“Hunger Games” in Forbes September 10 2012

In the Forbes print article “Hunger Games” by Steve Schaefer five stocks were recommended playing on the theme of drought:

Agrium (AGU) @ 100.37

CF Industries (CF) @ 216.09

Market Vectors Agribusiness ETF (MOO) $50.79

Tractor Supply (TSCO) @ 92.28

Tyson Foods (TSN) @ 15.26

Aside from a dire quote from perennial bear Jeremy Grantham about a “chronic global food crisis unlikely to fade for many decades” there isn’t much support for the described trend.  If it holds, the picks themselves may be good.  Tyson is probably questionable since feed costs will rise — one source of their current laggardry.  The fertilizer stocks go in and out of vogue and have had quite a run this year and this summer.  Chart for Agrium Inc. (AGU)

Chyanne Fickes of the Stone Agribusiness Fund is quoted these stock remain “extremely cheap” which strikes me as suspect: Agrium is up 10x since 2003 and had not moved much from 1995-2003.   This fund the article notes has $10 million under management — which one might have prefaced by saying puny.   Their results at least as expressed in (Canadian) dollars per share is not remarkable (were there large dividend distributions?):

Chart forSTONE AGRIBUSINESS FUND (HAY-UN.TO)

Guess one could have just bought Agrium.

AltaCorp Capital analyst John Chu says farmers are planting more corn than say soybeans which requires seven times more fertilizer which is a compelling point that can be matched against actual acreage planted.  In this earlier estimate on Seeking Alpha, Corn was indeed at “a 75 year high” but only a 4% acreage gain over last year in the US versus a 1% drop in Soybeans to 73.9m acres.  Does that move the needle?  The grain complex moves together; all else being equal one might suggest more Soybeans next year if there are lower fertilizer crops.

Deere (DE – 73.81) and Caterpillar (CAT – 86.01) were notable absences from the list of recommendations which if anything earns points for freshness.  In crops that’s paramount but will put their quotes here for comparative measure.

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