Mosaic gives the first indication of overall strength among the other fertilizer makers. Potash Corp. of Saskatchewan, Inc. (NYSE: POT) is expected to post EPS of $0.93 for the quarter ending this month, more than double its EPS of $0.44 in the same period a year ago. Agrium Inc. (NYSE: AGU) is expected to show EPS of $1.85 in same period, up from EPS of $0.37 a year ago. Analysts expect CF Industries Holdings, Inc. (NYSE: CF) to post EPS of $4.56 in the September quarter, up from $1.10 a year ago. Only Monsanto Co. (NYSE: MON) is expected to post an EPS loss of -$0.27 for the current quarter, largely due to weakness in sales and margins of its Roundup herbicide.

The demand for fertilizer, particularly potash, reflects an effort among the world’s farmers to increase yields as crop prices remain relatively high. Expectations for crop plantings in the 2012-2013 crop year indicate that global wheat acreage could rise to about 563 million acres in 2012, up 4% from last year, while corn plantings could rise to 94.3 million acres world-wide.

But even if acres planted don’t increase much, farmers everywhere are looking to increase yields. China, for example, plants nearly as many acres of corn as the US, but yields are just half as large. If the country’s farmers could increase their yields, the amount of corn China must import to feed its people would fall.  The country has also restricted consumption of corn for industrial purposes like sweeteners and ethanol.

In what could be a boost to seed makers like Monsanto and Syngenta AG (NYSE: SYT), China is also considering allowing the import of genetically modified seed even as it tests a domestically developed strain of corn seed. The country does allow import of genetically modified strains of corn for consumption.

Farmers chasing yield improvements are expected to be the driving force behind fertilizer makers’ growth. Mosaic received an average of $446/metric ton of potash in its first quarter, up from $331 in the same period a year ago. The company guided potash prices for the second quarter at $440-$465/metric ton. For its phosphate products, Mosaic received $576/metric ton in the first quarter, compared with $431 in the same period a year ago. Phosphate prices for the second quarter were guided at $600-$625/metric ton.

While farm prices remain high, fertilizer makers can raise prices and still maintain volume. Mosaic guided shipment levels for potash at 1.7-2.1 million metric tons for the second quarter, compared with shipments of 1.8 million metric tons in the first quarter. Shipments of phosphates are expected to rise to 3.1-3.5 million metric tons in the second quarter, compared with 3.2 million metric tons shipped in the first quarter.

The fertilizer business is strong now and looks to remain that way for the coming year.  Market Vectors Agribusiness ETF (NYSE: MOO) is also up by more than 1% at $45.01 and its 52-week range is $43.00 to $57.93.

Paul Ausick

Overall weakness in US economic growth, combined with still shaky European sovereign debt and some slowing in the emerging markets have dampened enthusiasm for equities. The Dow appears headed for a ninth straight day of losses and the S&P 500 has posted a new low for the year. There have to be some winners among equities, don’t there?

One place to look is fertilizer companies. CF Industries Holdings Inc. (NYSE: CF) has been rising steadily for the past 52-weeks and is now about 90% higher than its 52-week low. The company’s trailing 12-month P/E ratio is 17.37, and its forward P/E is 9.98. The price/book ratio is at 2.5. CF Industries reports earnings tomorrow and analysts are expecting EPS of $5.87 on revenues of $1.76 billion. Three months ago EPS estimates were $5.39, so the bar has been set higher rather than lower.

CF Industries is just the top dog among several fertilizer companies that have experienced good growth in the past 12 months. Potash Corp. of Saskatchewan (NYSE: POT) has posted share price growth of nearly 60%, Mosaic Co. (NYSE: MOS) is up more than 40%, Syngenta AG (NYSE: SYT) and Agrium Inc. (NYSE: AGU) are both up more than 35%, and Monsanto Co. (NYSE: MON) has gained about 20%.

Global demand for food is high and rising, and increasing yields on available farmland is the quickest and cheapest way to get more food. These growth rates are, perhaps, too strong to be sustainable, but barring some enormous foul-up on the part of fertilizer makers, the upward trend in share prices is likely to continue.

For ETF investors, the PowerShares DB Agriculture ETF (NYSE: DBA) has posted a share price gain of around 28% this year, leading the Market Vectors Agribusiness ETF (NYSE: MOO) by a couple of percentage points of gain. DBA is down about -1% today, at $32.47, within a 52-week range of $25.45-$35.58. MOO is also down about -1%, at $52.07, in a 52-week range of $41.03-$57.93.

Paul Ausick

Analysts at Citigroup have raised both Potash Corp. of Saskatchewan (NYSE: POT) and Mosaic Co. (NYSE: MOS) from ‘hold’ to ‘buy’. Citi also raised Mosaic’s price target from $84/share to $85, and raised its price target on shares of Agrium Inc. (NYSE: AGU) from $94/share to $96, while maintaining a ‘hold’ rating on the shares. Fertilizer makers have gained anywhere from about 40% to more than 120% in the past 12 months.

CF Industries Holdings, Inc. (NYSE: CF) is the big gainer and the stock is trading off slightly today, at $153.03, down about -1.4% in a 52-week range of $57.56-$158.42. CF gained more than 12% just last week. Monsanto Co. (NYSE: MON), which has posted a 40% share price gain in the past year, and Syngenta AG (NYSE: SYT), up about 50% in the same period, are just following along.

There’s no big mystery about what’s going on. Demand for food is up and perhaps the cheapest way to grow more food is to add more fertilizer. It beats clearing new land (if that’s even possible).

A dry year so far has boosted prices for malting barley in Europe. Prices have jumped from about $300/metric ton in November 2010 to around $380/metric ton in May.

The long delays in corn planting in some parts of the US could lead farmers to plant barley, a crop that can thrive with a shorter growing season. The drought in Europe has hit the barley crop very hard, and the number of US acres already set for planting is just 2.95 million acres, the second lowest total on record. Canada’s recently boosted its barley price to about $360/metric ton.

Rising prices for barley are not the only thing hurting brewers — demand is falling as well. Anheuser-Busch InBev SA (NYSE: BUD), Molson Coors Brewing Co. (NYSE: TAP), and Boston Beer Co., Inc. (NYSE: SAM) are all feeling the effects of lower sales, and the coming rise in barley prices won’t help. Anheuser-Busch InBev is trading up about 3% today, at $60.32, in a 52-week range of $46.19-$60.38. Molson Coors is trading down fractionally at $46.59, in a 52-week range of $40.35-$51.11. Boston Beer is down about -0.5%, at $82.97, in a 52-week range of $60.95-$100.93.

Finally today, Russia announced over the weekend that it would resume wheat exports in July. The country could export up to 20 million metric tons of wheat out of a crop that could be as high as 85-90 million metric tons. The news has hit European markets hard and US wheat futures in Chicago are down more than -5%, at about $7.78/bushel.

The PowerShares DB Agriculture Fund (NYSE: DBA) is off about -0.4%, at $32.70, in a 52-week range of $22.85-$35.58. The Market Vectors Agribusiness ETF (NYSE: MOO) is up nearly 1%, to $55.22, within a 52-week range of $35.62-$57.93.

Paul Ausick

For food producers, fertilizer costs are rising rapidly so far in 2011, though not as quickly as they did in 2010. In Illinois, anhydrous ammonia is up $20/ton, diammonium phosphate (DAP) is up $15/ton, and potash is up $33/ton so far this year.

As fertilizer prices rise, crop prices also rise, likely because more crops like corn and soybeans are planted, which increases the demand and price for fertilizers. Because farmers can pay the higher prices for fertilizer as a result of the higher prices they receive for their crops, fertilizer prices rise again. This scenario closely resembles the classic inflationary wage-price spiral.

According to the Dairyherd Network, it cost $113/acre to fertilize corn in August of 2010. By mid April 2011 it cost $155/acre, a jump of 37%. Of that cost $58/acre was spent on nitrogen fertilizer in 2010, while $85/acre is the current cost of nitrogen.

The price of a bushel of corn last August was about $3.73, compared with about $7.55 today. Figuring 300 bushels/acre, one acre of corn in August 2010 yielded $1,011, compared with $2,265 today. Ignoring other costs and subtracting fertilizer costs, an acre of corn in August put $898 in a farmer’s pocket. Today, that same acre puts $2,110 in the same pocket.

The actual numbers could be different from this back-of-the-envelope calculation, but the conclusion remains the same. The more acres a farmer plants in corn, the more fertilizer they need to buy. More fertilizer costs more, but it increases the payoff by about 2.5 times. The only question is how long this can continue.

In the Southwest, the US wheat harvest on 36% of planted acres is projected to be either “poor” or “very poor.” More than half the country’s winter wheat comes from Texas, Oklahoma, and Kansas, and both Texas and Oklahoma are the driest they’ve been since the Dust Bowl years of the 1930s. The outlook for rain in Kansas, which alone produces one-quarter of US winter wheat, is promising, provided the storms don’t coalesce into severe thunderstorms or tornadoes. Winter wheat prices in Kansas City are around $8.74/bushel, down slightly from yesterday.

China has turned back at least four cargoes of South African coal in the past month, sending them all back to European buyers. China’s rejection of the coal is not unusual, but previously the coal was taken by other Asian buyers. The re-sold coal is competing with Australian coal, which has made its way back into the European market for the first time in years. Low prices for China’s domestic coal is responsible for the resales.

Gold prices rose to a record high at $1,487/ounce earlier this morning before pulling back to around $1,485. Silver rose to another 31-year record high of $42.80 as well. The SPDR Gold Shares ETF (NYSE: GLD) posted a new 52-week high this morning, putting its 52-week range at $110.54-$145.07. No to be outdone, the iShares Silver Trust (NYSE: SLV) also posted a new 52-week high, putting its 52-week range at $16.73-$41.82.  As noted earlier today, the calls for $50 silver are growing.

Paul Ausick

Other fertilizer and seed companies, including Monsanto Co. (NYSE: MON), Mosaic Co. (NYSE: MOS), Potash Corp. of Saskatchewan (NYSE: POT), Agrium Corp. (NYSE: AGU), Intrepid Potash Inc. (NYSE: IPI), and Compass Minerals International Inc. (NYSE: CMP), are generally expected to be among the lifted boats.

Syngenta reported sales for its first quarter of $4.02 billion, with year-over-year growth of 11% in its crop protection segment, to $2.79 billion. The company’s seeds segment grew 20%, to $1.24 billion. Overall, Syngenta’s revenue beat estimates by about $100 million for the quarter. For the full year, analysts expect earnings to total $1.77 billion, which calculates out to EPS of about $3.84.

Monsanto reported first quarter EPS last week of $1.88 on revenue of $4.13 billion, and re-affirmed its full-year guidance for EPS of $2.72-$2.82. Both its actual revenue and its guidance were below analysts’ expectations, causing a share price drop of about -4.5% from which the stock has not yet recovered. With the exception of Syngenta, Monsanto also dragged down all the other stocks as well. Monsanto reports third fiscal quarter results in late June, and is expected to post EPS of $1.12 on revenue of $3.4 billion.

Mosaic reported its fiscal third quarter earnings about two weeks ago, handily beating expectations by posting EPS of $1.21, compared with expectations of $1.08. Revenue totaled $2.2 billion, below estimates of $2.34 billion. The company reports its fourth quarter earnings in July, and is expected to post EPS of $1.38 on revenue of $2.57 billion.

Potash Corp. reports its first quarter earnings on April 28th. The company is expected to post EPS of $0.80 on revenue of $2.02 billion. The company tripled its margins on nitrogen fertilizer in the fourth quarter of 2010, and forecast strong prices through the spring planting season for corn, which requires a lot of nitrogen. The company’s potash fertilizer, though, is its main profit driver and will continue to be so for 2011.

Agrium is scheduled to report first quarter earnings on May 4th. Analysts expect EPS of $0.93 on revenue of $2.3 billion. The company did not provide 2011 guidance other than to note tight supplies of nitrogen, phosphate, and potash fertilizers were likely to give profits a boost in 2011.

Intrepid reports first quarter earnings on May 4th, and is expected to post EPS of $0.32 on sales of $102 million. In a preliminary sales report the company said it produced 230,000-240,000 tons of potash in the quarter and sold it at an average price of $435-$445/ton. That yields a revenue range of about $100-$107 million.

Compass reports first quarter earnings on April 27th, and is expected to post EPS of $1.80 on revenue of $400.3 million. In the fourth quarter the company posted EPS of $1.70, short of estimates of $1.83. Its specialty fertilizer division more than doubled quarterly sales in the fourth quarter of 2010 compared with the same period in 2009. But average sales price per ton fell, clipping margins. Compass expects revenues to be good in 2011, but margins will continue to be a problem.

Syngenta shares are up more than 1% in early trading, to $68.18, after posting a new 52-week high of $68.67 just after the market opened. The Market Vectors Agribusiness ETF (NYSE: MOO) is down fractionally, as are all the other stocks mentioned here except Compass, which is up about 0.05%, to $92.70, within a 52-week range of $68.50-$98.00.

Paul Ausick

Corn prices have turned back northward today, trading up more than $0.10 at $7.68/bushel. The crop set a new 33-month high of near $7.89/bushel on April 11th. Concerns over delays in spring planting and low inventories are pushing the prices up again today. With about 5 billion bushels of the US corn crop going to produce fuel ethanol, it should be no surprise that prices are booming. Ethanol production now drives demand for corn.

Reuters is reporting that the US EPA and its Canadian counterpart will begin reviewing a key, but controversial, chemical in Round-up, the herbicide developed and marketed by Monsanto Co. (NYSE: MON).  Glyphosate, the key ingredient in Round-up, was introduced in 1974 and is currently used world-wide to eliminate weeds in corn, soybean, and cotton fields. Non-farmers use the stuff to control weeds in gardens and lawns as well.

Monsanto’s patent protection on glyphosate ran out in 2000, and since then other fertilizer and farm products companies have released their own herbicides containing the chemical. Syngenta AG (NYSE: SYT), The Dow Chemical Co. (NYSE: DOW), E.I. du Pont de Nemours and Co. (NYSE: DD), and BASF SE (OTC: BASFY) are the other large makers of glyphosate-based products.

Glyphosate has come under attack for causing cancer, infertility, leading to the development of herbicide-resistant weeds, and causing changes to soil chemistry. Monsanto and other herbicide makers claim that glyphosate is safe and that its use should not be restricted because it is so valuable to farmers.

The US EPA will review the risks from glyphosate and has set a deadline of 2015 as the date for a decision on whether the chemical can continue to be sold or should be in some way restricted. The EPA’s review will include a number of studies indicating that glyphosate could contribute to spontaneous abortions and infertility in pigs, cattle, and other livestock. Monsanto rejects such studies as invalid, and reiterates its claim that glyphosate is safe.

Australian miner Rio Tinto plc (NYSE: RIO) expects to raise production of iron ore and metallurgical coal as it recovers from the damage caused by typhoons and heavy rains in Australia earlier this year. The company expects production of iron ore to rise from 184.6 million tons in 2010 to 191 million tons in 2011. Metallurgical, or coking, coal production is expected to rise to from 9 million tons in 2010 to 9.3 million tons in 2011, while thermal coal production is expected to fall slightly from 18.4 million tons to 18.2 million tons. Production of alumina is also expected to be slightly higher in 2011, but production of mined copper is expected to be lower by about -21%, at 539,000 tons.

After hitting a low below $270/thousand board feet, lumber prices are back up slightly today to $276/thousand board feet. Lumber prices hit a recent peak of around $342/thousand board feet in January. Lumber’s tumbling price is primarily a reaction to the slow pace of homebuilding in the US. Log exports to China and Japan have not closed the gap, although demand from Japan should pick up as the nation starts to rebuild after the earthquake and tsunami.

Paul Ausick

Farm equipment makers like Deere & Co. (NYSE: DE) and CNH Global NV (NYSE: CNH) have seen share prices rise substantially this year. Fertilizer and seed producers, for the most part, have also done well. Potash Corp. of Saskatchewan, Inc. (NYSE: POT), The Mosaic Co. (NYSE: MOS), Syngenta AG (NYSE: SYT), Intrepid Potash Inc. (NYSE: IPI), Agrium Inc. (NYSE: AGU), and Monsanto Corp. (NYSE: MON) have watched share prices rise between 25% and 80% since July 1st. The Market Vectors Agribusiness ETF (NYSE: MOO) is up about 40% in the same time frame.

Deere is scheduled to release earnings on November 24th, and analysts are estimating EPS of $0.93 on revenue of $6.2 billion. In the same period a year ago, Deere posted EPS of $0.23, way above then-estimates of $0.03. The company has hammered estimates every quarter since.

In its most recent earning report on October 21st, CNH posted EPS of $0.43, about 27% above estimates. Like Deere, since a year ago, CNH has pounded estimates. For the quarter ending in December, CNH is expected to post EPS of $0.42 on revenue of $3.69 billion, reflecting sales growth of about 15%.

Potash Corp.’s share price has been distorted by the $38.6 billion buyout offer from BHP Billiton plc (NYSE:BHP). The $130/share offer boosted the company’s share price from around $112 to more than $150. Now that BHP says it’s withdrawing the offer, the share price will decline again, even with the company’s plan to buy back $4.2 billion in stock. But demand for potash fertilizer will keep Potash Corp. earnings and revenues rolling in, with estimates for the current quarter at EPS of $1.60 on revenue of $1.57 billion. The EPS estimate is double the year ago’s actual EPS.

Mosaic, which is majority owned by privately held Cargill, Syngenta, Intrepid, and Agrium should continue to post solid numbers as demand for fertilizer follows demand for the agricultural commodities. Cotton, corn, wheat, and soybean prices will encourage farmers to plant more and to get the expected yields, farmers will buy more fertilizer as well.

Monsanto has been struggling with sales of its latest modified corn seed, and a drop in sales of its Roundup Ready seeds. Analysts expect that to turn around somewhat in 2011, with EPS estimates rising from $2.79 in the year ending August 2011 to $3.31 in the 2012 fiscal year. Those estimates have been declining over the last 90 days, and Monsanto still looks to have an uphill climb.

Paul Ausick

First, a look at the main player. Potash Corp. closed at $112.15 last Friday with a mean price target of $129.30 and a forward P/E ratio of 18.99. Potash Corp. is the largest potash producer in the world and holds rights to more than 773,000 acres of land for mining.

Following BHP’s offer, on Monday Mosaic Co. (NYSE: MOS) closed at $55.60 with a mean price target of $56.17 and forward P/E ratio of 13.97. Mosaic is the world’s second largest potash miner and the larges producer of phosphate products. It’s relatively low forward P/E and solid mining assets make it an attractive, if fairly rich, target.

Agrium Inc. (NYSE: AGU) closed Monday at $68.89 with a mean price target of $76.26 and a forward P/E ratio of 12.11. Agrium is more diversified than Potash Corp. and has just made an offer to buy an Australian grain marketing firm. The company failed in its effort to acquire CF Industries Holdings, Inc. (NYSE: CF), and could be a target for a company looking for retail outlets in North and South America as well as Australia and New Zealand.

CF Industries closed Monday at $88.53 with a mean price target of $92.82 and a forward P/E of 11.38. Analysts at Goldman Sachs recently put a price target of $110/share on CF and raised the shares from ‘neutral’ to ‘buy’, mostly on the strength of the company’s phosphate and nitrogen businesses. CF doesn’t produce any potash.

Intrepid Potash, Inc. (NYSE: IPI) closed Monday at $25.30 with a mean price target of $26.15 and a forward P/E ratio of 20.08. The forward P/E ratio could just be wishful thinking because Intrepid is too small to attract a big player such as BHP. And the company’s trailing twelve month P/E ratio is nearly 60.

Compass Minerals Intl. Inc. (NYSE: CMP) closed Monday at $73.69 with a mean price target of $80.67 and a forward P/E ratio of 12.38. Compass produces potash fertilizer for high-value crops that is approved for use in organic farming. Again, Compass is not large enough to attract a BHP-size company, but could be attractive to CF or Agrium.

The prospect of a bumper wheat crop in the US that could be large enough to cover the several million metric tons of wheat that Russia bans from the market likely will act as a drag on wheat prices until the harvest is in. Fertilizer and seed stocks are likely to benefit from the coming planting season for winter wheat and from next spring’s planting, both of which could be larger than this year.

Our technical analysis affiliate, Adam Hewison of INO, has a charting audio-video analysis that discusses how huge this move has been in wheat prices and where the could go from the high levels seen currently.

ADM opened the week at $27.75 and hit a weekly high this morning of $30.98 before giving some back on news that wheat prices haven fallen about 5% from yesterday. The Thomson/First Call mean target price for ADM is $35.71. ADM could make a run at that price. The stock’s 52-week high is $33.00, set back in November. Today’s ADM share price is about $2 higher than the same day a year ago, so the price target is within range.

Deere’s mean target price is $72.60 and that is well within range. Shares opened the week at $67.27 and set a new 52-week high yesterday of $69.10 before falling back about $2 currently. Again, the coming planting seasons are likely to improve demand for Deere’s equipment as the prospect of higher prices gives farmers a boost.  Monsanto started the week at $58.39 and climbed above $62 before falling back today to around $60. The mean target for this stock is $60.34. Look for new targets any day now.

Potash Corp. opened the week at $106.61 and rose more than 10% to more than $116 before falling back to around $113 today. The mean price target for the shares is $121.98, which is below the stock’s 52-week high of $128.42 reached in March. Potash, like the other fertilizer makers, should get a boost from the November planting season and the price target is definitely within reach.

Syngenta shares started the week at $45.44 and hit a weekly high today of $49.21 before falling to around $48.50. The mean price target for the stock is $52.83. Whether the company threatens that price depends on getting a boost in European sales, which is hard to predict at this point.

Mosaic opened this week at $47.08 and climbed to a high of $52.78 today, before retreating to around $51. The target for the stock is $55.72, well below the 52-week high of $68.28, so probably within reach.

Terra Nitrogen, which is a master limited partnership that is now owned by CF Industries (NYSE:CF), opened the week at $83/common unit before jumping to $94.71 this morning. The shares are now trading at around $94, mostly on the strength of a very positive quarterly earnings report. The stock’s 52-week high is $115.62, and there is no mean price target established for the stock. Using the high as a bar, that’s a pretty high one to get over, requiring a jump of more than 20% in the share price.

Market Vectors Agribusiness ETF opened the week at $42.12 and posted a weekly high of $44.12 earlier today. Shares are trading at around $43.50 currently. Six of the stocks covered in this report are included in the ETF, accounting for about 41% of the fund’s total holdings. The three largest holdings are Mosaic at 8.12% of assets, Syngenta at 8.07%, and Monsanto at 7.92%.

Whether this situation in Russia is short-lived or will pose longer-term issues is one thing.  The moves seen in many of these companies is another issue entirely.

Paul Ausick