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Agricultural Chemical Companies Had A Good Start To 2020, And BofA Says It's Over

May 11, 2020 11:36 am
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Agricultural Chemical Companies Had A Good Start To 2020, And BofA Says It's Over

While agricultural chemicals companies reported significant volume growth in the first quarter, U.S.-centric suppliers have likely peaked, according to BofA Securities.

Analyst Downgrades Corteva, CF Industries, Nutrien, Mosaic 

Steve Byrne downgraded Corteva Inc (NYSE:CTVA) from Neutral to Underperform with an unchanged $27 price target. 

The analyst downgraded CF Industries Holdings, Inc. (NYSE:CF), Nutrien Ltd (NYSE:NTR) and Mosaic Co (NYSE:MOS) from Buy to Underperform, with price targets of $25, $38 and $12, respectively.

BofA's Takeaways 

Cash prices for corn and soybeans could dip to their lowest in 14 years due to record corn acreage, lower fuel ethanol consumption and all-time high soybean production in Brazil, Byrne said in the Monday downgrade note. (See his track record here.)

A decline in farm income levels could lead to delayed fertilizer purchases, lower seed prices and greater discretion for all crop inputs, the analyst said. 

BofA expects the agriculture industry to struggle in the back half of 2020 and believes it could continue to be under pressure in 2021, he said.

Other chemical sub-sectors, like coatings, specialty chemicals and gases, may deliver solid results in the second half of the year if social distancing eases and the broader economy recovers, Byrne said. 

Byrne maintained a Buy rating for FMC Corp (NYSE:FMC), citing its “global breadth, resilient earnings growth, and minimal US corn exposure.”

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