Agrium highlighted the significance of elevated corn sowings to fertilizer demand, and forecast prices of the grain staying high for now, as the nutrient group unveiled record quarterly earnings.

However, while the results beat market expectations, they were overshadowed by a sector downgrade by an influential analyst.

The Canadian-based farm retail and fertilizer group flagged the incentive to growers from "historically high crop prices and production margins" to lift plantings of major grains and oilseeds, providing a "historically-strong incentive to maximise crop production".

In corn, the prospect of another strong year of US sowings implied growers' increasing successive corn sowings on the same fields.

This practice, which ignores best practice in crop rotation, requires extra spending on inputs to avoid the risks of pest build-up, and nutrient drain, involved.

A knock-on effect of the "market incentives to maximise crop production, particularly corn," has been "increased corn-on-corn plantings, which invokes increased crop nutrient and crop protection production applications", Agrium said.

'Strong seed demand'

The US Department of Agriculture has forecast corn sowings falling 500,000 acres this year, to 96.5m acres a still historically-strong figure, with the International Grains Council forecasting area at a 77-year high of 98.8m acres.

Agrium said that demand for seed "has been strong leading into the 2013 spring season, as growers have sought to assure supply of the top genetics", and exploit prices supported by the need further to ration supplies.

To meet USDA forecasts for domestic corn stocks at the close of 2012-13 means rationing 1.2bn bushels of demand between December 1 and the end of August, Agrium said.

"This tight situatiuon is expeced to support cash corn prices through at least the first half of 2013."

There have been concerns voiced that the slump in US corn production last year, thanks to drought, has limited the supply of grain available as seed.

In the October-to-December quarter, Agrium's seed sales soared 27% to $105m, although this was attributed largely to an increase in winter wheat plantings, rather than advance spring seed orders.

Fertilizer outlooks

The performance helped the group's retail division raise sales by 7.9% to a company record of $1.97bn during the quarter, and gross profits by 12.6% to $509m.

Retail fertilizer sales rose 10% to $1.1bn, although greater growth was seen in agrichemicals, of which sales soared 22% to $491m, thanks to a dry autumn application period, as well as price increases.

Sales in the wholesale fertilizer business fell 5.2% to $1.16bn, and gross profit by 11.9% to $490m, declines "primarily due to weaker global demand for potash and weaker phosphate pricing".

While the outlook for phosphate remained clouded by the prospect of a lack of sales to India, where "domestic inventories are reportedly high", the outlook for potash is "positive for the first half of 2013", after China and India signed new import deals.

In nitrogen, while US demand "is expected to be very strong as a result of high crop acreage", a "strong pace of imports in the 2012-13 fertilizer year has positioned the market well to deal with this demand," Agrium said, forecasting a rise of at best in North American nitrogen demand in 2013.

Ahead of forecasts

The group reported earnings of $354m for the quarter, a jump of 83% year on year, although this result did include some one-off boosts, including $18m in insurance recoveries.

Per share earnings, excluding one-time items, came in at $2.16, above analyst expectations of a $2.00-a-share result.

Nonetheless, Agrium shares tumbled 5.5% in late morning deals in Toronto to stand at Can$102.83, after Dahlman Rose analyst Charles Neivert downgraded shares in major fertilizer majors, citing the impact of expansion plans on boost supplies, and so lowering price potential.

Production capacity in urea is set to rise 18% by 2016, in phosphates by 12% and in potash by 31%, he said.

Besides cutting his rating on shares in Agrium, and CF Industries Holdings and Rentech Nitrogen Partners, from "buy" to "sell", Mr Neivert downgraded Mosaic stock to "hold" from "buy", and PotashCorp shares from "hold" to "sell".

Shares in other downgraded companies showed lower price falls with Mosaic dropping 1.4% to $56.90 and CF Industries 1.6% to $200.70 in New York, and PotashCorp 1.0% to Can$39.95 in Toronto.