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Less bullish on corn prices/fertilizer

March 28---Merrill Lynch said today that the USDA forecast of a 4% increase in corn plantings this spring is above expectations and will depress corn prices. If corn prices stay down, the analysts see this as a long-term negative development for fertilizer companies such as IMC Global (IGL), Agrium (AGU) and Potash (POT). Fertilizer companies would prefer to see high corn prices, which usually result in strong corn acreage the next year and an increase in aggressive high-yield, high-input management practices among farmers.

The analysts further speculate that increased corn acreage could be an immediate, short-term positive for DuPont (DD), due to the company’s strong corn seed and corn herbicide market position. The Syngenta (SYT) herbicide/seed portfolio also stands to benefit from increased corn plantings.

The analysts say USDA’s forecast of a 2% decline in soybean plantings, versus expectations of increased plantings, could be “mildly negative” for Monsanto (MON), since it is the market leader in Roundup Ready soybeans.

What the experts at Merrill Lynch didn’t mention is that there’s little or no actual seed in the ground yet. Although farmers are now tuning up their planters for the season, a lot of them could still change their minds. And if weather conditions delay corn planting and force more farmers to shift to soybeans, all Wall Street’s prognostication goes out the window.

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