The hits just keep on coming in the agricultural sector.

Just days after fertilizer maker Agrium (AGU) raised its guidance for the first half of 2011 on better than expected prices and demand http://jubakpicks.com/2011/06/20/update-agrium-in-my-watch-list/ , on June 21 Syngenta (SYT) said rising demand for seeds and pesticides would help it double revenue from its main seed and crop-protection products to $17 billion in 2015 from $8.4 billion in 2010.

Syngenta’s projected 102% growth in that period would exceed that forecast for the sector as a whole. Market research company marketsandmarkets forecasts that the global agricultural chemical market will grow to $223 billion in 2015 from $134 billion in 2010. That’s a rather heady 66% growth rate but lags Syngenta’s figures because the company is forecasting that it will pick up market share from competitors in the sector over that period.

I’d call Syngenta’s forecast a stretch goal but not as outlandish as it sounds. Read more

The weather just isn’t cooperating. When the world needs bumper harvests to slow food price inflation, bad weather has lowered projected harvests in the United States.

With wheat and corn prices already near record highs and with projections for end of season stockpiles calling for record lows, weather reports from the U.S. grain belt point to below normal yields and slower than usual planting.

About 38% of the winter wheat crop is in poor or very poor condition as of April 17, according to the U.S. Department of Agriculture. That’s up from 36% poor or very poor a week earlier and from just 6% at this time in 2010.

Dry weather is slowing planting of spring wheat. Only about 5% of the spring wheat acreage was sown as of April 17. That compares to 8% at the same time in 2010 and a five-year average of 12%.

Unless weather improves, yields in the U.S. could fall to 38 or 39 bushels an acre, the lowest since 2006. Yields have been below 40 bushels an acre only twice in the last 13 years.

Not surprisingly wheat for July delivery reached a high of $8.2475 a bushel on the Chicago Board of Trade in April 18.

The national corn crop is struggling too. Read more

Sell Lindsay (LNN)

I’m looking to take profits in Lindsay (LNN) here now that the stock is again above my $72 target price. So as of today April 8 I’m selling these shares out of Jubak’ Picks with a 19.8% gain since I added Lindsay to the portfolio on December 23, 2010.

On March 30 the company blew away projections for the second quarter of fiscal 2011 with earnings of 89 cents a share. That was up from 48 cents in the second quarter of fiscal 2010 and above analyst projections for 71 cents a share fore the quarter.

Revenue grew by 41% to $120 million in the quarter.

Revenue from irrigation systems grew a strong 35% from the second quarter of fiscal 2010. Revenue from the United States grew by 72% although international irrigation revenue slipped 14%.

But the big driver for the quarter’s earnings beat was the company’s infrastructure segment. Sales of such products as the Quickchange Movable Barrier, used in highway construction, climbed 65% from the second quarter of fiscal 2010. Gross margins at Lindsay climbed to 28.3% from 26% a year ago thanks to sales of higher margin infrastructure products.

It’s the uncertain prospects for that infrastructure business that leads me to recommend selling these shares. Read more

China, the world’s largest wheat producer, is facing a severe drought in areas of the North China plain that account for 67% of the country’s wheat crop. China’s wheat production fell to 114.5 million tons in the 2010 harvest from 115.1 million tons a year earlier. This year the harvest could drop another 4 million tons.

This is a big deal since China is also the world’s largest consumer of wheat and accounts for about 17% of global wheat consumption.

The government is working to provide additional irrigation to mitigate the drought.

In Western Australia—across the continent from Australia’s worst floods—drought has put the wheat crop in Australia’s largest wheat producing state in doubt. The impact of the decade-long drought itself is intensified by a battle for Western Australia’s scarce water supplies between farmers and miners. There are about $170 billion in new mining projects on the books for the next five years. All those mines need water to help dig out and process ore, to remove waste rock and to suppress dust. Mining is already the largest user of water, taking 27% of licensed water, compared to 22% for agriculture. Six years ago the proportions were reversed with farming getting 37% of water and mining 26%.

I think you can see where I’m going with this, right?

No, no. Not more about the increasing global squeeze on food supplies. I’ve dealt with that quite enough recently, thank you. (See my posts http://jubakpicks.com/2011/01/14/food-prices-are-back-to-2008-peaks-here-are-10-stocks-that-tap-into-the-trend/ and http://jubakpicks.com/2011/02/01/egypt-has-escalated-the-food-crisis-and-shifted-global-economic-policy-on-inflation-too/ )

This time I want to talk about water scarcity, the trend that everyone sees but that it is so difficult to invest in. Read more

USDA reports global wheat producer lower than expected–forget about inflation relief from falling food prices

This isn’t good news for anyone worried that soaring food prices are fueling global inflation.

Today, February 9, the U.S. Department of Agriculture lowered its forecasts of global wheat inventories because of falling production in the Ukraine. Global stockpiles will total just 177.77 metric tons on May 31, 2011, the USDA now projects. That’s down 0.1% from the agency’s forecast of 177.99 million metric tons in January. Read more