The Calgary-based company reported net earnings of US$860 million or $5.44 per share for the quarter ended June 30, compared to net earnings of $718-million or $4.54 per share a year earlier.
Quarterly revenue came in at $6.8 billion, up from 10 per cent from $6.2 billion a year ago.
The average analyst estimate had been for a profit of $4.65 per share and revenue of $6.5 billion, according to those polled by Thomson Reuters.
Agrium (TSX:AGU) said its results included a pre-tax gain of $3 million on natural gas and other hedge positions, and a pre-tax share-based payment expense of $9-million.
Excluding those items, the company said net earnings would have been $864 million or $5.47 per share for the second quarter.
Agrium had signalled last month that its second-quarter earnings would be even better than a bullish estimate provided in June.
The earnings have been driven by higher nitrogen and potash prices, offset by lower phosphate prices than during the same period last year, as well as lower wholesale fertilizer sales volumes and lower margins in North America.
Agrium said it remained optimistic in its outlook for the rest of the year despite a severe drought affecting the U.S., which it said will likely lead to crop yields being revised downward.
"We expect high crop prices and tight grain inventories to create significant support for international nutrient demand in the coming year, as growers globally are expected to expand acreage and optimize application rates," Agrium President and CEO Mike Wilson said in a statement.
"Inventories for most crop nutrients remain tight in North America as retailers have ended the season largely empty The combination of these factors and an expected early start to the fall harvest and application season is expected to result in solid crop input demand in the back half of 2012 and Agrium will be there to provide the expertise and products necessary for growers to meet the unrelenting global growth in demand for food."
In June, Agrium more than doubled its dividend to a semi-annual payout to shareholders of 50 cents per share, up from 22.5 cents per share previously.
It's not clear how fertilizer producers such as Agrium will be affected by a prolonged drought in much of the United States. Conditions in Canada's Prairie region haven't been as severe.
If farmers' yields aren't as strong because of the dry conditions, the plants won't take up all the nutrients in the soil, leaving some of them behind. Phosphate and potash can remain in the soil throughout the winter, whereas nitrogen tends to leach out of soil more easily.
Further complicating matters is the fact that fertilizer inventories are low in North America. So even if farmers don't wind up needing more fertilizer, distribution channels will still need to be replenished.
Agrium is a fertilizer producer that has diversified into other parts of the agriculture services sector, including a major U.S. retail presence.