Mosaic Co. on Thursday forecast growing demand for fertilizer next year even as U.S. farmers grapple with lower crop prices and profits.
Executives at the Plymouth-based company, one of the nation's largest producers of fertilizer, used its quarterly earnings announcement to attack perceptions that the collapse of corn and soybean prices this year will lead farmers to cut back on fertilizer next year.
"Think about it this way: if you buy a thoroughbred racehorse, you're not going to try to recoup your cost by not feeding it," Jim Prokopanko, Mosaic's chief executive, told investors and analysts.
American farmers are in the midst of a second record-breaking harvest, helped by favorable weather. That led to a drop in commodity prices, which means lower revenue and profit for farmers. Many analysts forecast farmers, in turn, will try to lower costs next year by cutting back on fertilizer and chemicals.
Prokopanko said Mosaic takes a global view and that, while the U.S. farmers contend with the economic effects of record harvests, farmers in South America and Southeast Asia experienced drier than normal years.
"We return to the simple concept that the world needs all the food they can grow and it needs a lot more of that food in the coming years," he said.
Prokopanko said he expects U.S. farmers to pull some land out of production next year and defer equipment purchases. But he suggested they will be less inclined to cut back on chemicals. "We know farmers are going to farm and, when they do, we're confident they will follow good business economics and work to maximize yields from every planted acre," he said.
Mosaic forecast global shipments for phosphate, a key ingredient in fertilizer, to rise 1.5 percent to a range of 64.5 million to 66.5 million tons next year. And global shipments of potash, another ingredient, will rise 2.6 percent to around 59 million tons.
Mosaic's shipments this year are likely to be the highest in five years and close to its 2008 record. In the third quarter, Mosaic's phosphate sales amounted to 3.3 million tons, up from 2.7 million a year ago. And potash sales were 1.8 million tons, up from 1.4 million a year ago.
It previously said that it was throttling back phosphate production about 23 percent during the fourth quarter because of higher production costs.
The company said it earned $202 million, or 54 cents a share, in the quarter, well above last year's 29 cents a share. One-time expenses reduced its latest profit by 2 cents a share. Revenue was $2.3 billion, up 21 percent from a year ago when it coped with a plunge in potash prices tied to the collapse of a cartel in Eastern Europe.
The company's shares rose 1.6 percent Thursday, in line with gains in the broader market.
Evan Ramstad • 612-673-4241
