Now keep in mind we cannot directly compare prices in India with China, as the Indian price includes shipping (which is roughly $125/kg in today's era) so effectively it is $500 for the product, $625 to $750, stripping out the $125 shipping in both scenarios, is still a massive increase. And this is why, once people overreact one way or the other to Mosaic's (MOS) report Friday, I'll be looking to quickly scale back in. Granted we will have more major overreaction in a few week's to Potash (POT) earnings (my god the sky is falling! input prices going up! whine! cringe! weep!), but as I've said in my piece - these input costs are being passed right along to the end customers. But you can't discuss with a panicked herd, so I am going to remain cautious until I see the Friday reaction. But the fundamentals remain... scratch that... get better by the month. Now we just have to wait to see how the herd of sheep react... and then keep on trucking on this amazing secular growth story.
- The huge price jump for potash exports to India is a sign of things to come for China and other buyers for the rest of 2008, the chief executive of Russia's Uralkali, one of the world's biggest potash producers, said on Wednesday.
- Vladislav Baumgertner told a BMO Capital Markets fertilizer conference that spot market prices quickly jumped to $750 per tonne from $625, effective June, after contracts set last week between India and Russian and Canadian producers.
- "A new price level definitely higher than $750 might be seen already in the third quarter," Baumgertner said. (are you kidding me? really... are you kidding me?)
- "In the short term, our goal is to eliminate the significant Chinese price discount relative to the spot markets and the Indian contract," Baumgertner said. (Go Vlad... go get 'em tiger)
- The head of Canadian potash producer Agrium Inc. (AGU) told Reuters he expects China will end up paying the equivalent of India's contract price of $625 per tonne (landed), which is more than double last year's Indian contract price. (that would be $500, which would be a huge win...just huge)
- "The world hasn't waited for China. The market continues to move," Doyle said. (go Bill, tell 'em)
- Potash producers said they don't expect capacity expansion to overcome demand in the foreseeable future because deposits are rare and mines require huge capital costs." (I try to tell everyone this Bill, but instead they sell off your stock and others because of whiny natural gas increases... or because US farmers will produce 8% less corn which is just an estimate anyhow.... whine whine whine.....mommy hold my stock certificate please and wipe my nose... soybeans and wheat and lions, oh my.... one day they'll understand the massive earnings leverage)
- "A potash greenfield mine is a massive undertaking, and despite the noise and attention being paid in Saskatchewan and Russia, still no significant greenfield projects have been announced anywhere in the world today," Doyle said. [Nov 16: Potash Expands Mine for $2 Billion]
I already mourn my loss of fertilizer exposure... only 24 hours more... I pray I can hold out.
Here is a link to a pdf file for Potash's CEO's investor presentation today
Long Potash, Mosaic in fund; long Mosaic in personal account
10 comments:
I had similar thoughts, that China would have to sign deals sooner or later. They are playing hardball on alot of fronts. (ie the iron play) That being said, as these deals get signed, are you looking at all, back to the dry bulk shippers?
I'm not a huge dry bulk fan as that 'ship has nearly passed' (insert laugh track here; I'll be here all week folks).
When the actual date of a flood of new ships arriving is an open question but it will happen at some point and the market will discount it before I have the faintest clue. Could still be a year or two off. Also China should "slow" to 8% GDP growth which will cause the sheep to panic. My gosh how are these companies going to survive with 7% India and 8% GDP... global depression. But its basically a 2nd derivative play on the same global trend. So why not just play the 1st derivative (the stuff the dry bulk ships are carrying) and make it simple - i.e. coal, iron ore, fertilizer.
I do have DRYS but its a pretty shoddy chart right now. The whole global trade theme is basking in the "on hold" bin for now as people chase back into early cycle US plays. This will reverse in due time. But I feel a lot more secure with coal or fertilizer for 3-5 year time frames than the shippers. That said DRYS screams when it moves.
$66 (50 day) and $70 (200 day) provide resistance. Its seemed to settle at lows of mid $50s. I've been buying a bit in the $50s and selling at $60s, in small amounts.... awaiting some meaningful move. Just pocket change for the fund.
Money will come back to these trades at some point; right now its rotating elsewhere. All in good time; but I do have serious worries about the impact of food inflation on the people in these countries... might really hurt their GDP meaningfully. Still thinking that out.
you're right.. its a derivative play. And you're right - they can REALLY move when they want to. Which was why I was considering a trade, if deals start to get signed over the next few months.
I think the food inflation will hurt growth. Clearly, it cant help. But that said, I think once you start to eat meat, it becomes a staple. Kinda like tropicana pure premium orange juice.
Technical Breakout in POT today... Cheers..
need....to.....stay....disciplined....24...more.... hours... gravitational....pull... towards... buy.... button.... immense....
Well this is the other side of being conservative...watching your favorite names take off... darn market :)
I had to let go of just a little stock today and yesterday.. and yes.. it hurt. I still have excessive overweighting in the sector, however, and probably still too much to be diversified correctly. But I really like the technical pattern, especially that its broken out quite nicely, and the charts - well, they look so much like the Aug chart. Take a quick look at the fertilizers during the Aug decline, and them today. And we both kinda agree that the market today, feels alot like August. It's purely a technical perspective, which I do use alot.
http://tinyurl.com/yqzyhx
It appears 2 analyst reports out today touting the names. Funny, right ahead of earnings. So I assume this offsets my Citigroup analyst call? Or 2 to 1 offset? lol.
This Cramer is really getting to me, he literally said not to be in ag because its sitting and he didnt like the action since the 400 pt rally and today he is out with ag is the 2nd best play to be after natural gas. All because the stocks are up. Cmon now dude!
I think this market is REALLY holding up. Even an "in line" jobs number might set it off... they continue to ignore all bad data - but you have to respect the action - unlike the previous 2 Tuesday gains of 400 pts this one is holding up very well in the face of a steady drumbeat of bad news. Definitely a change in character. But so much headline risk with tomorrow's report.
I'd normally be adding short exposure here but with the strength in the market I am going to sit tight in cash instead. Still mourning my fertilizer ... bah humbug.
It is doing very well. And from a technical standpoint, this is the first time the corrections actually look constructive. They actually look like bull flags! Add in your kool aid, and some technical charts playing out, it does look good. But I'm still very weary, once we get up to 1400. I actually think it's possible to get to 1450, which is the backtest of the recent uptrend. (purely technical - i know) But it's self fulfilling. As for Cramer - Actually, I like the guy. I usually tape his show, pass out in the lighting round. But yeah, I saw that comment about AGU yesterday - and the sector in general. In reality, the sector is well off its hights. I do think some of the hedgies tried to break the stocks, but it does seem like there are alot of buyers sitting underneath with nets. I'm one of them. Anyways, back to Cramer - I think he's a smart guy - good stock picker - but for gods sake - for anyone reading this - dont do whatever he says! Listen to how he develops a thesis. That's the only reason why I watch the show.
He is very smart. Thats not my point. He changes directions like an oak leaf on a tree in late October. Sheesh! He makes John Kerry look like "stay the course" man. ;)
It is very basic with him. if the stock is up, he is bullish. if the stock is down, he is bearish.
Literally 24 hours ago he said step away from ag, and now he is back to the "2nd best group" thing - and a week ago he was in ag , and 2 weeks ago he was against it.
Actually he is very good to observe to see why this market is so topsy turvy. Just imagine billions upon billions of money being traded with same thought process of him... and you see why commodities are great for 48 hours, trashed for 72, than great again, and into early cycle for 48 hours, trashed for a week, back to it for 72 hours, and vice versa.
It's a nation of ADD. When "yesterday's price action" is all that matters to see if a stock is bull or bear case. Not criticizing ti per se, god knows I change my weightings constantly based on price action but I don't make bear cases and 24 hours make bull cases. I am bullish on everything I own - its simply a case of not jumping in until the "herd" agrees with my view. My conceptual view doesnt change dynamically by the day like his.
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