Agriculture + Latin America = Growth for This Giant


Growth is so hard to come by in these days of continued economic uncertainty. Finding any seeds of growth is important for investors looking to dig up market-beating returns. So far this earnings season one trend is beginning to stand out -- agriculture is booming -- especially in Latin American.

Both Monsanto and Mosaic pointed to strength in Latin American when each reported earnings earlier this month. For Monsanto it saw strength in its corn business as farmers in Argentina and Brazil upgraded to new seed products. Mosaic also enjoyed strong growth in Brazil, while its Latin American business as a whole was up 18%.

Now DuPont is reaping these same fruits of growth with its Latin American business, noting that volume growth was driven by agriculture and calling its Latin American sales "robust." Overall, DuPont saw year-over-year growth in the segment of 10% in the fourth quarter.

Agriculture growth in Latin America was seen across both its Pioneer and Crop Protection lines. The Crop Protection business grew faster than market at 13% in the fourth quarter. DuPont also saw a multiple point share gain in Brazil for its Pioneer line in summer corn. Total agriculture growth was up 18% over the fourth quarter of 2011 thanks in large part to volume growth of 11%.

Looking ahead, DuPont sees continued momentum in its seed and crop protection businesses, with significant sales increases expected in the first half of 2013. However, it does see margins being pressured slightly due to higher input costs. For the full year, it expects low-teens growth in both volume and price. The company plans to maintain growth investments which include research and development, new product launches, and increasing its production capacity.

For investors looking ahead, the strength in agriculture, especially in Latin America, could mean big things for PotashCorp which reports its earnings on Jan.31. The company's earnings will likely be pressured by lower than forecasted potash sales volumes in China and India. Last quarter, strong demand in Latin American wasn't enough to offset its delays in closing those contracts in China and India. Continued strength in Latin America could lead to a very strong year for PotashCorp, especially now that contract negotiations in China have been settled.

So far, 2013 looks like it will be a big year for investors in agriculture, especially with the strength being displayed in Latin America. DuPont's quarter was highlighted by its strength in both areas making it one of the bright spots for the company this quarter. Will we see the same strength when PotashCorp reports next week?

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Matt DiLallo has the following options: Long Jan 2015 $70 Calls on Monsanto Company, Short Jan 2015 $70 Puts on Monsanto Company, and Short Jul 2013 $95 Calls on Monsanto Company. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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