Analysts Downgraded Fertilizer Stocks: What Does It Mean?



Analysts downgraded fertilizer stocks

Previously, we saw that most fertilizer stocks declined on April 14 after analysts’ downgrades. Scotia Capital downgraded Agrium (AGU) due to concerns about nitrogen fertilizer prices as well as weakness in the outlook for the agricultural environment beyond 2016.

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Nitrogen prices

Ammonia is the key nitrogen fertilizer. Later, it’s upgraded into other fertilizers such as urea and urea ammonium nitrate. Ammonia and urea prices have been declining since the beginning of 2016. Recently, they rose with the planting season in play. To track fertilizer prices, read A Look at Fertilizer Price and Input Cost Movements as of April 8.

Cowen downgraded the stocks. It stated that “With no help from grain prices and increases in global nutrient supply in excess of demand growth through 2017, we find it difficult to be constructive on the ag-input suppliers.”

Recently, the US issued a prospective plantings report. It showed that the intended acres for corn in the US will increase to 93.6 million acres—6% higher than the 2015 season and 4% higher than what analysts estimated. Read A Look at Corn, Soybeans, and Wheat: Will Prices Suffer This Year? to learn more.

Extended weakness

The excess supply of grains is pushing down crop prices (MOO) and impacting the farm income globally. This is posing a challenge for farmers. This impacts fertilizer spending. It affects companies such as Agrium, Mosaic (MOS), CF Industries (CF), and PotashCorp (POT). Crop prices have been declining in the past two years. The weakness extended into 2016. Given this environment, the Market doesn’t have an optimistic view of fertilizer companies in the next 12 months.


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