Over the past few weeks it seems that volume has slowed on the potash stocks we follow as the share prices have taken a breather. Interest has waned yet share prices have found themselves in a bit of a trading range, especially when one consults a chart of Potash Corporation of Saskatchewan (POT), The Mosaic Company (MOS) and Agrium Incorporated (AGU). Not much has changed in the past few weeks, and investors understand that the fertilizer stocks will be around for a while. Right now we have some sideways movement, which could soon end.
The Wall Street Journal wrote this past week a somewhat negative story of the "cartels" which control the world's potash market. They noted that they are legalized entities in both Canada and the United States, and we all know from experience and past history that the Russians will let you do just about anything as long as you play by their rules and scratch their back at the end of the day. Farmers across the world are getting angry with prices for potash and other fertilizers, but truth be told they could not achieve anywhere close to the yields they do without it so it all falls under the category of "you gotta spend money to make money" in our book. We highly doubt that either the Canadian or United States' governments will seriously consider, let alone implement, any price caps on fertilizers. Their tunnel vision in the states is focused on oil prices and the oil majors and shall remain there as prices around the country cross the US$4.00 a gallon mark.
Something interesting we have been watching over the past week to see if it would hold is the support of Potash Corporation of Saskatchewan at around US$190. It held this week, so we feel compelled to share this chart with you along with our insight.
Every fifty point move by the stock is met with it rising above the benchmark number, then falling back towards the benchmark for a roughly two month span before beginning a march upwards again. We have highlighted this chart going back two years which we believe gets the point across pretty well. It has been a little over a month and a half of our current sideways movement and choppy trading, so we would expect a movement one way or another in the next week or two to give us an indication of where the stock will move next.
The potash juniors have moved lower in recent trading, as is to be expected due to the leverage they afford investors. You can achieve larger percentage returns higher in good times, and larger returns to the downside in just normal and bad times. With interest waning, it is only natural that shares are falling as investors sell and move their money to "hot" sectors like the solar dry bulk shippers (as has been the case recently). Also dragging the juniors down is the fact that they are getting competition for investors' capital with new entrants into the industry over the past 2 months.
Universal Uranium (UULFF.PK) and Utah Uranium have both moved into the potash arena in varying degrees, with Universal selling its Two Time Zone resource to Crosshair Exploration (CXZ) for 10 million shares to finance its new activities in the potash industry. Utah Uranium has staked a large block of land near Intrepid Potash's mine. Both are blue sky projects where drilling will probably not take place for at least two quarters. Also, Western Potash came public listing shares on the Toronto Venture and another private company, Intercontinental Potash Corp., sold a 50% stake to Trigon Uranium. Intercontinental Potash Corp. owns a 100% stake in U.S. Potash Corp. which holds nearly 86,000 acres in the U.S. This is another blue sky company hoping their prospecting lands pan out, but only time will tell.
We would stay focused on the major players in the industry who are producers and then those companies with historical resources or very near the prolific Saskatchewan mines. We have listed companies producing potash now, as well as some juniors with land positions around them:
Potash Producers:
Potash Corporation of Saskatchewan (POT)
The Mosaic Company (MOS)
Agrium Inc. (AGU)
Intrepid Potash (IPI)
Saskatchewan and Western Manitoba Juniors:
Athabasca Potash (ABHPF-Pink Sheets)
Anglo Potash (AGPOF-Pink Sheets) * Agreed to be bought by BHP Billiton
Potash One (KCLOF-Pink Sheets)
Raytec Metals (RAYMF-Pink Sheets)
Western Potash (WPX.V- not traded on American exchanges)
Thursday, June 5, 2008
Opening Glance: Machinery
Machinery stocks fluctuate in early trading after release of jobs report
NEW YORK (AP) -- Shares of machinery companies fluctuated in early trading Thursday, after the release of a government report showing a drop in the number of laid-off workers seeking unemployment benefits and better-than-expected retail sales results.
Also on Thursday, UBS downgraded Paccar Inc. to "Sell" from "Neutral."
Here's how some machinery stocks were doing in early trading:
Manitowoc Co., up 46 cents to $41.47.
Paccar Inc., down $1.56, or 2.9 percent, to $51.69.
NEW YORK (AP) -- Shares of machinery companies fluctuated in early trading Thursday, after the release of a government report showing a drop in the number of laid-off workers seeking unemployment benefits and better-than-expected retail sales results.
Also on Thursday, UBS downgraded Paccar Inc. to "Sell" from "Neutral."
Here's how some machinery stocks were doing in early trading:
Manitowoc Co., up 46 cents to $41.47.
Paccar Inc., down $1.56, or 2.9 percent, to $51.69.
More Food From Monsanto
According to the NY Times, Monsanto (MON) said it will develop a seeds that can double crop yields and require 30% less water, land, and energy to grow by 2030. Monsanto CEO Hugh Grant said the company decided to make this goal public “so this isn’t just a bound report on some library shelf.” The announcement comes as world leaders meet in Rome to discuss the recent surge in food prices. Grant said it was merely a coincidence, but some believe it is an effort to gain acceptance of genetically modified crops. Professor Glenn Curtis mentioned Monsanto recently in Dow Does Price Hikes.
From the Bull Pen: Monsanto bulls feel comfortable about the long-term prospects of the company. Sell-stops can be set near its 50 DMA ($122).
From the Bear Cave: Those bearish in the Ag space can play the downside in the agriculture ETF (DBA); buy-stops can be set above the 50 DMA ($37).
From the Bull Pen: Monsanto bulls feel comfortable about the long-term prospects of the company. Sell-stops can be set near its 50 DMA ($122).
From the Bear Cave: Those bearish in the Ag space can play the downside in the agriculture ETF (DBA); buy-stops can be set above the 50 DMA ($37).
More Food From Monsanto
According to the NY Times, Monsanto (MON) said it will develop a seeds that can double crop yields and require 30% less water, land, and energy to grow by 2030. Monsanto CEO Hugh Grant said the company decided to make this goal public “so this isn’t just a bound report on some library shelf.” The announcement comes as world leaders meet in Rome to discuss the recent surge in food prices. Grant said it was merely a coincidence, but some believe it is an effort to gain acceptance of genetically modified crops. Professor Glenn Curtis mentioned Monsanto recently in Dow Does Price Hikes.
From the Bull Pen: Monsanto bulls feel comfortable about the long-term prospects of the company. Sell-stops can be set near its 50 DMA ($122).
From the Bear Cave: Those bearish in the Ag space can play the downside in the agriculture ETF (DBA); buy-stops can be set above the 50 DMA ($37).
From the Bull Pen: Monsanto bulls feel comfortable about the long-term prospects of the company. Sell-stops can be set near its 50 DMA ($122).
From the Bear Cave: Those bearish in the Ag space can play the downside in the agriculture ETF (DBA); buy-stops can be set above the 50 DMA ($37).
Monsanto's Industry-Leading Seed Position Creates Accelerated Biotech Trait Opportunity in Latin America
2008 Accomplishments Provide Continuing Springboard for Growth in 2009 and Beyond
NEW YORK, June 5 /PRNewswire-FirstCall/ -- Monsanto's international seed brands serve as an ideal launching pad that positions the company for new launches of biotechnology traits with significant scale and ramp-up speed, Brett Begemann, Monsanto's executive vice president of global commercial, will tell investors today at the Merrill Lynch Agricultural Chemicals Conference in New York.
Begemann will cite the examples of Argentina and Brazil, where the company recently received separate regulatory approvals for corn biotechnology traits. In Argentina, Monsanto received the first-ever approval for a double-stack trait combination, YieldGard Corn Borer with Roundup Ready Corn 2, and plans to offer the combination on more than 1 million acres in its year of introduction. Likewise, Monsanto received planting approval for the YieldGard Corn Borer trait in Brazil and is planning for a 1 million to 2 million acre launch for the upcoming 2008-2009 season.
"If you combine the scale of our seed businesses in Argentina and Brazil with our proven ability to deliver traits, we're in the best competitive position to enter new trait markets quickly and with an immediate financial benefit," said Begemann. "These two approvals came a year ahead of our original plan, accelerating this opportunity and giving us what we believe is a significant first-mover advantage that translates to an enduring advantage in these new markets."
Begemann's comments will be part of a broader update on the company's five-year growth plan, which targets doubling the company's 2007 gross profit by 2012. With the company's third quarter just completed, Begemann will indicate that the company's 2008 progress on its six identified growth drivers continues to set the stage for further growth in 2009 and beyond. Monsanto will report its third-quarter earnings on June 25, and will provide further strategic updates at that point.
At today's conference, Begemann will highlight developments in key areas of the company's growth drivers. These include:
-- U.S. corn business: With U.S. planting nearing completion, Monsanto
remains on track with its 2-3 share point gains in its DEKALB corn
seed business and complementary 1-2 share point gains in its American
Seeds, Inc. businesses. Paired with increased trait penetration,
especially for triple stacks, Monsanto is setting the stage for the
introduction of its new SmartStax trait platform for corn expected in
2010, Begemann said.
-- International corn: In addition to the new biotech trait launches in
Latin America, Monsanto has strengthened its corn seed position in its
key international markets. Notably, in Argentina, Monsanto brands
have gained 5 shares points, ahead of the original expectation of 1-2
share point gain. In Brazil, where Monsanto targeted holding share in
2008, its seed brands met the objective and are poised for growth in
2009. In expanding markets in the European Union and India, Monsanto
brands fell short of the original 1-2 share-point gain target, but
retain strong positions and good momentum for renewed growth in 2009.
-- Soybeans: Monsanto remains on target for its planned 1 million to 2
million acre pre-commercial launch of its Roundup Ready 2 Yield
platform in 2009 in the United States, with significant seed bulk up
and final commercial testing underway in 2008 to support the roll out
next year.
-- Cotton: In the United States, Monsanto's cotton business continues to
be a turnaround story, with the Deltapine seed brand expected to lose
share in 2008 and stabilize at a level of approximately 33-36 percent.
With new seed varieties in testing and a more aggressive trait ramp-up
program, Monsanto is re-establishing the base for renewed growth in
the Deltapine brand.
Begemann will emphasize that Monsanto's growth will continue to come from innovation, with a focus on developing new products and technology that create value for farmers and the value chain by improving the productivity of acres that are being farmed.
"What I believe we do better than anyone else is to apply our technology to increase on-farm yields," said Begemann. "As a leading technology provider in agriculture, our products work to create more grain at a lower cost with less risk to serve the collective needs for feed, food and fuel across crops."
Webcast Information
Begemann's presentation slides and simultaneous audio webcast of the presentation may be accessed by visiting the company's web site at http://www.monsanto.com/investors. Following today's live broadcast set for 2 p.m. ET, a replay of the webcast will be available for two weeks through this same link.
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. For more information on Monsanto, see: http://www.monsanto.com/.
Cautionary Statements Regarding Forward-Looking Information:
Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.
NEW YORK, June 5 /PRNewswire-FirstCall/ -- Monsanto's international seed brands serve as an ideal launching pad that positions the company for new launches of biotechnology traits with significant scale and ramp-up speed, Brett Begemann, Monsanto's executive vice president of global commercial, will tell investors today at the Merrill Lynch Agricultural Chemicals Conference in New York.
Begemann will cite the examples of Argentina and Brazil, where the company recently received separate regulatory approvals for corn biotechnology traits. In Argentina, Monsanto received the first-ever approval for a double-stack trait combination, YieldGard Corn Borer with Roundup Ready Corn 2, and plans to offer the combination on more than 1 million acres in its year of introduction. Likewise, Monsanto received planting approval for the YieldGard Corn Borer trait in Brazil and is planning for a 1 million to 2 million acre launch for the upcoming 2008-2009 season.
"If you combine the scale of our seed businesses in Argentina and Brazil with our proven ability to deliver traits, we're in the best competitive position to enter new trait markets quickly and with an immediate financial benefit," said Begemann. "These two approvals came a year ahead of our original plan, accelerating this opportunity and giving us what we believe is a significant first-mover advantage that translates to an enduring advantage in these new markets."
Begemann's comments will be part of a broader update on the company's five-year growth plan, which targets doubling the company's 2007 gross profit by 2012. With the company's third quarter just completed, Begemann will indicate that the company's 2008 progress on its six identified growth drivers continues to set the stage for further growth in 2009 and beyond. Monsanto will report its third-quarter earnings on June 25, and will provide further strategic updates at that point.
At today's conference, Begemann will highlight developments in key areas of the company's growth drivers. These include:
-- U.S. corn business: With U.S. planting nearing completion, Monsanto
remains on track with its 2-3 share point gains in its DEKALB corn
seed business and complementary 1-2 share point gains in its American
Seeds, Inc. businesses. Paired with increased trait penetration,
especially for triple stacks, Monsanto is setting the stage for the
introduction of its new SmartStax trait platform for corn expected in
2010, Begemann said.
-- International corn: In addition to the new biotech trait launches in
Latin America, Monsanto has strengthened its corn seed position in its
key international markets. Notably, in Argentina, Monsanto brands
have gained 5 shares points, ahead of the original expectation of 1-2
share point gain. In Brazil, where Monsanto targeted holding share in
2008, its seed brands met the objective and are poised for growth in
2009. In expanding markets in the European Union and India, Monsanto
brands fell short of the original 1-2 share-point gain target, but
retain strong positions and good momentum for renewed growth in 2009.
-- Soybeans: Monsanto remains on target for its planned 1 million to 2
million acre pre-commercial launch of its Roundup Ready 2 Yield
platform in 2009 in the United States, with significant seed bulk up
and final commercial testing underway in 2008 to support the roll out
next year.
-- Cotton: In the United States, Monsanto's cotton business continues to
be a turnaround story, with the Deltapine seed brand expected to lose
share in 2008 and stabilize at a level of approximately 33-36 percent.
With new seed varieties in testing and a more aggressive trait ramp-up
program, Monsanto is re-establishing the base for renewed growth in
the Deltapine brand.
Begemann will emphasize that Monsanto's growth will continue to come from innovation, with a focus on developing new products and technology that create value for farmers and the value chain by improving the productivity of acres that are being farmed.
"What I believe we do better than anyone else is to apply our technology to increase on-farm yields," said Begemann. "As a leading technology provider in agriculture, our products work to create more grain at a lower cost with less risk to serve the collective needs for feed, food and fuel across crops."
Webcast Information
Begemann's presentation slides and simultaneous audio webcast of the presentation may be accessed by visiting the company's web site at http://www.monsanto.com/investors. Following today's live broadcast set for 2 p.m. ET, a replay of the webcast will be available for two weeks through this same link.
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. For more information on Monsanto, see: http://www.monsanto.com/.
Cautionary Statements Regarding Forward-Looking Information:
Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.
Starting a Position in Intrepid Potash
Based on Monday morning's earnings report and some follow-up information from my analyst team (ahem - readers), we've come to the conclusion that Intrepid Potash (IPI) prices their fertilizer 70% by contract, 30% spot in each quarter. For the contracted portion, if last quarter is a representative sample, they priced the contracted portion with a 4 month lag. Assuming April 1 'contract' pricing came in December 2007-January 2008, we should begin to see meaningful upside in Q2. Q3 (starting July 1) should price in March 2008 and the full effects of the rampant bull in potash pricing be reflected by then. A risk of course is if potash pricing falls in the back half of the year, something I would find as a very small probability:
[Mar 27: Canpotex Potash Contracts Secured with India @ $625][Apr 2: Potash Makers Already Talking $750, up from $625][Apr 16: Chinese Agree to $576 Price Point for Potash][Apr 23: Potash Hits $1000 on Spot Market]
With that said, I still want to hear myself tonight, but going with my analyst team, I'm creating a starter stake in Intrepid Potash here in the $48s, with a 400 share buy or $19,600. Due to market conditions and potential for commodity pullback, plus the need to listen to the conference call, I'm starting small - this is a 1.6% stake. I would like to add to this position in the low to mid $40s on a sector pullback, or if the name starts to run on me, I'll add as well.
I don't expect this to take off tomorrow, but if this pricing mechanism outlined above is accurate, the current 2008 estimate of $2.24 EPS should be surpassed by Dec 31, 08; but this will be a very backloaded year.With that said, coal is a 2009/2010 story and that has not stopped the stocks from creating massive moves in 6 weeks. So we won't know when the market will recognize inefficiencies - you just have to identify them and be ready to latch on once the whale starts swimming.
This new information makes me far more bullish on this name than I was 24 hours ago; again every $100 increase in potash = 70 cents EPS to Intrepid according to their filing.
We estimate that every $10 per ton increase in the price of potash will have a pro forma annual earnings impact of approximately $0.07 per share.
According to their filing this is their current pricing scheme
Q1 Average: $390 (Jan $357, Feb $397, Mar $417)
Q2 Looks like this - Apr $503, May $532, Jun $582
As an added bonus, it appears the vast majority of their sales are domestic in nature; with China short-changed in their potash this year, I can see certain Asian friends knocking on their door in the coming year. Again... just about everything is about China nowadays - but while they can slowdown their orders of steel, concrete, metals - keeping their people warm (coal) or feeding them (fertilizer) is going to be a very difficult thing to stop doing; so even if China does implode under its own supersonic growth rate, feeding and energy needs should not suffer. (Note that does not mean American stockholders of companies in these areas won't panic-sell on first hint of China slowdown, but that's just American stockholders being American stockholders - very little to do with fundamentals)
[Mar 27: Canpotex Potash Contracts Secured with India @ $625][Apr 2: Potash Makers Already Talking $750, up from $625][Apr 16: Chinese Agree to $576 Price Point for Potash][Apr 23: Potash Hits $1000 on Spot Market]
With that said, I still want to hear myself tonight, but going with my analyst team, I'm creating a starter stake in Intrepid Potash here in the $48s, with a 400 share buy or $19,600. Due to market conditions and potential for commodity pullback, plus the need to listen to the conference call, I'm starting small - this is a 1.6% stake. I would like to add to this position in the low to mid $40s on a sector pullback, or if the name starts to run on me, I'll add as well.
I don't expect this to take off tomorrow, but if this pricing mechanism outlined above is accurate, the current 2008 estimate of $2.24 EPS should be surpassed by Dec 31, 08; but this will be a very backloaded year.With that said, coal is a 2009/2010 story and that has not stopped the stocks from creating massive moves in 6 weeks. So we won't know when the market will recognize inefficiencies - you just have to identify them and be ready to latch on once the whale starts swimming.
This new information makes me far more bullish on this name than I was 24 hours ago; again every $100 increase in potash = 70 cents EPS to Intrepid according to their filing.
We estimate that every $10 per ton increase in the price of potash will have a pro forma annual earnings impact of approximately $0.07 per share.
According to their filing this is their current pricing scheme
Q1 Average: $390 (Jan $357, Feb $397, Mar $417)
Q2 Looks like this - Apr $503, May $532, Jun $582
As an added bonus, it appears the vast majority of their sales are domestic in nature; with China short-changed in their potash this year, I can see certain Asian friends knocking on their door in the coming year. Again... just about everything is about China nowadays - but while they can slowdown their orders of steel, concrete, metals - keeping their people warm (coal) or feeding them (fertilizer) is going to be a very difficult thing to stop doing; so even if China does implode under its own supersonic growth rate, feeding and energy needs should not suffer. (Note that does not mean American stockholders of companies in these areas won't panic-sell on first hint of China slowdown, but that's just American stockholders being American stockholders - very little to do with fundamentals)
Deere Acquires Plastro to Become Third Largest Worldwide in Agricultural Irrigation
MOLINE, Ill., June 5 /PRNewswire-FirstCall/ -- Deere & Company said today that it has completed the acquisition of Plastro Irrigation Systems, Ltd., headquartered in Israel, to add significant momentum to the growth of John Deere Water Technologies. Terms of the transaction were not disclosed.
Deere will combine Plastro with its current John Deere Water Technologies operations and T-Systems International, which Deere announced it had acquired in late May. The joint operations establish John Deere as the third largest agricultural irrigation company in the world.
"This sale demonstrates that we have been on the right course in our continuing effort to create value as a company," said Yonatan Bassi, chairman of Plastro Irrigation.
Michael McGrady, president of John Deere Water Technologies, said, "Precision irrigation will help the world meet its demand for increased productivity from agriculture. The world's population growth, demand for improved nutrition globally, and increased interest in renewable fuels all require much more precision in the management of the world's fresh water and arable land."
John Deere Water Technologies, San Marcos, California, is a manufacturer of high performance plastic micro and drip irrigation products for the agricultural, nursery, landscape, and greenhouse markets and was formed in June of 2006 when Deere & Company purchased Roberts Irrigation Products, Inc.
Plastro Irrigation was established in Israel in 1966 and is a leading provider of irrigation system components including peripheral equipment; agro-technical consultation; design and planning; installation assistance; and training.
Deere & Company (NYSE: DE - News) is the world's leading provider of advanced products and services for agriculture and forestry and a major provider of advanced products and services for construction, lawn and turf care, landscaping and irrigation. John Deere also provides financial services worldwide and manufactures and markets engines used in heavy equipment.
Deere will combine Plastro with its current John Deere Water Technologies operations and T-Systems International, which Deere announced it had acquired in late May. The joint operations establish John Deere as the third largest agricultural irrigation company in the world.
"This sale demonstrates that we have been on the right course in our continuing effort to create value as a company," said Yonatan Bassi, chairman of Plastro Irrigation.
Michael McGrady, president of John Deere Water Technologies, said, "Precision irrigation will help the world meet its demand for increased productivity from agriculture. The world's population growth, demand for improved nutrition globally, and increased interest in renewable fuels all require much more precision in the management of the world's fresh water and arable land."
John Deere Water Technologies, San Marcos, California, is a manufacturer of high performance plastic micro and drip irrigation products for the agricultural, nursery, landscape, and greenhouse markets and was formed in June of 2006 when Deere & Company purchased Roberts Irrigation Products, Inc.
Plastro Irrigation was established in Israel in 1966 and is a leading provider of irrigation system components including peripheral equipment; agro-technical consultation; design and planning; installation assistance; and training.
Deere & Company (NYSE: DE - News) is the world's leading provider of advanced products and services for agriculture and forestry and a major provider of advanced products and services for construction, lawn and turf care, landscaping and irrigation. John Deere also provides financial services worldwide and manufactures and markets engines used in heavy equipment.
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