Bi-weekly Agriculture Update

Instead of going in depth with individual Agriculture related stocks I think I would rather try to illustrate the broad themes I see in the industry and a bi-weekly update would probably be often enough to stay on top of it. Honestly I think the rest of the market will probably drive price action for the Ag stocks irregardless of any fundamentals that exist within the space but provided crop prices remain relatively high there may be decent rebounds if these equities sell off. With that in mind these are the things I have been noticing as I go about managing my small farm and speaking with the producers I do business with.

Neutral to bullish grain prices: Usually this time of year is marked by a seasonal pull-back in most grain prices as the unknown becomes known. The industry usually has a pretty decent handle on the year’s yield by Nov/Dec and the market’s focus turns from more speculation to trading supply/demand. We have not seen a very large pull-back in prices this year which tends to be bullish going into the new calendar year. Multiple factors are playing into this: short-term weakening of the USD, China “re-opening”, drought in South America, and of course the continuing conflict in Eastern Europe. Worth watching: WASDE on January 12th, the last two years have seen large bullish moves in grain due to “surprises”.

10% increases for non-fertilizer crop inputs. Seed and chemical producers want their share of the higher crop prices. This trend has never not taken place when we see above average prices, this is just part of the business. Unfortunately on the equities side potential plays are somewhat limited for US markets: FMC and CTVA are the only trade-able companies that I can find. Please point others out if you see them! Bayer AG is a huge seed and chemical provider and may be a decent look for our European traders but the agricultural segment of the company is part of the conglomerate, so take care.

Ag Equipment: New and Used prices continue to remain high, especially for well cared for used equipment. Some of this is hangover from the supply chain headaches of the last few years and some of it is the higher grain prices allowing sellers to hold for the prices they want. DE, AGCO, and CNHI all remain at or near their all time highs. I think that even if grain prices fall the equipment manufactures may see continued strength until potential earnings misses.

Lower fertilizer prices due to lowered demand. Until this year Brazil has been an importer of fertilizer from the United States, this has seemed to shift as Brazil has developed closer ties with Russia through the BRICS geopolitical bloc. It will be interesting to see how/if this continues and what this does to CF, NTR, UAN, MOS and IPI. Theses companies may be the weakest part of the ag sector right now, all have see substantial pull backs in the last few weeks.

Thanks for reading my rambles and I will try to keep up with potential catalysts in the sector. Really everything hinges on grain prices remaining at or near these levels and I think it will take some time for prices to fall back to their pre-invasion ranges. As always play safe and good luck!


Good evening. Short update, tons going on away from trading this week and I don’t know how much I will be on.

We have the WASDE on Thursday. Grains sold off a bit last week, seems to be a combination of repositioning by traders and relative strength of the USD. There is a ton of focus on the weather in Southern Brazil and Argentina, they are short on moisture and are experiencing very hot weather going into a crucial growing stage for both corn and soybeans. Northern Brazil seems to be in good shape so that may explain some of the weakness in prices as well.

Ag stocks have been very highly correlated to SPX lately. As example:

Small differences but the general pattern is there.

Notable exceptions: CF and ADM, (chart is on the same time frame as above)

These two did rally but seems to have lagged the rest of the segment and the market in general. Might be a decent scalp/swing if the rest of the market decides to cooperate.

CF looks like it MIGHT be breaking it’s rather dramatic downtrend, potentially consolidating? Worth watching…

However, in general I don’t see divergence from the rest of the market prior to Thursday, potentially. For the last few years mid-January into February has been a volatile period for grain prices and I expect that to continue. It seems like the best profits in playing the Ag stocks come from a mid term swing but in this market that can be really risky. Please manage positions responsibly and even if you are just looking for and intra-day play give yourself as much time as you can afford.

Good luck Valhalla!

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Good morning, this week I am in a training seminar for my work but during this time we have the opportunity to hear from industry experts an get a larger picture view of emerging trends. Hopefully I will be able to identify some ways in which we can benefit, and I will try to get this information up over the weekend. Nothing imminent, unfortunately but on a longer term horizon potentially solid. Have a good week, play smart and as always Good Luck!