Mosaic Co (MOS), Potash Corp./Saskatchewan (USA) (POT): You Want to Pay Attention to This Fertilizer Stock Next Week

While the last contract these companies signed with India, through legal cartel Canpotex, continues through January 2014, the one with China ended in June. With the main selling season in the U.S. already over and the two international buyers yet to sign fresh contracts, the next few months could be tough for Mosaic.

The big advantage that could turn bigger
Mosaic recently postponed plans to expand annual potash capacity by 2 million tons because of high costs. Soon after, Agrium Inc. (USA) (NYSE:AGU) decided to defer two of its nitrogen expansion projects. While Agrium Inc. (USA) (NYSE:AGU)’s decision was largely influenced by the volatility in the prices of natural gas – a key input for nitrogen fertilizer – Mosaic is less affected by natural gas because it doesn’t sell nitrogen.

That should help Mosaic grow its gross margin in the future even as nitrogen-centric companies like CF Industries Holdings, Inc. (NYSE:CF) and Rentech Nitrogen Partners LP (NYSE:RNF) battle rising input costs. While CF Industries Holdings, Inc. (NYSE:CF)’s stock has lost nearly 17% in the past six months because of the recent uptick in natural gas prices, Rentech Nitrogen Partners LP (NYSE:RNF)’s shares plummeted 37% over the period for the same reasons. Both companies are relying on forward booking of gas prices to reduce risk.

Yet, how efficiently Mosaic can boost its margins will also depend on whether the company can curtail costs in hard times. As I mentioned earlier, international markets look weak. So Mosaic’s management might want to find ways to streamline operations to reduce cost pressures. Look for any signs in the company’s upcoming earnings call.

The Foolish bottom line
Mosaic is likely to end the year on a good note since its earnings for the nine months ending Feb. 28 improved year over year. The company is also expected to provide an outlook for the next financial year, which should give you an idea about what to expect from Mosaic over the next year or so, particularly on the share buyback front.

The article You Want to Pay Attention to This Fertilizer Stock Next Week originally appeared on Fool.com is written by Neha Chamaria.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool owns shares of CF Industries Holdings (NYSE:CF).

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