2012 Should Keep Terra Nitrogen Growing

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With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should keep buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Terra Nitrogen (NYS: TNH) . As I discussed last month, Terra Nitrogen soared last year, as high crop prices and favorable conditions in the ag industry gave the company plenty of business. But can the good times last, or will the master limited partnership finally end up falling back to earth in 2012? I'll take a closer look at what people expect from Terra Nitrogen and its rivals.

Forecasts on Terra Nitrogen

Expected 2012 Change in Wheat Prices, Based on Futures14%
Expected 2012 Change in Corn Prices(8%)
Expected 2012 Change in Soybean Prices1%
CAPS Rating for Terra Nitrogen (out of 5)*****

Sources: Chicago Board of Trade, Motley Fool CAPS.

Will Terra Nitrogen keep growing in 2012?
The big queston for Terra Nitrogen going forward is what will happen with crop prices. When farmers have money to spend, they tend to use it to enhance crop yields by buying fertilizer. That boosts demand and helps Terra Nitrogen and its peers raise the prices they charge for their products, but there's a delicate balance that can cause problems if crop prices reverse course.

At least for now, the bullish case seems to be intact. Terra's majority owner, CF Industries (NYS: CF) , expects huge amounts of corn planting this year. Nitrogen-based peer CVR Partners (NYS: UAN) also thinks the market will be strong in 2012, and it's expanding its production of urea ammonium nitrate to meet anticipated demand.

In the longer run, though, high levels of corn planting could depress prices. Futures markets already have expected corn prices for early 2013 well below their current levels. And although Fool analyst Neha Chamaria believes that fear of falling corn prices is unjustified, a change in long-term trends could hurt Terra Nitrogen in the long run.

Still, with the inherently lower cost structure of nitrogen-based fertilizers over the mined potash and phosphates that PotashCorp (NYS: POT) and Mosaic (NYS: MOS) rely on, Terra Nitrogen has a natural advantage over those rivals in the fertilizer space. Add dividends that are more than 10 times what Mosaic and PotashCorp pay, and Terra Nitrogen will reward you even if the master limited partnership's share price goes nowhere.

Even though agriculture is a promising place to invest in 2012, we think we've found an even better idea. Check out The Motley Fool's latest special report to discover our top stock pick for 2012. It's free, but it won't be available for long, so get your copy now.

Add Terra Nitrogen toMy Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

At the time this article was published Fool contributorDan Caplingerdoesn't own shares of the companies mentioned. The Motley Fool owns shares of CF Industries. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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