NEW YORK (AP) -- A near-record corn crop is going to cut demand for fertilizers, said a UBS analyst Friday as he downgraded two fertilizer companies, just as the government sees U.S. farmers' incomes dropping.
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The Agriculture Department said Thursday that farmers' net income will drop 38 percent to $54 billion this year from 2008. That's $9 billion below the average net farm income over the past 10 years.
Dropping incomes mean farmers will have less money to spend on fertilizers.
Moreover, the U.S. government expects a record soybean crop this year and the second-biggest corn crop ever -- despite a 30-35 percent decline in shipments of potash, a key fertilizer, according to UBS analyst Don Carson.
"This makes us less confident of a complete recovery in potash consumption," he said in a research note. Potash prices have also stabilized at lower levels after India made a major purchase at $460/tonne in early July and Brazil spot sales were $525/tonne. At the time of the India buy, spot prices were between $700 and $750 per tonne. Carson doesn't expect prices to head back up soon.
He downgraded Mosaic Co. and Potash Corp. of Saskatchewan Inc. to "Neutral" from "Buy."
Mosaic shares fell $1.84, or 3.6 percent, to $49.54, while Potash dropped $2.02, or 2.1 percent, to $90.60. Other fertilizer companies were also lower. Agrium Inc. slipped 31 cents to $47.45; CF Industries Holdings fell $1.11 to $81.07; Intrepid Potash Inc. declined 40 cents to $24.47; and Terra Industries Inc. fell 41 cents to $32.66.
Other agribusiness companies were mixed. Crop producer and biofuel maker Archer Daniels Midland Co. rose 54 cents to $28.75, while Monsanto Co., the world's biggest seed company, dropped $1.82 to $82.80. Bunge Ltd., which has fertilizer, seed and consumer foods units, dipped 6 cents to $68.53.
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