Agrium Shares Tumble on Downgrade, Lower Fertilizer Demand

  • Analyst cites lower nitrogen prices, weak agriculture outlook
  • Shares of other fertilizer makers slump as demand falls

Agrium Inc., the largest agricultural retailer to U.S. farmers, posted its biggest two-day loss since August after Scotiabank downgraded the company’s shares amid weaker demand for fertilizer. Other crop-nutrient producers fell.

Bank of Nova Scotia analyst Ben Isaacson reduced the recommendation on Calgary-based Agrium to sector outperform in a note on Thursday, citing lower nitrogen-fertilizer prices and a weaker agricultural outlook beyond 2016. While that’s still the equivalent of a buy rating, Agrium had previously been on the bank’s list of so-called focus stocks. The downgrade came one day after Hedgeye Risk Management, recommended shorting the stock.

Agrium shares tumbled 5.6 percent to $83.22 in New York, after a 1.3 percent drop on Wednesday. Shares of other North American fertilizer makers, including Potash Corp, Mosaic Co., and CF Industries Holdings Inc., also fell as a rout in crop prices is taking its toll on the companies. Three straight years of declining corn, wheat and soybean futures have shrunk farmer income and lowered demand for growing supplies.

Cowen and Co. analysts Charles Neivert and Jeffrey Rossetti downgraded several fertilizer stocks, including CF Industries and Mosaic, to underperform, according to a Thursday report.

“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,” they said.

  • Hedgeye analyst Jay Van Sciver recommends a short on Agrium as retail margins are weakening and history suggests a further drop for shares of as much as 50 percent into 2017, he wrote in a note.
  • Uralkali PJSC, the largest miner of potash by volume, sees 2016 potash demand falling to as low as 58 million metric tons from 61 million tons in 2015 on falling consumption in India and China, the company said in a presentation.
  • CIBC analyst Jacob Bout cut Potash Corp. to sector perform earlier this month to reflect the prospect of soft potash markets in the foreseeable future, according to a note.
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