Agriculture Earnings Retrospective

The following ramblings assume a higher than average price for grain again for 2023. If the price of grain tanks then all bets are off!

So we’ve gotten through most of the earnings for the Ag stocks and it’s been pretty interesting.

Honestly the most interesting aspect of earnings plays especially for these tickers has been a price dip in the morning followed by a run. AGCO, CF, and DE all
did it even with really good earnings. This further reinforces the relative safety of playing after earnings. You remove the surprises and IV burn and can make a good trade when they have a reason to run.

Another aspect of this was CNHI’s sell off after a good earnings. It appears that they sold off because they will not longer be listed on the Italian Stock Market and will be solely listed on the NYSE. This move looks like it brought both AGCO and DE down with it and there still may be some short turn profits for all three. Demand is still strong for the Ag manufacturers and they seem to have solved a good amount of the supply chain issues they have had.

NRT missed and lowered guidance, I think part of this has to do with the lower demand for potash than what was expected. This need a short agronomy lesson.

N=nitrogen, P=phosphorus, K=potassium… these (along with water) are the macro nutrients that modern crop production hinges around. N and P have higher removal rates through grain harvest than K does, K is used by the plant to grow stocks and leaves which remain in the field after harvest. Historically K has been pretty cheap so most farmers have good K levels in the soil which has a tendency to remain there year-over-year. Thus if the price of potash rises YOY to a prohibitive price point it’s not the end of the world if a producer “skimps” on application for that year. Which brings me to:

MOS and IPI have yet to report and this may provide a decent play because IPI reports after MOS. If MOS has a big miss we could see IPI follow. Worth watching and I will try to keep on top of it going into earnings. MOS 02/22/2023 (wednesday this week).

Nitrogen, however, is both removed through grain production and does volatilize or leach out of the soil unless it can mineralize (become organic-based N and more stable…through absorption by the crop of inorganic N and “locked-up” in the form of plant material) which leads to:

CF and UAN. CF beat and remarked in their earnings presentation that they foresee tight nitrogen supplies until at least 2025. They have since sold off, down over 3% on friday…why? Neutral ratings and continued weakness in natural gas? More sensitive to the rest of the market? Really not sure but it has price targets around $100 and has fallen to the low 80’s. The lowest price this stock has traded at since the russian invasion was $78.20 back in July, and then 79.95 just after the first of the year so we are at some pretty decent support.
UAN reports 02/21 after close (tuesday this week). The market might be waiting for confirmation that UAN is seeing what CF is to justify a run in price. Going to be watching both UAN and CF. If CF can catch a bid a two-week swing could be pretty profitable.

This post is long enough for right now and I think I will take a look at the grain elevators (BG, ADM, ANDE) and chemical companies in another post. Main takeaways: have patience, look for supports, and put some time on the positions. One good trade is better than 5 “OK” trades and the market will be there tomorrow. Thanks for reading!


Good video, well worth your time. This does not just cover agriculture but also population and industrial trends.

High points: Russia is trying to conquer Ukraine as a pathway to securing land invasion routes through Poland and Romania (yeah, to them Ukraine is beside the point). Zeihan goes into the exports coming from Russia, Ukraine and Belarus (much of what we have already identified, damn we’re smart).

China’s issues with inter-party communication (i.e. people telling Pooh anything at all) demographics, coronavirus, high skill tech, swine flu, food insecurity.

European issues with maintaining their high-tech manufacturing base as their source of petrol-chemicals has been eliminated. (AirBus is in trouble, BASF is moving european chemical facilities to the US).

Brazil’s issues with maintaining their agricultural production going forward. They need a massive amount of fertilizer to keep their agricultural production where it is and will have problems sourcing it going forward.

North America: Importance of NAFTA II going forward. Canada and the US produce most of the fertilizer that we need and Mexico has a large, inexpensive labor pool. US shale gas and it’s importance for domestic use and potential export. North American farmers will try to feed the world but will fail.

Well worth a hour of your time and a decent starting point in identifying companies that can benefit IF what is detailed in this presentation takes place.

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