US corn sowing delays stoke drop on Agrium shares

Shares in Agrium tumbled 6%, leading fertilizer shares lower, after the farm retail and fertilizer group highlighted a list of hurdles - including lower-than-forecast US corn sowings - to profits growth in the current quarter.

The Canada-based company revealed it had got off to a better-than-expected start to the year, helped by a scramble by growers for fertilizers and herbicides to maximize yields and cash in on high crop prices.

Earnings per share for the January-to-March quarter, at $1.09, beat market forecasts of a $0.92-a-share result.

However, Agrium's forecast for the full first half of 2011, including the seasonally stronger April-to-June period was, at $4.40-4.90 a share, below the expectations of many analysts.

Sowings miss?

The group blamed its "fairly cautious" outlook statement on factors including higher natural gas prices, pre-sales of urea fertilizers at weak prices earlier in the year, higher freight costs, and the strength of the Canadian dollar, which makes the country's exports less competitive.

The company is also to take temporary shutdowns in June at one phosphate and one nitrogen operation.

However, Richard Gearheard, head of the group's retail business, also flagged the impact of US corn sowings falling short of the US Department of Agriculture's forecast.

"It probably will fall a little short of the 92m acres," Mr Gearheard told investors.

"We are late," with sowings, as of Sunday, only 13% complete, compared with 66% a year ago.

Soybeans vs corn

While the situation was "not a disaster by any stretch... in some of the fringe markets you might see more soybeans" which are a less fertilizer-intensive crop than corn, Mr Gearheard said.

Ron Wilkinson, head of Agrium's wholesale business, said: "It comes down to 'soybeans don't use nitrogen, corn does'.

"And, generally, if growers plant without fertilizing, that is probably the difference in our guidance range" between relying on forward volumes, the great majority of trade, "and getting that last bit of cash sales".

'Not a plus point'

Agrium shares slid to a 2011 low of Can$78.84 in Toronto before recovering some ground to stand at Can$79.71 in lunchtime deals, down 4.6%.

Other fertilizer shares fell too, amid a weak day for stocks, but particularly those in resource-related sectors, which have suffered from a decline in prices of commodities themselves as investors ponder the potential impact of interest rate rises.

"I'm not convinced that Agrium looks particularly exposed. But there is an idea gaining traction that the ending of easy money is not a plus point for the sector as a whole," a London-based commodities investor told Agrimoney.com.

In New York, Mosaic shares fell 1.6% to $70.26, taking their losses this week above 6%. PotashCorp shares dropped 2.0% to Can$50.45 in Toronto, taking their drop this week to more than 5%.

In Frankfurt, stock in potash group K+S closed down 3.4% at E53.84, while Australia's Incitec Pivot earlier ended down 3.9% at Aus$3.68.

(Source: http://www.agrimoney.com/news/us-corn-sowing-delays-stoke-drop-on-agrium-shares--3108.html)