"Many growers are taking a wait-and-see approach to buying fertilizer," said Agrium chief operating officer Chuck Magro, who recently toured a number of major U.S. agricultural regions.
There's also more uncertainty in the global marketplace than usual, he said, from the size of this year's corn crop to developments in China, India and Russia.
"However, most of this uncertainty is well reflected in the current pricing levels," Magro told a Scotiabank fertilizer conference on Tuesday in Toronto.
"At today's pricing, with all of this uncertainty in the market, the grower — which is really what matters — is still making very solid returns... Growers across North America are in sound financial shape and remain optimistic about the future."
Farmers could pull back on buying more premium types of fertilizer if corn prices fall much below US$4 per bushel — they're currently at $4.50 — "but so far, there's been very little sign of that to date because I think over all, there's still a lot of optimism in the marketplace," Magro said.
Wayne Brownlee, chief financial officer at Potash Corp. of Saskatchewan (TSX:POT), said droughts and flooding in China could be positive for corn growers in other parts of the world, including the United States.
"We're seeing a real weakness in wheat and corn production there. You're probably going to see record corn imports in China over the next year or so," he said.
"The combination of drought in some areas and flooding in other areas has really diminished that crop — so, good news for the corn growers in the United States and elsewhere."
In May, PotashCorp raised its quarterly dividend by 25 per cent to 35 cents. On Tuesday, Brownlee said there is room for further dividend increases, though not at the same rate.
On Monday, Agrium raised its dividend by 50 per cent to $3 per share on an annualized basis, despite warning that it expects sales volumes of its three main fertilizer products to be down up to 30 per cent from a year ago.
"I think it does illustrate our confidence in the ability of our company to generate significant cash flow, even in these uncertain times and I think it does show the testament and the value of our integrated strategy," said Magro.
"We believe the long-term fundamentals of our business remain strong and we expect solid crop input demand as we move into the fall season."
Agrium recently won Competition Bureau approval to buy 210 Viterra retail outlets in Western Canada from Glencore Xstrata PLC.
There's still an opportunity to grow Agrium's retail presence in the United States, where the company's market share is currently 18 per cent, lower than any of its other operating regions, Magro said.
He said he sees the growth coming from bite-sized deals rather than any "big bang" acquisitions, like its $2.65 billion acquisition of UAP Holding Corp. in 2007.
"There are still a lot of independent operators that were able to consolidate over time. And that's really the strategy that we have, is optimizing our existing network, managing our costs and building the tuck-ins," said Magro.
"We still have plenty of market share growth in the United States."
— By Lauren Krugel in Calgary