Investors treated the fiscal first-quarter earnings announcement from fertilizer maker Mosaic (NYSE:MOS) like, well, a pile of fertilizer. For a large firm that's not especially well-covered by Wall Street analysts, the stock has been pretty volatile, moving back and forth between $12 and $18 over the past year or so.

Created through a merger of Cargill Crop Nutrition and IMC Global, Mosaic is one of the largest players in both potash and phosphates. Competitors include the likes of Potash Corp (NYSE:POT), Mississippi Phosphates, and Agrium (NYSE:AGU), while companies such as Terra Industries (NYSE:TRA) are more focused on nitrogen products.

Results for the first quarter weren't bad per se, but they weren't as good as hoped. Pro forma sales (treating the results as though the merger were in effect a year ago) dropped 4%, though pro forma earnings increased 55%. Although pro forma earnings per share rose nearly 64%, they still missed the mean estimate by about 22%. It should also be noted that the company got a $0.14-per-share boost from derivative gains, somewhat offset by a $0.09-per-share loss from foreign exchange.

Phosphates, which composed more than half of the company's revenue, saw continued favorable pricing in the quarter, but profits were pressured by higher raw material costs. Although Mosaic escaped Katrina with minor damage, other phosphate producers weren't so lucky. Still, the hurricane caused the price of ammonia (a principal ingredient in Mosaic's phosphate fertilizer products) to rise, so Mosaic isn't exactly better off.

On the potash side, demand and pricing are still strong, but the company produced less than management had initially expected. Because inventories were low going into the quarter, the company had to rely on current production, which was constrained by scheduled maintenance issues. Potash results were also hurt by the fact that about 15% of the total was sold under old contracts with less favorable pricing.

Mosaic is in a tricky spot. On one hand, most of their sales go overseas, and there is significant demand in places like India where domestic production has fallen below plan. On the other hand, there has supposedly been some resistance to higher potash pricing in places like Brazil, even though demand is exceeding supply. Going further, while crop nutrition demand looks like it will continue to rise, year-to-year performance can be variable, and the company still has to contend with high input prices for things like natural gas, ammonia, and urea.

Current prices may be attractive, especially if the company makes its targeted progress with cost cuts and synergies, but investors should heed the risks. Not only does Mosaic have a lot of debt, but capacity is being added across the industry, and that could hit pricing and profits sooner than some expect.

Further food for Foolish minds:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).