America's corn farmers are, for a second successive year, to reap profits of more than $200 an acre, creating fertile ground for shares in nutrient groups, Credit Suisse has said.
The bank, in a note foreseeing "limited downside risk" to shares in fertilizer groups, pegged corn farmers out-earning peers in soybeans and wheat this year, with a profit of more than $205 an acre.
The estimate - which comes as US growers are weighing up options for spring sowings, a process widely expected to favour increased corn area – would put profits in line with last year's $206.70 per acre, a figure huge by historical estimates.
In 2008, the best year of the last rally in grain prices, profits reached $101.10 an acre, with corn famers suffering at least nine years in the red in a losing streak which ended in 2006.
Corn growers' losses from 1997 to 2005 totalled $678m on Credit Suisse estimates, which for this year factor in December futures prices.
'Bullish price environment'
Grower profitability is being helped by a lag in the recovery markets behind that in farm commodities.
Prices of potash, for instance, are still 45% behind average levels for 2008, while those for soybeans are 16% ahead, and for corn up 20%.
Credit Suisse forecasts for US farmers' profitability, 2011
Corn: $205.60 per acre
Soybeans: $169 per acre
Wheat: $49 per acre
Estimates based off prices of December 2011 futures for grains and November 2011 futures for soybeans
However, with phosphate prices back on their way above $500 a tonne this year, and potash hitting that level in 2012, including freight, on Credit Suisse estimates, the "bullish price environment should support" sector shares.
The bank lifted its price target on shares in Russia's Uralkali from $40 per depositary receipt to $46, and on stock in Israel Chemicals to 68.40 shekels from 54.50 shekels.
For Uralkali, which revealed on Monday it had received investor approval for a merger with domestic peer Silvinit, the upgrade represented a second boost, after UralSib analysts upgraded its target price on the depositary receipts to $50 from $42, also citing higher potash prices.
"Uralkali's position is strengthened by its being one of the lowest cost potash producers globally," UralSib analyst Anna Kupriyanova said.
Credit Suisse fertilizer price forecasts, as year averages
Urea (Yuzhny prilled, FOB): 2010, $289 per tonne; 2011, $360 per tonne; 2012 $355 per tonne
Phosphate (US Gulf, FOB): 2010, $499 per tonne; 2011, $570 per tonne; 2012 $500 per tonnePotash (Vancouver, FOB): 2010, $343 per tonne; 2011, $415 per tonne; 2012 $465 per tonne
However, the brokers differed on prospects for Acron, the Russian nitrogen group, which Credit Suisse downgraded to "neutral" from "outperform", citing the higher prices the group looked set to pay for potash.
Ms Kupriyanova lifted her rating on Acros shares to "buy" from "hold", citing the group's 8.1% stake in Silvinit, which had been made more liquid by the Uralkali deal, and, if sold, could provide funds to launch its own potash projects.