Agrium's shares (TSX:AGU) have traded near 52-week highs since it announced on June 11 that its second-quarter profit would be near the high end of its guidance, which was US$4.18 to $4.78 per diluted share.
The company now estimates earnings for the three-month period will be in a range of $5.40 to $5.50 per diluted share — about 15 per cent above the previous range, Agrium announced before markets opened.
That's more than $1 per share higher a range of analyst estimates compiled by Thomson Reuters before Agrium made its revision.
Agrium stock was up $2.85 to $96.76 around mid-day Wednesday. The shares had been as high as $96.98 earlier in the session — a level not seen since the summer of 2008 when commodity prices were setting pre-recession record highs.
"The increase in expected earnings is due to excellent results across our entire crop input business, resulting from the continuation of robust demand through June, despite the very early start to the spring season," Agrium chief executive Mike Wilson said in a statement.
The early spring in North America caused farmers to get into their fields earlier than they usually would.
As a result, many had expected fertilizer demand that would normally come during the second quarter to be moved up to the first, said BMO Nesbitt Burns analyst Joel Jackson.
"So there was concern that maybe Q2 would be strong, but not as strong as it could be, because you already saw some of that demand in Q1 and Q1 results were stellar," he said.
Jackson had expected to see a $170-million dip in Agrium's retail segment's EBITDA (earnings before interest, taxes, amortization and depreciation) from a year ago because of the projected shift in demand, but he said it's clear the picture is different now.
"Q2 '11 was probably their best quarter ever in the retail segment and it looks like they're going to do better than that" this year, he said.
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, said Jackson.
Phosphate and potash can remain in the soil throughout the winter, whereas nitrogen tends to leach out of soil more easily.
"Farmer consumption of phosphate and potash could be lower this year, not because they'll use less. There's already some in the soil. It's already banked," said Jackson.
On the flip side, farmers might be compelled to plant more land down the road if crop prices remain as strong as they are now, and that means they'll need more crop nutrients.
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's Wilson said: "The outlook remains very positive, supported by the significant increase in grain and oilseed prices globally due to adverse weather in the U.S. and an expected tightening in international crop input markets."
Its full second-quarter results are scheduled to be released on Aug. 2.
Agrium is a fertilizer producer that has diversified into other parts of the agriculture services sector, including a major U.S. retail presence.
It is seeking to buy some of the assets of Viterra Inc. (TSX:VT), a major grain-handler and agricultural supply company that is being acquired by European commodities giant Glencore International.