Somewhat related: USDA SAYS FOOD INFLATION RATE TO SOAR, HIGHEST SINCE 2008
The Agriculture Department said food prices would rise an average of 5% this year, an abrupt two-point increase from its forecast a month ago.
Besides the current catalysts like Ukraine / Wheat and fertilizer, there is also a “highly pathogenic avian influenza” affecting chickens, so expect chicken & egg prices to rise (and in turn products that utilize them).
Patiently waiting for the return of mad cow disease…
so fertilizers right now are heavily influenced by Ukraine situation (aka down a lot this morning) but based on a lot of what I’ve read, it seems like real world prices for fertilizers will inevitably stay really high this year. Thoughts on if that translates to the stocks trading at elevated levels?
I’m sure these fert companies will be presenting record profits come next quarter simply from increasing prices. If it will be priced in by then or not is the big question.
I think it’s safer to simply try and find a good entry on down days and sell when it pops from inevitable “the war continues on” news.
Good morning, busy this morning so this is going to be quick. USDA has a report coming out today that may provide a short-term catalyst for fertilizer stocks.
Keep position size small as it’s unclear how the market will react, however stocks may pick a direction following the report. Good luck.
Sorry, that was dumb and rushed. If we see a higher corn number it may provide a bullish catalyst for NTR, CF, and $UAN. The fertilizer stocks are also “suffering” from this week’s “War is Over” news, even though it definitely is not over. Basically just trying to give you a heads up so if at 12:01 EST these stocks move you will know why.
From one-minute speeches today. Possible legislative action in the future?
IMPORTANT* for anyone in fertilizer
Multiple news sources saying today that fertilizer sanctions on Russia being lifted. It is not in the main headlines yet.
Is this for real? If true this is very bearish for fertilizer stocks.
https://www.rt.com/business/553034-us-russia-fertilizers-sanctions/
Guy made a youtube video showing some official looking document lifting sanctions. https://youtu.be/krHATq-xdWo
The veracity of the source is rather questionable. Russia has banned exports, so any move the US government makes in terms of relaxing sanctions on fertilizer from Russia doesn’t really matter if Russia still has an export ban in place. It may provide some FUD, but these articles were released at 12:00 EST or so I think. Have a quick trigger on profits?
Yeah I took profits when I saw that.
Good catch on the export ban. I guess the real down side comes if this is true and russia reciprocates and removes its side of the ban.
I commented recently in the oil thread about a series of short videos made by a geopolitical analyst that I follow: Peter Zeihan. He also publishes a newsletter with varying frequency… needless to say it’s been very frequent since the beginning of the war. Anyhow, this morning’s newsletter bit was about fertilizer and the impact we’ll see over the next several years at minimum. Here’s the text:
(TLDR; Fertilizer is already fucked)
[center]The Return of the Third Horseman[/center]
The Ukraine War is having dozens - hundreds - of follow-on impacts across the world, with the most dramatic about to be felt in the world of food. Whatever you think will happen, the reality is almost certainly worse.
Let’s start with a point of reference:
In 2010, dry weather across Western Siberia prompted concerns about the Russian wheat crop. In preparation for a poor harvest, Russian President Vladimir Putin ordered temporary export limitations for wheat, Russia’s primary agricultural product. Within weeks global wheat prices had doubled; Prices tripled in Russia’s primary export market, the Middle East. Those increases contributed to the series of protests, riots, coups, revolutions and wars we now know collectively as the Arab Spring and the Syrian Civil War.
What’s happening this time around is far, far worse. Roughly three weeks ago the Russian army poured across Russia’s western frontier into Ukraine. As viewed from an agricultural point of view, the world’s largest wheat exporter invaded the world’s fourth-largest wheat exporter. That alone condemns the Middle East to its most volatile and violent period in at least the last century.
Unfortunately, this is just the beginning of the story.
In order to pacify a seriously overperforming Ukrainian resistance, the Russians have already reached for a tactic they pioneered in Groznyy during the Chechen War, and honed in Aleppo during the Syrian Civil War: the complete obliteration of all civilian infrastructure that would-be rebels might hide in. We’ve all seen - vividly - what such tactics can do to major cities such as Kyiv and Kharkiv and Mariupol. In time Russia’s southern thrust along Ukraine’s Black Sea Coast will reach the port city of Odessa, which serves as Ukraine’s agricultural gateway to the world. No Odessa, no exports. At all.
The deeper damage lies elsewhere. Russia forces are using the same scorched earth assaults in Ukraine’s omnipresent small towns and villages. Without the logistical sinew these towns provide, Ukrainian farmers won’t be able to plant this year. Ukraine isn’t simply disappearing from the ranks of the world’s major global exporters, this year and for years to come it will be an importer.
There’s a much bigger problem cresting the horizon.
The Industrial Revolution brought us no end of magical advances which make modern life possible, but none are more important than the ability to apply fertilizer to fields and in doing so triple the land’s ability to produce the food we eat. Our fertilizer usage breaks down into three broad categories.
The first is phosphate. This time the problem isn’t Russian, but instead uniquely Chinese. A couple years back the Chinese hog herd suffered from a nationwide outbreak an ebola-like disease: African Swine Fever. China culled about the same number of pigs that the rest of world has in total, yet failed to purge ASF from its territory. The only way the Chinese Communist Party can guarantee food security is to rely upon its culture’s primary staple: rice. So Beijing has banned the export of phosphate, the fertilizer type most useful for rice paddies. Until that occurred, China was the world’s largest phosphate source. The export ban is certain to last until Chinese agriculture can be supported by at least one other pillar. That won’t be in 2022. Or 2023.
Phosphate is the best story I have to tell.
In 2014 a narrative took hold cross the world’s many financial centers that fossil fuels were doomed, so why invest in their production? Consequently, global oil and natural gas investment plunged by 60%, landing us with near-global natural gas shortages, accompanied by the price surges one would expect.
We do more with oil and natural gas than burn it for power. We also transform natural gas into nitrogen-type fertilizers. As of February, nitrogen fertilizer prices had already significantly increased compared to a year earlier. On top of the preexisting global natural gas and nitrogen crunch, Russia is the world’s largest exporter of natural gas, most of which is sold to Europe. The day before the Ukraine War began, natural gas prices in Europe had already risen fivefold form last summer’s lows. European fabricators of nitrogen-type fertilizers have already suspended production due to high input costs.
The third and final type of fertilizer - potash - is…straightforward. Russia plus Belarus (and we need to think of the two as the same country since Russia effectively annexed Belarus in the war’s first week) is the world’s largest potash exporter, providing roughly 40% of global totals.
If that weren’t enough, Russia isn’t only the world’s biggest source of the inputs for fertilizers, it is also the world’s biggest supplier of the actual finished product as well. The firm in question is Russia’s EuroChem. Its boss, Putin confidant Andrey Melnichenko, has had a busy couple of weeks. He’s resigned from EuroChem in an attempt to avoid international sanctions. (It didn’t work.)
Building out replacement mining, processing and fabrication facilities can of course be done, but it is no quick fix. Courtesy of the shale revolution, the United States has gobs of natural gas, but new nitrogen fertilizer facilities require three years minimum. Saudi Arabia and Morocco both have sufficient phosphate reserves to justify more industrial plant, but in the past most of their expansions have required five years. There was fresh potash capacity about to come online, but it was all in Russia (or Belarus). Any greenfield projects anywhere else in the world - probably Canada in the end - will take a full decade.
Farmers in Sub-Saharan Africa and South Asia have little choice but to use less fertilizer. Lower yields will follow. Russian fertilizer has been part of the constellation of factors that have enabled Brazil to become an agricultural superpower. That ends now. Even in the rich agricultural powers - Australia, France, the United States - any money that farmers must expend upon pricier fertilizers is capital that cannot chase other needs.
Whether due to sanctions, war, boycotts or malinvestment, we stand at the beginning of years-long shortages of the stuff we need to feed the world. We’ll chew through the world’s collective wheat reserves before year’s end, and shortly thereafter tip into deep, chronic food shortages spanning multiple continents.
Russia’s invasion of Ukraine is reacquainting the world with the First Horseman. That’s no fun for anyone. But it is the return of the Third that gives me nightmares.
Interesting video from a farmer in the UK, it should start part-way when he starts talking about fertilizer prices and other costs that have gone crazy. Likewise talking about other issues they are facing over there in europe.
For instance, cost of fertilizer went from 200£ / tonne to 1,000£ / tonne! Cost for glyphosate went 4x! Diesel has also skyrocketed and you won’t know the price until they literally come and deliver.
As farmers are currently planting right now I think this is going to be center stage for a while, though it’s not like much can be done. Farmers are going to cut back their fertilizer and chemical usage plain & simple. Come fall / winter during harvest time we will likely see another surge in food prices depending on crop yields.
Wow, this is nuts, those comments about not knowing the actual price of diesel until delivery is insane. It’s all insane…sounds like pure demand, limited and hoarded supply (guy in the back of the room - “Yeah, that’s the play, Bubs!”). That bit about needing half a billion extra chicken and who knows how many cattle to meet the needs for organic fertilizers this year is pretty crazy too. On top of which, it seems it wouldn’t really matter all that much even if a billion chicken and cattle did appear out of thin air, to quote him
“Why not go all organic and just not use synthetic fertilizer at all?(…)So we’ve got a massive increase in livestock, a massive increase in labor to look after that livestock, and half the yield of wheat coming out the other end. It’s unsustainable on a world scale, us all going organic. We need to find a replacement for nitrogen fertilizer, to be able to feed the world, because with organic you halve the production of wheat a year, and we just can’t feed everyone. All the balls are up in the air and it’s extremely worrying for food security, and the world harvest will be way down if fertilizer prices stay up.”
Looking into that CCM Technologies company that was briefly shown in the video, which is leading to a rabbit hole of “net zero carbon fertilizers” and their producers. There are definitely plays here (guy in back- “Yeah no shit dude! You’re holding MOS!”) and I will continue to play them, but just wanna take a side note and say that this is actually all very worrying for the future, there’s a huge, worldwide food problem looming that seemingly only farmers and gay Viking traders care about. Everyone else doesn’t want/can’t handle more negative news and are burying their heads in the sand. And unfortunately, we all know most people will probably continue not to care until bread is over $10 a loaf. What a mess…
Yeah, funny thing needing a ton of more animals to generate the organic fertilizer. But what are all those animals going to eat when there’s already a huge deficit of crop production? Creating more mouths to feed doesn’t equate.
That’s an excellent point, the animals need to eat as well, truly a catch-22 there. Scary times…
Saw an article touting Ammonia as the future …
@Catalyst_59 posted a DD on CF Industries back in January (Edit- Here), they’re mentioned in that article. Should be worth looking into, and following Ammonia’s supply trail as well.
Summary: the fertilizer companies have the world by the “short ‘n’ curlies”. That being said, please keep positions in these companies to a manageable level because the market can remain irrational longer than we can remain solvent!
I spoke with my brother who manages a local CO-OP (local supply for seed, fertilizer, chemicals). His statement to me was that to his mind most of what producers need for Crop Year '22 is where it needs to be for sale and distribution. It will be more expensive this year but at least we will be able to get it. My hope is supply will improve for 2023.
My apologizes, but the organic production method is not sustainable. Sorry. In order to keep up with global population growth by the year 2050 agricultural production will need to double on average. In order to put that in perspective, in 2001 the average wheat production for the United States was 40 bushel/acre. In 2021 it was 44.3 bushel/acre. The highest average of the last 20 years was 52.7. Certified organic acres account for less than 2% of the farmland in the United States. That ain’t happening.
Source: Wheat yield per harvested acre in the U.S. 2022 | Statista
In terms of the article Labubs posted, there are research programs on-going towards developing a “better” process in terms of nitrogen fertilizer production. Whether or not they will be viable in the future is anyone’s guess, especially with the current questions concerning renewable energy production and distribution. Companies that can develop these processes and be commercially viable are worth watching.
The price of oil is deeply intertwined in all of this. Diesel fuel delivers the inputs to plant a crop, diesel fuel powers the equipment used to plant, protect, and harvest the crops, diesel fuel delivers the crop to the processors and then to the consumers. Diesel fuel has doubled in price in the last two years. There is no way around this problem. There are no viable EV semi-trucks in widespread use. There are no viable EV tractors, sprayers, or combines anywhere on the horizon. Oil will be with us for a very long time to come.
Grain prices have gone up 20-30% from the harvest lows of last summer and fall. I would not be surprised if they do that again by this time next year. I’m not trying to be an alarmist, but something has to give, and soon.
And yeah Peter Zeihan is legit.
I’m going to start watching Trimble, ticker TRMB this week. No position currently. Trimble makes and provides services for GPS guidance systems and with the added cost of fertilizer and other crop inputs I think they are worth watching. They fell from a high of $97 in 08/21 to around $63 at the beginning of March, and has since rebounded to ~$73. As I said, no position currently.
The “Big Three” in agricultural guidance in North America are Ag Leader(private company :P), John Deere with proprietary “GreenStar” systems, and Trimble. There are other companies that are trying to build market share but right now these companies are the “best” options for growers.
CHS Inc (CHSC(L,M,N,O,P) no, I’m not kidding there’s five of them) is the largest agriculture CO-OP in North America. It has terrible volume and no options but it does offer a 6+% dividend and seems to be very stable, bouncing between $25 and $30, depending on the sub-ticker. They may be worth looking at for a “boomer” portfolio.
Catalyst_59 asked me to post this info, “The ethanol news IS going to pump corn futures. It will also cause sympathy with soybeans and NTR, CF most likely.”
It’s in regards to the Biden administration bumping ethanol from 10% to 15% at the pumps.
Good morning folks. NTR and MOS have a listed earnings release of Monday May 2nd, CF will reportedly release earnings Wednesday May 4th. I have been and will be playing small positions in at least NTR and MOS but plan on being out of most of my positions prior to earnings release. I will, however try to have available funds to enter CF to try and catch potential sympathetic movement following the earnings release of the other two (this will depend entirely on the “feel” I have for the current market conditions). It is difficult to not remain bullish on these companies but please keep your positions sizes responsible. Good luck Valhalla!