BofA Downgrades Mosaic, Cites Phosphate Pricing Pressure

The MWSPC phosphate plant in Saudi Arabia, in which Mosaic Co MOS has a 25-percent stake, in now operating at almost full capacity.

While the company is the world's largest integrated producer of phosphate, channel checks and talks with industry leaders suggest high inventory levels and pressure on prices, according to Bank of America Merrill Lynch.

The Analyst

Steve Byrne downgraded Mosaic from Buy to Neutral and reduced the price target from $34 to $30.

The Thesis

With sluggish global demand and increased exports from China and Saudi Arabia, phosphate prices have been on the decline since October 2018, Byrne said in the Thursday downgrade note. (See his track record here.) 

Although weather conditions in the U.S. have resulted in increased use of this fertilizer, barge traffic on the Mississippi River is still unable to move north of Missouri, which will likely result in short supply of phosphate in the northern corn belt, the analyst said. 

Channel checks suggest high inventory levels at distributors after the springs, which will exert pressure on prices, Byrne said. 

A conference call with the CEO of Ma’aden further fueled concerns around near-term pricing, the analyst said.

The CEO expects lower phosphate prices in 2019 and potentially into 2020 due to weak farmer economics and additional phosphate exports out of Saudi Arabia, Morocco and China, according to BofA. 

Price Action

Mosaic shares were down 2.44 percent at $25.18 at the time of publication Thursday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For May 2, 2019

Mosaic Announces Idling Of Brazilian Mines

Photo by Dennis Jarvis/Wikimedia.