Sector Snap: Analyst sees fertilizer recovery

Fertilizer stocks are poised to gain as farmers ramp up buying for the spring season, although demand is likely to remain depressed through the fall, an analyst said Thursday.

Sterne Agee analyst Mark Connelly began coverage of the fertilizer sector, rating Potash Corp. of Saskatchewan Inc., Agrium Inc. and Terra Industries Inc. "Buy." He assigned "Neutral" ratings to Mosaic Co. and CF Industries Holdings Inc., which Agrium is trying to acquire.

The analyst said fertilizer shares should rise before the end of the year, even if farmers don't buy much fertilizer this fall.

Crop yields in the U.S. and Latin America are likely to be disappointing, he said, and grain prices will rise as supplies get tight. Higher crop prices means farmers have more income to spend on fertilizer.

Furthermore, Connelly sees an easing of the credit constraints that hurt farmers' abilities to buy fertilizer.

In afternoon trading, shares of Potash Corp. rose $2.05 to $119.39, while Agrium stock gained $1.77, or 3.6 percent, to $50.88. Terra shares added 11 cents to $28.06.

Mosaic shares gained $1.63, or 3 percent, to $56.91, while CF Industries rose $3.43, or 4.3 percent, to $83.76.