This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Laudani: Plant Some Money in Agriculture

With stories of the widespread U.S. drought in the news every day, have we missed the big move in fertilizer stocks? Or is this just beginning of a huge bull run?

When the weather turned from bad to worse in early June, investors began to stock up on fertilizer. In just a month and a half, names including Mosaic (MOS - Get Report) rose 21% and Potash (POT - Get Report) jumped 15%. Despite the recent gymnastics, these stocks have not been great investments. Year-to-date, the group is up less than 5% and on a year-over-year basis, these names are down anywhere from 20% to 25%. But I don't think the run is over. I think Potash can reach $60 (a 36% increase) and Mosaic could get to $70 (a 27% pop).

According to the U.S. Drought Monitor, about 56% of the U.S. is experiencing drought conditions and there is little, if any, relief in sight. Since the U.S. Drought Monitor began keeping records, the previous drought record was 2003, when 54.79% of the lower 48 states were experiencing drought. According to the Department of Agriculture, approximately 30% of the U.S. corn crop is in poor condition. Indiana and Illinois have been particularly hard hit -- 60% of Indiana's corn crop is ruined and almost half of Illinois crop is in very poor condition. The poor condition of not only corn, but also soybeans, almost guarantees higher food prices later this year.

While the stocks have been terrible buy-and-hold investments, they have made great trading vehicles. Since fertilizer prices have become unpredictable -- due to oversupply and fluctuating foreign demand -- dealers have been reluctant to hold much inventory. The current period seems to mirror the 2010-planting season. As the sun baked the Midwest and corn crops died, prices rose. Farmers from unaffected areas rushed to buy fertilizer to take advantage of the higher corn prices. The stocks began moving up by July. By February 2011, POT shares had doubled from its summer low. During the same time frame, MOS shares rose 125%.

I think the current situation is similar to the summer of 2010. Potash inventories peak in May and June and decline all summer. By fall, dealers are out of stock and prices are high. Because of high demand, producers jammed through a $50 price increase per short ton in early September. Although dealers have more inventory this year than 2010, I think the drought is much worse than 2010 and corn prices will continue to move higher.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Real Money
Try it NOW

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs