Feed the need

Investors have had quite a rollercoaster ride with fertilizer stocks like PotashCorp and Mosaic (NYSE: MOS) in 2008. The demand cycle that had been pushing commodity prices through the roof started to slip late in the year, sending shares plummeting. The global economic crisis cut demand for crop nutrients such as potash, nitrogen, and phosphate, and PotashCorp reported weaker sales in all three during the fourth quarter. It also lowered its full-year earnings outlook, but CEO Bill Doyle said the company expects demand to pick up as 2009 progresses, since food production and the necessary fertilizer applications can't be delayed indefinitely.

While potash prices stayed stronger over the past months thanks to decreased production, supply has been high for nitrogen and phosphate, leading companies like Terra Industries (NYSE: TRA) and Mosaic to now cut back on production. While nitrogen and phosphate have had constrained margins, PotashCorp expects gross margins for potash to triple compared to 2007. Despite the current volatility, many investors look for a better 2009 for fertilizer stocks like PotashCorp and highly rated Agrium (NYSE: AGU). In PotashCorp's case, nearly 96% of the 4,274 CAPS members rating the firm remain bullish on its prospects to beat the market.