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Mosaic expects farmers to drive big nutrient push in fall after wet spring

Mosaic Co. said "unprecedented" wet weather in the U.S. Midwest should drive strong demand for nutrients into the fall season this year and beyond after relatively weak demand in the spring season.

The phosphate and potash miner expects strong price increases in grains combined with depleted soil nutrients in North America to drive higher fertilizer applications as farmers bounce back from a very wet spring season. Farmers will be highly incentivized to chase grain prices that have reached multiyear highs, Mosaic CEO Joc O'Rourke said on an Aug. 6 earnings call.

"The spring planting season in North America was challenging. It was the wettest and latest season on record," O'Rourke said. "In fact, we believe U.S. farmers were prevented from planting at least 10 million acres."

Fields in North America will be in "serious need of nutrient replenishment," O'Rourke added.

"Our expectation is we're going to have a big spring in North America, and we fully expect big volumes coming out in 2020," O'Rourke said.

The company has been taking steps to reshape its business and increase operating leverage, including permanently closing its Plant City phosphates facility in Florida and accelerating the development of its Esterhazy K3 potash mine in Saskatchewan. Further, the company announced Aug. 6 that it was curtailing potash production at its Colonsay operation in Saskatchewan.

O'Rourke also expects demand to be strong in key markets such as Brazil and India. In China, phosphate demand was down, which offset some of the growth the company reported elsewhere. That could change soon as larger Chinese producers begin a coordinated curtailment of production, the executive added.

"While today's lower phosphate prices are challenging in the short term, we believe they can accelerate the restructuring of the Chinese industry," O'Rourke said. "It is our belief that marginal producers will cease production as we move into 2020."

The company reported a net loss of US$233.1 million for the second quarter, including a US$284 million noncash after-tax charge for the closure of Plant City. For full year 2019, it anticipates sales of between 8.7 million and 9.1 million tonnes of potash and between 8.4 million and 8.8 million tonnes of phosphates. The company expects to sell between 9.4 million and 9.8 million tonnes of product from its Mosaic Fertilizantes segment it acquired from Vale SA in 2018.