The Grass Doctor

Is phosphate fertilizer proportionately less used in a recession?

When I look at stocks like Mosaic (MOS) and Potash (POT), it seems that MOS is down substantially more from its summer highs than competing companies. I don't know much about fertilizers. Why does the sinking economy affect one type more than another? Which is most likely to surge, come next year's growing season? Are natural fertilizer prices inversely related to the price of petroleum? Does $40/gal oil mean disaster for companies like MOS and POT?

Public Comments

1. YOU ARE CORRECT! Go to www.lifeaftertheoilcrash.net everything we have is used from oil. EVERYTHING. Even your lettuce, food, clothing, bicycles..EVERYTHING. Get educated. I PROMISE you will learn alot from that site. Please go to it NOW
2. The bubble has burst for fertilizer and agricultural chemical stocks, with former stock-market star Mosaic Co. (MOS) off by a third in Thursday trading and others hard on its heels as excess supply and reduced demand slow the pattern of price increases on farm chemicals. Farmers could not bear the weight of ever-increasing costs forever, especially as grain prices fell by nearly half in recent months and credit tightened. And the popularity of the momentum "ag trade" with hedge funds and day traders has led to a decline similar in magnitude and pace to the tech bust.
3. I only thing I know about fertilizer is that it makes my plants grow, Right now, I have been looking at POT and MOS since they made there 52 week lows.
4. This is not an easy field. Nitrogen has a large input cost from natural gas, so reduced gas prices cut the cost of production significantly. . Potash is different since it is mined. Demand for all of them can drop for alot of reasons, first being that farmers will not pay more for ferts when the selling price of their crop is depressed in a recession. Lack of credit in the farm sector has not even been discussed by the political nitwits in Washington yet, and by the time they figure out what a crisis it will be, the planting season in the USA will be past. WIth grain crop inventories at multi-decade lows, I truly expect record crop prices in the next year as reduced planting works its way thru the system. Add in any kind of bad weather, and it will get ugly, as in global famine. Now Potash is underutilized relative to Nitrogen and phos, so you can make a case that demand could go up for Pot even if crop plantings go down. This is one reason why Pot prices have held up much better than N or P. Also, potash requires a multi-year capex to bring on new capacity, and some of that expansion has been delayed due to the credit crisis. They all are getting sold off together for teh most part, so opportunities may be there. The market s waiting to see what the spring contract negotiations bring for ferts, especially potash. Watch for the price China agrees to pay to POT as a leading indicator.