Pardon me for lumping together a fairly diverse group of
businesses, but across the agricultural sector, we're hearing
largely similar stories. Farmers are cutting back on all
sorts of outlays, which in turn is cutting into most
agricultural companies' profits.
Valmont Industries (NYSE: VMI) reported a 50%
plunge in irrigation sales, following record prior-year
results. The firm said it expects more weakness in the fourth
quarter, and that 2010 should rebound somewhat, although "not
in any significant way." Fortunately for Valmont, its
infrastructure segment cushioned the slump in
agriculture.
Competitor
Lindsay (NYSE: LNN), whose irrigation revenue
in the quarter accounted for three-quarters of its
watered-down sales, found itself more exposed to the same
trend. To explain its customers' hesitancy, the firm cited a
USDA projection that net farm income will come in 15% below
the 10-year average. Apparently the situation is more severe
than I had previously understood.
Bunge (NYSE: BG), dramatically cutting its
forecast for full-year earnings, blamed a softer pricing
environment and "lackluster global demand" for fertilizer.
Yara International also reported
"non-satisfactory" results, which was unsurprising, given
that German potash and phosphate fertilizer sales have
dropped to their lowest levels since 1950.
Mosaic (NYSE: MOS) reported a
tough quartertwo weeks ago, and
PotashCorp (NYSE: POT) and
Terra Industries (NYSE: TRA) acknowledged
similar challenges yesterday. PotashCorp saw its realized
potash price drop 34% year on year, and dropped its 2010
guidance for global potash volumes to 50 million metric tons,
down from a range of 55 million to 60 million tons last
quarter. Terra, which is busy fending off persistent suitor
CF Industries (NYSE: CF), suffered 50%-plus
price declines across its trio of nitrogen products.
What seems to be supporting share prices in the group --
and the fertilizer stocks in particular -- is the hope for a
return to a semblance of normalcy in 2010, plus a hearty
amount of
takeover speculation. With regards to the latter, we got
yet another iteration of the "big global miner X wants/ought
to swallow big potash player Y" meme, with a Bank of America
analyst talking up a
BHP Billiton buyout of PotashCorp.
Personally, I'm getting kind of tired of this one.
This article was originally published as
A Poor Crop of Ag Earningson
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