Stifel Update Identifies Top Fertilizer Industry Investment


Stifel maintained its Hold rating on Mosaic stock and lowered the $70 price target to $67. The stock traded near $59 in the noon hour Friday. Earlier this year, Mosaic acquired privately held Plant Response, a biological-based provider of crop inputs and technology. The acquisition was Mosaic’s first since 2016’s $2.5 billion purchase of Vale’s fertilizer business in Brazil.

Stifel’s analysts commented:

Mosaic is a global leader in phosphate and potash nutrients, which benefit from comparatively lower demand elasticity versus other globally traded commodities due to their vital role in crop growth. Potash markets should remain relatively stable, but upside is limited, owing to Nutrien’s plan to keep markets balanced via excess capacity for the foreseeable future. This leaves Mosaic’s fate to be largely decided by phosphate markets, where we do not see an immediate catalyst for improvement.

Risks include lower-than-expected fertilizer prices, declines in crop prices, a stronger U.S. dollar, operating risks, geopolitical risks and mine operating risks.

The Hold rating on CF Industries was maintained, but the $107 price target was cut to $93. The stock traded at around $95 in the noon hour Friday. The company is the world’s largest producer of nitrogen, and it benefits from relatively lower demand elasticity than many commodities because soil nitrogen must be replaced every year.

Stifel noted that nitrogen markets have recovered thanks to Chinese-led rebalancing of the market and a slowdown in production capacity growth. However, Stifel commented, “we believe near-term upside may be limited by declining nutrient affordability and the recent reversion in fossil fuel feedstock spreads.”

Risks to the price target include lower coal and gas prices, lower-than-expected fertilizer prices, declines in crop prices, a stronger U.S. dollar and operating risks.

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