China, the world’s largest potash consumer, is more likely to pay a higher price for imports of the fertilizer after grain prices soared because of a drought in the U.S., according to Mosaic Co. (MOS)
Corn futures have jumped 52 percent in Chicago in the past month and soybeans have climbed 21 percent as the worst U.S. drought in a generation damages crops. Mosaic Chief Executive Officer Jim Prokopanko said that will influence talks currently in progress between China and North American potash suppliers about a six-month supply accord.
“That strengthens our hand,” he said yesterday in a telephone interview from Mosaic’s headquarters in Plymouth, Minnesota. “The more grain is worth, the more fertilizer is worth.”
Mosaic, based in Plymouth, Minnesota, rose 5.1 percent to close at $58.21 yesterday in New York, the biggest gain since April 25.
Most market watchers expect China will end up paying the same or less, Edlain Rodriguez, an analyst at Lazard Capital Markets LLC in New York, said yesterday in a telephone interview.
“It is very unlikely Canpotex will get a higher price,” Rodriguez said, referring to Canpotex Ltd., the international trading arm of the largest U.S. and Canadian potash producers. “North American inventories are relatively high.”
Mosaic yesterday posted fiscal fourth-quarter earnings and revenue that beat analysts’ estimates. The company said it sold potash at an average of $455 a metric ton in the quarter through May, 13 percent more than a year earlier. It forecast an average price of $415 to $440 a ton in the current quarter.
China currently pays about $470 a ton for potash including freight costs, unchanged from the previous contract, Rodriguez said.
Prokopanko said he expects India to conclude potash price talks as early as September. A weaker rupee and cuts in government fertilizer subsidies may mean an agreement isn’t possible this year, he said.
Mosaic said it plans to raise its quarterly dividend to 25 cents a share from 12.5 cents. Fourth-quarter net income dropped 22 percent to $507.3 million, or $1.19 a share, from $649.2 million, or $1.45, a year earlier.
Profit excluding plant-closing costs, losses on derivatives and including a 2-cent foreign-exchange gain was $1.27 a share, topping the $1.15 average of 16 analysts’ estimates compiled by Bloomberg. Sales fell 1.4 percent to $2.82 billion, beating the $2.56 billion average of 11 estimates.
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