Mosaic’s potash guidance is more optimistic than Potash Corp.’s

Market Realist

Why Mosaic sees a much more upbeat outlook than Potash Corp. (Part 5 of 5)

(Continued from Part 4)

Colder winter

While the cold winter hurts shopping malls and retailers, as people stayed more indoors, the fertilizer industry benefited. Frigid temperatures have created transportation issues and backlogs. If dealers and buyers want to ensure adequate supply when the spring planting season comes around, they have to buy more and store more as inventory. If transportation problems persist into early spring, Mosaic Co. said we could see “considerable more upside price pressure on the potash that is available in the country.” While this could be positive for revenue and earnings, it’s unlikely to affect investors’ medium- to long-term returns.

Global potash market

On a global scale, Mosaic Co. gives a more optimistic outlook of 57 to 59 million tonnes of potash shipments in 2014, up from an estimated 53.9 million tonnes for 2013. This is higher than Potash Corp.’s estimate of 55 to 57 million tonnes of potash. In 2014, Mosaic Co. estimates 800,000 tonnes increase in China’s potash shipments, of which 300,000 is expected to be supplied by domestic suppliers.

Malaysia and Indonesia will each add ~200,000 tonnes. In 2013, India imported 3 million tonnes of potash last year. But actual consumption was more like 4 million tonnes. Since a certain level of inventory must be maintained in the pipeline to ensure product availability, the company expects India to import 4 million tonnes of potash this year.

Another 1 million tonnes would go to the Soviet Union, Western Europe, and Eastern Europe. Shipments to Brazil are expected to increase by 500,000 tonnes, while the rest of the world (the Americas) will add about another 500,000.

Global phosphate market

In the phosphate market, India imported ~3.5  million tonnes of phosphates in 2013. According to management, that’s probably the “low point,” because it doesn’t account for a draw-down of 1.5 million to 2.0 million tonnes of pipeline inventory. This means the actual amount of phosphate farmers used was likely between 5.0 million and 5.5 million tonnes. To prevent inventory from falling even further, phosphate shipments would have to rise.

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