News And Updates
After soaring stock price gains earlier this year, the Mosaic Company is taking a financial hit that has crimped its plans to increase phosphate production in Southwest Florida.
Booming demand for corn, partly driven by interest in corn-based ethanol as an alternative fuel, pushed Mosaic stock to a mid-June peak of $162.35. Investors anticipated increased demand for phosphate-based fertilizer to grow more crops.
But the company’s stock started dropping in July. At the close of trading on the New York Stock Exchange on Friday, Mosaic shares were at $36.49.
The decline is part of an overall retrenchment in commodities. Oil, corn and metals have also seen dramatic declines in response to the weak global economy, tight credit markets and overall reduced spending.
“Fertilizer got crushed during the market debacle,” said David Townsend, spokesman for Mosaic.
With thousands of acres of phosphate strip mines and several processing plants in the Gulf Coast region, Mosaic Company is the world’s largest producer of phosphate, a key component of fertilizer.
In response to a lower stock value and a dip in phosphate’s price, Mosaic plans to cut production by as much as 20 percent.
The company planned to produce up to 10 million tons of refined phosphate this fiscal year.
Now it plans to produce 8 million to 9 million tons, Townsend said.
“For a while there, the demand was so flat-out and extraordinary that we were running accordingly,” Townsend said.
The cutback will slow mining and put off plans to reactivate two production lines that would have increased the company’s ability to refine more phosphate, Townsend said.
He said it will not trigger layoffs or affect the company’s momentum in pursuing permits to mine more land in Manatee and Hardee counties.
Mosaic’s push for more mining over the past several years has sparked a legal fight with environmentalists and local governments, who contend that strip mining threatens the drinking water supply and natural resources, including the Peace River and Charlotte Harbor.
“The permits we’re seeking are for longer-term source of supply,” Townsend said.
Fertilizer buying over the summer eventually led to a global oversupply, which weakened prices.
Now buyers are reluctant, as prices continue to fall, Townsend said.
An analysis by the investment firm Goldman Sachs in October suggests prices could drop further, in response to tightening credit and a global decline in the use of fertilizer.
Farmers responded to high fertilizer prices by cutting back on usage, much like U.S. drivers cut back on fuel consumption when prices ballooned.
Tighter credit is forcing farmers to spend less, the Goldman Sachs analysis stated.
The price of phosphate, however, is still much higher than it was a year ago.
Between August and October, the average selling price for a metric ton of processed phosphate — called diammonium phosphate — was $1,013. During the same period last year it was $407.
The current price ranges from $825 to $850 a ton, according to ICIS Pricing, a chemical industry trade publication.
Net sales of phosphate were also 119 percent higher during the first three months of Mosaic’s fiscal year, compared to last year.
Townsend said he expects the declining demand to be temporary.
“The growth in food demand and higher quality foods all are still in place and will continue to produce high demand in the future,” Townsend said.