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Here's The Dirt: Phosphate's Hot

Published By: tbo.com

TAMPA - Savvy investors know dirt is not sold cheaply these days, certainly not the phosphate-laden earth mined for fertilizer production.

Two companies with phosphate mining and phosphate-based fertilizer production in Central Florida have become Wall Street favorites in the past year, with shares rising 300 percent and more as fertilizer prices soar worldwide.

The Mosaic Corp. and CF Industries Inc. have benefited as spot prices for fertilizer produced in Florida have more than doubled from about $250 a ton in 2007.

These gains come as worldwide population growth and huge investments in grain-based ecofuels in the United States have created a growing demand for fertilizer.

"It's all really a result of exceptional agriculture environments," said David Townsend, assistant vice president of public affairs for Minnesota-based Mosaic, the world's largest phosphate supplier. "Globally and domestically we just are in a very strong position to capitalize financially and operationally on steps we have taken since the 2004 merger of IMC Global and Cargill Crop nutrition."

Consider the numbers:

• An investor who bought just 100 shares of CF Industries at $43 a share a year ago now has a stock priced in the mid-$130s. It's the same at Mosaic, where shares sold at $32 a year ago have moved above $120. Stock price trends in recent weeks have been relatively flat, perhaps indicating some investors are cashing out of the wild ride.

• The International Fertilizer Industry Association reported that global phosphate use will have increased 13 percent, or 4.7 million tons, from 2006 through 2008. That's the equivalent to adding a country with the fertilizer demand of United States in about three years.

Those kinds of numbers mean plenty of rivals. Fertilizer producers in the United States face increased competition from China and Africa. In 2007, Chinese producers supplied much of the increase in global phosphate demand, although they may have shorted their domestic customers by 1 million tons, Mosaic reported.

But there's still plenty of business to go around. That includes Florida, where phosphate mining and processing have become 24/7 operations.

"From our perspective, we are producing phosphate at as high a rate as we possibly can to supply our orders," said Herschel Morris, CF Industries vice president and general manager in Plant City.

Mosaic owns five mines and three fertilizer manufacturing plants in Central Florida, with operations in Hillsborough, Polk and Manatee counties that employ 3,300 people.

Illinois-based CF Industries, which employs about 700 people at a mine in Hardee County and a fertilizer plant north of Plant City in Hillsborough County, reported a greater portion of gains from phosphate-based fertilizer from Central Florida than nitrogen-based fertilizer from Louisiana and Canada, said Chuck Nekvasil, director of public and investor relations at the Long Grove, Ill., headquarters.

About 20 to 25 percent of CF Industries' Florida fertilizer is exported and the remainder supplies domestic sources. One significant reason for the demand for fertilizer has been the rising demand for ethanol, which is primarily based on corn in the United States. CF Industries said core demand for ethanol production could increase from 3.1 billion bushels in 2007 to 4.1 billion bushels in 2008 and 4.45 billion bushels in 2009.

CF Industries senior vice president and chief financial officer Tony Nocchiero explained the basics of fertilizer demand in a presentation this month to a Bank of America basic industrials conference:

• It starts with a tight global supply/demand balance for major crops.

• Add strong, sustained new demand from biofuels, such as corn-based ethanol.

• To maximize profits, farmers optimize fertilizer application.

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