A disappointing corn forecast and rising demand from China add up for ag stocks
It may seem counter-intuitive but bad news on corn supply is usually good news for the stocks of companies that sell stuff to farmers. The dynamic works like this: lower supply means higher prices for the crops that farmers do harvest and that means they’ll have more profit to spend on things like tractors, seed, and fertilizer. If demand is growing as supply is falling, the dynamic can get supercharged.
And that’s what’s happening right now. On July 9, the U.S Department of Agriculture reported that farmers had planted less corn because of excess and untimely rains at the same time as demand, especially from China, is climbing.
The result is that U.S. corn inventories are projected to fall 7% by August 2011.
What stocks will benefit? Read more
Sell Yara International (YARIY.PK)
I love fertilizer stocks as a long term play on rising global demand for food and Yara International (YARIY), the world’s largest publicly traded fertilizer company, is one of my favorites in the sector. But that’s the long term picture.
In the short term Yara International is still a commodities stock and right now the commodity sector is getting killed on worries that growth is going to slow in Brazil, India, China (especially China) and the rest of the developing world as governments there raise interest rates or otherwise tighten the money supply in order to fight inflation. Read more
Sell Potash of Saskatchewan (POT)
So was that good news or bad news that Potash of Saskatchewan (POT) announced this morning, April 28?
For the first quarter of 2010 the company reported earnings of $1.47 a share and revenue of $1.71 billion. Both numbers beat Wall Street projections of $1.32 per share for earnings and $1.48 for revenue.
Clearly good news.
But then the report gets confusing. Read more
Update Deere (DE)
Deere (DE) is both a stock and one of the most reliable indicators of the fortunes of the agricultural sector.
No matter whether you own Deere (the shares are a member of the Jubak Picks 50 long-term portfolio) or are waiting for a turn in the sector as a whole, you should be very happy with the earnings, revenue, and guidance that Deere reported this morning, February 17. Read more
Update Potash of Saskatchewan (POT)
Investors get gun shy. Make every attempt to buy into a market correction a big loser and most investors won’t put a dollar in even when there’s concrete evidence of a turnaround.
Companies do too. After seeing every projection for the price of potash fertilizer and for the company’s earnings turn out to be laughably high for the last year, management at Potash of Saskatchewan (POT) has finally come out with guidance that strikes me as laughably low.
On January 28, the company announced fourth quarter earnings of 80 cents a share. That was 2 cents a share above the Wall Street consensus but a huge drop from the $2.03 a share in the fourth quarter of 2008.
And then the company dropped its bomb. Read more
