Anybody buying fertilizer producers?

[FinancialIndependence]

after the overnight news of the breakup of the potash fertilizer cartel, anyone buying Potash Corp (POT) Agrium (AGU) or Mosaic (MOS) this morning.
POT is down about 22% and MOS 21%.

[REWahoo]

I don't buy POT...

[MichaelB]

Quote:

Originally Posted by REWahoo I don't buy POT...

Grow your own?

[REWahoo]

+1

Thought my well going dry was going to result in crop failure...

[aja8888]

Quote:

Originally Posted by FinancialIndependence after the overnight news of the breakup of the potash fertilizer cartel, anyone buying Potash Corp (POT) Agrium (AGU) or Mosaic (MOS) this morning. POT is down about 22% and MOS 21%.

I'll wait until later today and see what the CNBC talking heads recommend, then I'll make a decision. Remember, as long as there is natural gas, there will be ammonia-based fertilizers produced. And North America is flush with gas. Forecast is excess supply of N fertilizer by 2016.

Here is some good reading for you:

2012 Doha Ifa Summary

[Larro Darro]

Quote:

Originally Posted by aja8888 Remember, as long as there is natural gas, there will be ammonia-based fertilizers produced. And North America is flush with gas. Forecast is excess supply of N fertilizer by 2016.

How long until that results in lower prices for farmers? I get sticker shock every time I go to the farmer's COOP.

[aja8888]

Quote:

Originally Posted by Larro Darro How long until that results in lower prices for farmers? I get sticker shock every time I go to the farmer's COOP.

So that "trickle down effect" is not trickling for you?

Those are lower potash prices on the wholesale level, not the production side! Actually, your cost may increase until this all shakes out.

[haha]

Quote:

Originally Posted by aja8888 I'll wait until later today and see what the CNBC talking heads recommend, then I'll make a decision. Remember, as long as there is natural gas, there will be ammonia-based fertilizers produced. And North America is flush with gas. Forecast is excess supply of N fertilizer by 2016. Here is some good reading for you: 2012 Doha Ifa Summary

Thanks for the article. Looks like phosphorus is expected to be in tightest supply, followed by potash. Jeremy Grantham is putting forward a scarcity paradigm for resource investing, and phosphorus is one of his favorite ideas. I looked at these ag supply stocks a few months ago, but they seemed expensive and my guardian angel was with me, so we didn't buy. Controlled or unfree markets are always scary, but at present, all markets are controlled, to one degree or another, so it's all scary.

I will look once more.

Ha

[aja8888]

Quote:

Originally Posted by haha Thanks for the article. Looks like phosphorus is expected to be in tightest supply, followed by potash. Jeremy Grantham is putting forward a scarcity paradigm for resource investing, and phosphorus is one of his favorite ideas. I looked at these ag supply stocks a few months ago, but they seemed expensive and my guardian angel was with me, so we didn't buy. Controlled or unfree markets are always scary, but at present, all markets are controlled, to one degree or another, so it's all scary. I will look once more. Ha

I don't own any of them either (except in TSM ETF). The commodity markets, in general, are hard to figure. Coal/steel/copper are all down and everybody worries about China's growth expectations these days. I may just stick with oil as I work in that industry. Then again, I'm not sure what to do there as WTI crude prices are pretty heady right now.

[Running_Man]

The potash market in particular was controlled in essence by 2 oligopolies, the problem they had was the extremely high cost of potash being manipulated by the market was in long term danger by new "green-field" projects being set up. This would eliminate the ability of the largest producer Uralki to control the market. While is consumption of about 37 million tons annually, proven reserves exceed 9.5 billion and many projects were announced to start tapping that market. Uralki alone has almost 4 million tons annually it has not been selling to keep potash prices high.
The purpose seems pretty clear to cancel any new mining for potash to protect their market share.

Uralki can produce potash for $60 a ton, the high cost producer K+S AG, has costs of $290 per ton and has a greenfield project in Canada to expand their production from 7 million tons presently in Europe to 11 million total worldwide but they had stated they needed a sales price exceeding $380 a ton to make this economically feasible. At 4 billion to build the potash facility $300 a ton will probably get the project cancelled.
BHP Billiton was planning a 20 billion project in Western Canada to create the world's largest potash mine coming online in 2020 with 8 million tons annually of production. They have stated they need a potash price of $550 tons to make that profitable and that project too will likely be cancelled with potash @ 300 a ton.

So for the potash side the incentive of the largest producer is truly to drop the price and knock the other producers out of any new production.

[houstenh]

I sold an IPI (Intrepid Potash) put a couple of days ago. Does that count?

[MRG]

Quote:

Originally Posted by houstenh I sold an IPI (Intrepid Potash) put a couple of days ago. Does that count?

So you may be a buyer?

MRG

[aja8888]

All the subject stocks are still in ugly territory.

[haha]

Do you know what company is the most concentrated bet on phosphorus? Phosphorus deposits are very tightly located geographically, whereas K is more widespread. I think the greatest leverage to agriculture is likely to be phosphorus.

[aja8888]

No, don't know what company, but here is the world production/reserve stats for the five largest deposit areas.

TOKYO, Sept 2 (Reuters) - Phosphate is one of the three key nutrients that are used in fertilizers, and is a target of Japanese trading houses as they look to invest in upstream assets overseas to tap growth in the fertilizer market.


Top 5 Phosphate Producers

(in mln tonnes) Country Production (2008), Reserves

1 China - 50, 4,100

2 US - 30.9, 1,200

3 Morocco, West Sahara - 28, 5,700

4 Russia - 11, 200

5 Tunisia - 7.8, 100

Source: U.S. Geological Survey Mineral Commodity Summaries (Reporting by Yuko Inoue)

[haha]

Thanks. I know Florida is a major mine site in the US, and of course Morocco probably has more PO4 per cap than anywhere.

I'll find some companies tomorrow. My mind is going to weekend now.

Ha

[Jsore13194]

I think long term the fertilizer stocks are a keeper. One of my favorites is TNH (Terra Nitrogen). I'm not sure now is the ideal time to be buying in, as they've taken a big hit as of late. Also, there are 3 different categories of fertilizers, so you need to know the differences and do your homework.

[ERsoonihope]

Well, I just bought a puppy. So we've got quite a bit of new fertilizer showing up. Back yard. Living room carpet.

[RISP]

I bought a small position of K+S (German potash producer) during the meltdown (a little too early, actually). I believe this to be a generally sound company that is run well, and the downturn to be an exaggeration. It's somewhat of a two-fold approach for me: If I'm right, and the stock bounces back in the short run, I'll sell for a quick buck. If the recovery takes longer, I'll stick to my usual buy-and-hold approach. And in case I'm wrong, I made sure to use only the play money budget. Which may well be the case, as the stock is dropping like a stone after today's announcement of the Q3 result, which wasn't even that bad.

Quote:

Uralki can produce potash for $60 a ton, the high cost producer K+S AG, has costs of $290 per ton and has a greenfield project in Canada to expand their production from 7 million tons presently in Europe to 11 million total worldwide but they had stated they needed a sales price exceeding $380 a ton to make this economically feasible. At 4 billion to build the potash facility $300 a ton will probably get the project cancelled.

It's 'Uralkali'. The reason for K+S's project in Canada is not so much volume expansion, but the fact that their German reserves will be depleted in a couple decades. They can either move abroad, or die. Hence this project will not easily be cancelled. Also, I read a figure lower than $380 a ton to be profitable, but I cannot find any source for that right now.

Here's a link to the price development of Potash, unfortunately in German: Kaliumchlorid - monatlicher Preis - Rohstoffpreise - Preis Charts und Daten - IndexMundi
Prices are in USD per (I guess?) metric ton. Despite the recent turmoil, they have hardly moved at all so far. This may partly be due to long-term delivery contracts, but I think the $300/t announced by Uralkali were just meant to scare away potential competition, as Running_Man has explained very well.

Another thing to keep in mind: Yes, Uralkali can produce really cheap, but you need to consider also shipping costs. Western producers have a big advantage in that they are much closer to the consumers of their products.

Finally, there is not really ONE world market price for potash. At least K+S claim that they produce a variety of specialty products that sell at a premium.

[HFWR]

I produce a fair amount of fertilizer on my own...