Monsanto (NYSE: MON): We originally recommended on April 30/07 at $60.30. Closed Thursday at $90.03 (all prices in U.S. dollars).
Last month the company announced second-quarter earnings of $1.09 billion ($1.97 per share), down slightly from $1.13 billion ($2.02 per share) last year. However, excluding one-time items, earnings per share for on-going business were $2.16, up from $1.77 last year. Pretty good numbers in a tough economy!
I originally recommended this stock in April 2007 at $60.30 and last mentioned it as part of an agricultural basket in September 2008 when it was trading at $118.41. The stock is currently trading in the $90 range and I expect it to break $100 before this run is over. The 52-week high was $145.80, which was reached last June, and I believe we could go there again. I just bought some more for one of my accounts and I consider it a key holding for the next 12 months.
The stock held up very well through the meltdown and the agricultural production story is still intact. Food consumption is only down 3% but the stock has been punished along with all the other fertilizer stocks like Potash Corp. (POT). All these stocks have begun to rebound and I think it's a sure bet that they will continue to do so.
Friday, May 15, 2009
Thursday, May 14, 2009
Fast Money AG plays
Lee shifted the panel's attention to the ag names, which she said made "monster moves to the upside."
Macke said the fertilizer names are finally making a comeback after spending a "year in the penalty box." He told investors they can now play Agrium(AGU Quote) and Potash(POT Quote). Of the two, Adami thought Potash was the better play.
Macke said the fertilizer names are finally making a comeback after spending a "year in the penalty box." He told investors they can now play Agrium(AGU Quote) and Potash(POT Quote). Of the two, Adami thought Potash was the better play.
Tuesday, May 12, 2009
Grain Prices: Back to the Futures
We noted in our May 1st Monthly Outlook summary points that the fundamentals promise bullish support for corn and soybeans prices in the near term, while less so for wheat prices. We often look to the CFTC’s weekly Commitment of Traders (COT) report to give us a better sense how the underlying futures speculation supports or casts doubt on the near term price outlook.
Keep in mind that the COT report is a rear-view look at the previous week’s trading. Even so, we can use this information to validate our assumptions of how the large speculators’ recent trading activity is supportive or restrictive of the current price move.
Performance of Underlying Futures
(weekly reporting period ending May 5th)
Corn: Prices for the reporting period rose 6% with flat open interest, while the large speculators’ net long position exploded by nearly 90% over the previous week. This dynamic tells us that the large speculators are increasingly bullish, yet the market overall is failing to attract new institutional buyers. This will likely change as the dollar weakens further.
Soybeans: Prices for the reporting period rose 13% and continued to see steady gains in both open interest and the net long position for the large specs. This dynamic of the open interest and the net longs rising in tandem demonstrates continued support for soybeans’ bullish leadership of the grains complex.
Wheat: Prices for the reporting period rose 6%. Open interest was down more than 5% over the previous week while the large specs’ net short position decreased by a whopping 78%. This feels more like short covering and spillover optimism from soybeans and the outside markets, rather than a sustainable bullish move for wheat. We have noted recently that wheat has the most difficult fundamentals to overcome in the grain complex. Production shortfalls due to drought and planting delays would need to be near historic levels to substantially impact the supply-demand equilibrium in the near term.
This week the trade turns its immediate attention to the May 12th supply-demand report, where the USDA will give the market its first official estimate of ending stocks for the current marketing year..seeking alpha
Keep in mind that the COT report is a rear-view look at the previous week’s trading. Even so, we can use this information to validate our assumptions of how the large speculators’ recent trading activity is supportive or restrictive of the current price move.
Performance of Underlying Futures
(weekly reporting period ending May 5th)
Corn: Prices for the reporting period rose 6% with flat open interest, while the large speculators’ net long position exploded by nearly 90% over the previous week. This dynamic tells us that the large speculators are increasingly bullish, yet the market overall is failing to attract new institutional buyers. This will likely change as the dollar weakens further.
Soybeans: Prices for the reporting period rose 13% and continued to see steady gains in both open interest and the net long position for the large specs. This dynamic of the open interest and the net longs rising in tandem demonstrates continued support for soybeans’ bullish leadership of the grains complex.
Wheat: Prices for the reporting period rose 6%. Open interest was down more than 5% over the previous week while the large specs’ net short position decreased by a whopping 78%. This feels more like short covering and spillover optimism from soybeans and the outside markets, rather than a sustainable bullish move for wheat. We have noted recently that wheat has the most difficult fundamentals to overcome in the grain complex. Production shortfalls due to drought and planting delays would need to be near historic levels to substantially impact the supply-demand equilibrium in the near term.
This week the trade turns its immediate attention to the May 12th supply-demand report, where the USDA will give the market its first official estimate of ending stocks for the current marketing year..seeking alpha
Agrium Ups Bid for CF Again
Today, Agrium Inc. (NYSE: AGU - News) announced it is substantially increasing its exchange offer to acquire all of the outstanding shares of CF Industries Holdings, Inc. (NYSE: CF - News) to $85.20 per CF share based on Agrium's closing stock price on May 8, 2009. Under the revised terms, CF stockholders would receive $40.00 in cash, an increase of $5.00, or 14.3 percent, in the cash consideration, and one common share of Agrium for each CF share.
The increased offer represents a premium of 53 percent to CF's closing price on February 24, 2009 -- the day before Agrium announced its initial proposal, and 68 percent to the previous 30-day volume weighted average price. While it is too early to see if this is the final offer, ultimately we believe that Agrium will prevail, and CF Industries has a fiduciary responsibility to accept the offer.
The increased offer represents a premium of 53 percent to CF's closing price on February 24, 2009 -- the day before Agrium announced its initial proposal, and 68 percent to the previous 30-day volume weighted average price. While it is too early to see if this is the final offer, ultimately we believe that Agrium will prevail, and CF Industries has a fiduciary responsibility to accept the offer.
Friday, May 8, 2009
Bulls Are Hungry for Grains
The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.
Near-Term Grain Price Outlook:
+ We expect soybeans to maintain their bullish momentum on Chinese purchases and international demand diverted from the South American market. U.S. ending stocks continue to shrink at a remarkable pace, and will remain tight until Chinese demand abates or South American production returns to normal next year.
+ Corn’s upside will begin to brighten as selling pressure from farmers’ unloading of old-crop storage subsides. If heavy rains continue to blanket the grain belt, the trade will see increasing concerns that planting delays will encourage growers to switch to soybeans. This development will provide a bullish double-whammy to corn’s price outlook because it reduces both expected yields (late planting) and overall acreage (switch to beans). We should note, however, that any planting delay premium for corn may be somewhat muted, as last year’s results are still fresh in traders’ minds. Recall that we had record pre-season rainfall that flooded fields throughout the western grain belt, yet we still realized superb productivity with the national yield at 153.9 bushels/acre.
+ The supply-demand equation is far too bearish to allow any significant momentum to develop in the near term for wheat prices. Record prices in 2008 did their job to spur enormous production increases, which now leave us with quite ample global supplies to meet current demand. If the U.S. dollar’s strength persists, U.S. wheat sales will continue to lose marginal orders in the export market. One bright spot in the wheat outlook: Prices will benefit from significant production cuts both in the U.S. and abroad, although any gain will be muted by the influences of excess supply noted earlier in this month’s report.seeking alpha
Near-Term Grain Price Outlook:
+ We expect soybeans to maintain their bullish momentum on Chinese purchases and international demand diverted from the South American market. U.S. ending stocks continue to shrink at a remarkable pace, and will remain tight until Chinese demand abates or South American production returns to normal next year.
+ Corn’s upside will begin to brighten as selling pressure from farmers’ unloading of old-crop storage subsides. If heavy rains continue to blanket the grain belt, the trade will see increasing concerns that planting delays will encourage growers to switch to soybeans. This development will provide a bullish double-whammy to corn’s price outlook because it reduces both expected yields (late planting) and overall acreage (switch to beans). We should note, however, that any planting delay premium for corn may be somewhat muted, as last year’s results are still fresh in traders’ minds. Recall that we had record pre-season rainfall that flooded fields throughout the western grain belt, yet we still realized superb productivity with the national yield at 153.9 bushels/acre.
+ The supply-demand equation is far too bearish to allow any significant momentum to develop in the near term for wheat prices. Record prices in 2008 did their job to spur enormous production increases, which now leave us with quite ample global supplies to meet current demand. If the U.S. dollar’s strength persists, U.S. wheat sales will continue to lose marginal orders in the export market. One bright spot in the wheat outlook: Prices will benefit from significant production cuts both in the U.S. and abroad, although any gain will be muted by the influences of excess supply noted earlier in this month’s report.seeking alpha
Saturday, May 2, 2009
Agriculture Stocks Still Make Sense, When Selected Wisely
Friday morning we got some disappointing news about slowing sales at Caterpillar (CAT). There's been a softening of orders in new machinery / equipment tied to global infrastructure and agriculture, which has led the company to slash costs and forecasts.
Earlier this month, we heard a similar story from Deere (DE), which has seen orders for agricultural equipment drop sharply.
You might be tempted to conclude that weak orders for agricultural machinery equates to a weak outlook for "ag" as an industry. It doesn't. You just need to pick your spots.
My checks of farmer demand indicate that, while uncertainty about the global economy remains a concern, farmers still need to grow their crops. To get the most from their crops, demand for nutrients, chemicals and fertilizer remains very high. Suppliers I've checked in with are very happy about orders for the coming season.
My two favorite nutrient/fertilizer plays here are Potash (POT) and Agrium (AGU) -- with trailing enterprise-value-to-EBITDA ratios of under 6 times and 4 times respectively. Both should see their stocks rise over the summer as results come in.
I also mentioned AgFeed (FEED) last week, a favorite Chinese small-cap of mine, selling pork in that market -- it's up about 20% since my mention last Thursday.
Ag makes sense. You just have to realize that not all in the space are created equal at this stage in the cycle.
Earlier this month, we heard a similar story from Deere (DE), which has seen orders for agricultural equipment drop sharply.
You might be tempted to conclude that weak orders for agricultural machinery equates to a weak outlook for "ag" as an industry. It doesn't. You just need to pick your spots.
My checks of farmer demand indicate that, while uncertainty about the global economy remains a concern, farmers still need to grow their crops. To get the most from their crops, demand for nutrients, chemicals and fertilizer remains very high. Suppliers I've checked in with are very happy about orders for the coming season.
My two favorite nutrient/fertilizer plays here are Potash (POT) and Agrium (AGU) -- with trailing enterprise-value-to-EBITDA ratios of under 6 times and 4 times respectively. Both should see their stocks rise over the summer as results come in.
I also mentioned AgFeed (FEED) last week, a favorite Chinese small-cap of mine, selling pork in that market -- it's up about 20% since my mention last Thursday.
Ag makes sense. You just have to realize that not all in the space are created equal at this stage in the cycle.
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