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Tickers in this Article: AGU, CF, TRA, MOO, DE, MON
Canadian fertilizer giant Agrium (NYSE:AGU) reported fourth-quarter earnings below expectations. Yet, for 2010 and beyond the company sees greener grass. Agrium earned 19 cents a share in the quarter compared with 79 cents in the year ago quarter. The 2007 and 2008 strong planting years led to record fertilizer prices which have fallen dramatically since. For the 2009 year, Agrium earned $2.33 a share, significantly less than $8.34 in 2008 when fertilizer prices were peaking.

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A Fertile Future
Yet Agrium's favorable 2010 outlook is providing a lift to all the major fertilizer players. The 2009 fourth quarter saw stabilization in fertilizer prices and recent sales are being struck at incrementally higher prices.

In addition to being a wholesale supplier of fertilizer, Agrium has a big retail business. The retail side does not have the gross margins of selling wholesale but it does give Agrium greater access to the smaller independent farmers who have less negotiating power. (For related reading, check out The Bottom Line On Margins.)

All in all, the outlook for fertilizer remains very strong. As corn and other agricultural commodity prices tanked, farmers deferred buying fertilizer, instead worked down existing inventory. But fertilizer use can only be delayed for so long; soils have to be replenished. After the deferral of 2008 and 2009, 2010 looks to be the year for increased fertilizer purchases.

Not Sitting Still
The big story for Agrium is its continued hostile takeover attempt of nitrogen producer CF Industries (NYSE:CF). CF still rejects Agrium's offer as too low. However, Agrium's offer for CF was contingent on CF abandoning its bid for Terra Industries (NYSE:TRA), and CF voluntarily terminated the bid to acquire the rival nitrogen company earlier this year.

While CF's actions are in no way a signal that it is ready to accept Agrium's offer as is, the path is now clear for a takeover should the two come to terms.

A Quality Industry
The world's need for agricultural will only continue to grow over time as the population increases. This opens up a host of investment options, be it fertilizer or elsewhere. Investors not keen on individual businesses can diversify and own the Market Vectors Agribusiness ETF (NYSE:MOO) which owns all the major fertilizer players along with other agriculture plays like Deere (NYSE:DE) and Monsanto (NYSE:MON). In any event, this industry will likely be earning greater profits in the years to come.

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