Companies that produce nitrogen-based fertilizers experienced a tough third quarter this year, after the record droughts plagued the Midwest and imports challenged domestic companies in the urea and ammonium nitrate market. The downward pressure affected both CF Industries (NYSE: CF ) and its subsidiary Terra Nitrogen (NYSE: TNH ) over the past three months, leading to decreases in year-over-year revenue for both companies. Thankfully, lower natural gas prices than a year ago propped up margins, leading to positive earnings growth.
Moving forward, though, CF management believes the industry could be in for a nice ride through 2013. Because of the drought, it's likely that corn demand will be much higher this year, as inventories were depleted to meet demand this summer. Those in the know also predict low domestic supply of the nitrogen necessary for fertilizer production. If these two situations play out, look for CF and Terra Nitrogen to benefit, along with larger competitors such as Agrium (NYSE: AGU ) and PotashCorp (NYSE: POT ) .
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