Barclays Getting Bearish On Ag: Downgrades Potash, Mosaic, Lowers Targets On Agrium, CF

Potash prices have been on a downtrend. Barclays’ Matthew J. Korn downgraded the ratings for Potash Corporation of Saskatchewan (USA) POT and Mosaic Co MOS from Equal-weight to Underweight. He reduced the price target for Potash from $16 to $14, while maintaining a price target of $22 for Mosaic.

Analyst Matthew Korn maintained Overweight rating for Agrium Inc. (USA) AGU and CF Industries Holdings, Inc. CF, while reducing their price targets from 96.00 94.00 and from $43 to $40.

Stock Performances

Fertilizer stocks came under pressure, since investors were concerned about corn farmers being on a path to “plant themselves broke,” even though there has recently been a meaningful recovery in nitrogen prices, Korn said.

Potash Prices Down

Potash prices have been falling, and could be reaching a bottom, albeit at a level lower than expected, the analyst pointed out. He wrote, “Across nearly every MOP-consuming region availability looks ample while signs of demand remain unexciting.”

There is growing concern regarding a more significant reduction in the looming Chinese contract settlement. The reduction could approach $70/t.

Korn commented that “persistently low prices combined with pressure from new capacity” are expected to have a substantial negative impact on the earnings prospects of Potash and Mosaic over next year.