Mosaic: Why Exit Nitrogen?

Yesterday in the news we saw that Mosaic (MOS) was looking to unload the Nitrogen segment of their business. As per CNN, they are seeking the sale of Saskferco, "a private company primarily owned by Mosaic and Investment Saskatchewan, a provincial corporation that seeks to boost Saskatchewan's economy."

At first glance this might not be anything to scoff at. But, at the same time, part of me wonders if the Nitrogen segment of their business is not seeing the continued strong demandof their potash and phosphate segments. Mosaic said it is looking to sell this segment so that it can focus on expansion of their primary business in phosphate and potash.

Maybe Mosaic just wanted to separate themselves from the Saskatchewan investment company who represented the other half in the joint venture of Saskferco. Yet, part of me wonders if they have noticed a developing trend within the industry. Because, after all, they are right smack dab in the middle of fertilizer's secular growth.

I'm going to go sort back through their earnings reports (along with other fertilizer companies) to see if the Nitrogen segments in any of these companies were showing signs of slowing or flat out hurting earnings. We know these companies are facing rising input costs. But that has not been a detriment to them because their revenues are rising faster than their input costs. I'm wondering if possibly the input costs associated to Nitrogen specifically are finally starting to impact the bottom line in that segment.

Again, I might be reading too much into this. But it almost seems as if Mosaic may be 'cashing out' at the top of the Nitrogen trade, while it thinks the underlying trend in potash and phosphates will continue. This would not surprise me one bit, since the company has a front-row seat to the whole agricultural boom we are witnessing.

My bets all along have centered around potash; phosphate and nitrogen were just added bonuses. I'll report back with what I find, if anything. At any rate, good to see them focusing on what I believe to be the main secular growth trend here: the potash itself. That is the nutrient with the brightest future simply because it has the most pricing power. There is ridiculously strong demand for it and very low supply of it. And, additional supply is many years away from coming online (due to construction of mines etc). Most likely this is just a case of me over-analyzing things. But, hey, due diligence is my middle name!