NA Fertilizer Stocks Performed Well In 2010, J.P. Morgan Reports

J.P. Morgan reports that the North American fertilizer stocks have performed especially well over the previous 12 months, as have just about any publicly traded assets connected with agriculture. “The Mosaic Company

is 22% higher, but its appreciation is the smaller of the North American fertilizer group: comparing to 47% for CF Industries Holdings, Inc.

, 42% for Agrium Inc.

and 38% for Potash Corp.

,” J.P. Morgan writes. “It is therefore probably worth spending a few sentences discussing why this is the case and whether the trajectory of the Mosaic performance is likely to change versus the other fertilizer companies in 2011.” J.P. Morgan said that roughly half of Mosaic is phosphate and there is a meaningful DAP capacity addition in Saudi Arabia in 2012 (3 million tons in a 60-million-ton market). “In addition, there are prospects for an additional 4 million tons from OCP in 2013-2015, or a 6% capacity addition,” J.P. Morgan writes. “Annualized demand growth of phosphate is thought to be about 3%, and if demand grew linearly, it is likely that there would be little change in the supply and demand balance, but demand tends not to grow linearly.” J.P. Morgan adds that the timing of changes in demand growth in the context of changes in grain prices, heavier and lighter annual fertilizer applications, and capacity growth (buyers hold back purchases when capacity looms) lead to various uncertainties concerning prices and volumes. The Mosaic Company currently trades at $78.56; Agrium trades at $92.46; CF Industries Holdings trades at $137.68; Potash Corp. trades at $165.92.