Mosaic's (NYSE: MOS) disappointing third-quarter numbers gave me another reason to be bullish on the stock. Surprised?

Well, low potash sales were the highlight of the quarter, but they were not unexpected. For me, there are reasons to bet on this fertilizer stock.

This was expected, so look beyond
Most producers were expecting demand to soften because of cautious buyer behavior, so they resorted to production cuts. Mosaic announced that potash production will be down nearly 20% for the first half of this year. In February, PotashCorp (NYSE: POT) curtailed production at some of its plants in Saskatchewan.

Now demand is coming back. According to Reuters, Mosaic CEO Jim Prokopanko said that in a single day, the company sold the same amount of potash it had sold in the whole of January! This makes me hopeful that Intrepid Potash's (NYSE: IPI) expectations of a strong spring season and PotashCorp's projections of record shipments this year could come true. The expansion programs these companies are undertaking say a lot, too.

Most of PotashCorp's potash mine expansion projects are scheduled to be completed this year. A good part of Agrium's (NYSE: AGU) capacity expansion at a Saskatchewan mine is expected to be completed by next year. Intrepid is aggressively expanding production as well. As for Mosaic, its 5 million tonne potash expansion program is on schedule both in terms of cost and time.

Phosphate is pitching in
Mosaic's phosphate revenue was up 13% from the year-ago quarter. Note that higher sales volume, not price, was the major driver. The business is really picking up, with mines producing at record highs year to date and expectations of record shipments this year. And don't forget a critical legal victory.

Since 2010, Mosaic was unable to operate a section of its South Fort Meade Mine in Florida because of a permit issue. A settlement was reached recently, and the company can run the mine at full capacity by the first quarter of next year. Mosaic can now produce more phosphate rock and reduce outside rock purchases by nearly 50%, which could relieve it of the high input costs.

Welcome news
Canpotex, the three-member legal cartel that handles Saskatchewan potash exports, recently bagged a contract from China's biggest integrated agriculture company, Sinofert. Since Mosaic is the second-largest stakeholder in Canpotex, such contracts will help it lock in a good portion of expected potash sales. This is clear from the fact that 51% of its potash sales in the first quarter (when things were going great) were through Canpotex. All eyes are now on a contract from India that consumes nearly 20% of Mosaic's potash.

Mosaic has an added advantage since it can export an additional 1.3 million tonnes via Canpotex after the settlement of its potash-tolling litigation with PotashCorp. The timing is perfect, as Canpotex is expecting potash shipments for 2012 to be as good as last year.

Prediction turning into reality?
If corn production increases, Mosaic stands to gain, as potash and phosphate are the two most important fertilizers for farmers after nitrogen. The U.S. Department of Agriculture's prediction of record corn plantations in the U.S. this year might hold true. Consider these three facts:

  1. According to USDA reports, corn stockpiles as of March 1 were at an eight-year low, dipping 8% from the comparable period last year. This shows there is high demand for corn.
  2. Farmers have started planting earlier than usual because of the warm weather in March, particularly in the critical U.S. Midwest. They had already planted 3% of the total annual corn crop by April 1, a pace not seen since 1980.
  3. Corn output from other major corn producers, such as Brazil and Argentina, has fallen because of drought conditions, giving a boost to U.S. farmers.

The Foolish bottom line
Mosaic is a strong company and has the wind at its back. I was a little perturbed that the company isn't paying out more to its shareholders. Looks like Mosaic heard me: It is increasing its annual dividend to $0.50 per share, up more than two times the current $0.20 per share.

I would definitely keep it on my watchlist if I were you. Click here to add Mosaic to your stock watchlist.

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