North American fertilizer stocks tumbled on Thursday after the U.S. Department of Agriculture shocked grain markets with a forecast of larger-than-expected corn and soybean supplies.
Shares of Potash Corp of Saskatchewan (POT.N), the world's biggest fertilizer maker, fell 3.5 percent, or $1.52, to $42.29 in early trading in New York.
Shares of Mosaic (MOS.N) and CF Industries (CF.N) fell 3.8 percent and 3.9 percent, respectively.
Overall, stocks were little changed.
Grain traders expect the bearish Agriculture Department report to weigh heavily on Chicago Board of Trade corn, soybean and wheat futures when that market opens at 10:30 a.m. EST.
"These crop nutrient equities trade along with the corn price," said Mark Gulley, an analyst at Ticonderoga Securities in New York, adding that nitrogen producer CF is typically the most closely linked to corn, the crop that is one of the biggest users of fertilizer.
The more lucrative fertilizer-intensive crops look to farmers, the more they are likely to spend on boosting soil nutrients, analysts say.
The Agriculture Department projected U.S. corn stocks of 846 million bushels at the end of the current marketing year, 2 million bushels lower than its estimate last month but a whopping 13 percent higher than what traders were expecting, on average, in a Reuters survey.
The drop for fertilizer stocks may be short-lived, Gulley said.
"Everyone in the industry agrees with us that the volatility in (USDA) numbers is becoming a bit disturbing," he said, adding that he expects next month's USDA report to be bullish, given ongoing concerns about dry farming areas of South America.
Dryness in Argentina, which threatens corn and soybean crops, has pumped up grains during the past few weeks.
"While we've diverted our eyes for one or two days to (USDA), all eyes are still on South America and will be for a couple more weeks," Gulley said.
(Reporting by Rod Nickel in Winnipeg, Manitoba; editing by John Wallace)