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Why Mosaic Company Stock Just Jumped 11%

By Rich Smith - Nov 24, 2020 at 3:44PM

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The Department of Commerce seems prepared to act to defend Mosaic against unfair competition from abroad.

What happened

Shares of agricultural chemicals company The Mosaic Company ( MOS 4.15% ) are up 11% in 3:15 p.m. EST trading Tuesday after the Department of Commerce's International Trade Administration ruled in the company's favor on allegations of price dumping by foreign exporters of phosphate fertilizer from Morocco and the Russian Federation. The ITA announced "affirmative preliminary determinations in the countervailing duty (CVD) investigations" of five separate foreign exporters, and suggested imposing tariffs of anywhere from 23.5% to 72.5%, depending on the exporter, to bring their prices in the U.S. up to market levels.

So what

In a note discussing ITA's action and its implications for Mosaic, investment bank Bernstein observed that ITA's proposed tariffs were higher than expected, which it called "clearly positive" for Mosaic, reports With foreign exporters less able to undercut Mosaic on price when selling to U.S. farmers, the company will both lose fewer sales after this action and be better able to charge higher prices on its own products.

Arrow angles up on a green stock chart

Image source: Getty Images.

Now what

Higher tariffs are not a given. ITA isn't expected to issue a "final determination" on these cases before March 25, 2021 or issue an order imposing the tariffs before April 1, 2021. However, even the threat of these tariffs may act to encourage the foreign exporters to raise their prices to avoid such a determination or order and, failing that, higher tariffs are likely.

Either of these results would be a good result for Mosaic, which lost more than $1 billion last year, and looks set to lose $1 billion or more this year, as well. The company could certainly use the help.

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