring planting season, several fertilizer and agricultural chemicals stocks could be worth a look as analysts are upbeat on this historically volatile industry because the government says farmers will plant more corn than in the past 75 years.

Fertilizer prices generally track crop prices, but they fluctuate with world food demand and weather patterns, among other things. That means there are lots of wildcards in this industry, but one of the greatest is how much corn China will import this year as it is the world's largest consumer. So far, the outlook is for much more than last year.

And corn prices have already been at a cyclical high for the past few years, in part due to its use in ethanol and rising demand from Asia. What's more, the U.S. Department of Agriculture said that, as of March 1, corn supplies nationally were down about 8% from a year ago.

All those factors set up a scenario for ever-higher prices for corn, which is used in everything from fuel and animal feed to syrup for soda.

10 Stocks That Fidelity Funds Are Buying

As a result of that outlook, farmers are expected to plant 4% more corn acreage than a year ago, which would make it the highest planted acreage dedicated to corn since 1937, according to the USDA.

Corn, in particular, requires lots of nutrients, which means higher demand for fertilizer commodities, principally potash, phosphates and nitrogen.

Acreage dedicated to wheat crops are also expected to increase this year, by 3%.

Goldman Sachs (GS) said it is bullish on fertilizer stocks in a report on the industry Friday. "Industry fundamentals have turned significantly more favorable since the last round of updates, with exceptional pricing gains in nitrogen and tentative signs of a recovery in phosphate and potash materializing.

"At the same time, (investor) sentiment remains negative, reflected in compressed multiples and ramping short interest," Goldman said. "This backdrop of improving fundamentals and low (investor) expectations is an attractive trading setup, in our view," especially as earnings are expected to improve in the second half of this year.

Similarly, Morningstar analyst Jeffrey Stafford said in a March 13 research note that "the potash market is attractive for a number of reasons. As potash is one of three essential crop nutrients, we think demand will grow as farmers strive to increase yields to feed a swelling global population. Moreover, the potash industry benefits from barriers to entry, as new (environmentally sensitive) greenfield projects are expensive and time-consuming.

10 Stocks That Could Rise in Market Decline

"Also, the industry is dominated by a handful of major players, leading to mostly rational pricing and supply decisions," he said. "In our opinion, potash prices will remain above historical levels, even as new capacity is added."

Finally, the International Fertilizer Industry Association said in its 2012 outlook that it expects 2.6% growth in fertilizer sales worldwide, to a record amount of tonnage.

Here are summaries of eight fertilizer industry stocks in inverse order of their market value:

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs