Agriculture Sector

[blid2def]

Okay, moved out the luncheon meat topic to Miscellaneous - will merge it with Dangerous Foods or the CRAB! thread, depending on mood.

Agriculture Sector is basically Commodities - Grains, blah blah, so dump it in here then.

Eat and be merry!

[millionairemind]

Finally managed to find this chart and article after 15mins of searching to upload here....



‘Dot-Corn’ Shares Mirror Dot-Com Stocks Bubble
By Michael Patterson
2008-08-19
Bloomberg

This year’s drop in agricultural stocks, whose rally since 2003 outpaced the gains in technology shares that preceded the dot-com crash, may deepen as the economic slowdown reduces profits, according to Citigroup Inc.

“Investors have been stung of late in farm equipment and fertilizer stocks, but more pain could be coming,” Tobias Levkovich, Citigroup’s chief U.S. equity strategist, wrote in a research note on Aug. 18. “There are significant cracks in the agricultural economy story. We have been very anxious that investors had gotten carried away with the global growth theme.”

The CHART ABOVE shows an index weighted by market- capitalization of five agricultural companies — Monsanto Co., Potash Corp. of Saskatchewan Inc., Agrium Inc., Archer Daniels Midland Co. and Bunge Ltd. — along with the Standard & Poor’s 500 Information Technology Index.

Note the 842 percent rise in the agricultural index during the five-year period before its peak in June. That surpassed the 755 percent gain in the S&P 500 technology index from March 1995 to March 2000, when the industry and the rest of the U.S. stock market began a 2 1/2-year descent.

Levkovich wrote that he’s “worried about what has been dubbed the `dot-corn’ stocks relative to the dot-com names of the late 1990s.”

Low price-to-earnings ratios for agricultural shares “should not provide any valuation comfort since that often reflects the market’s ability to sniff out the likelihood of peak earnings,” the New York-based strategist wrote.

[winston]

Not sure about this one.

There was very little earnings and revenue on some of the dot.com companies. People also did not know how to value them.

For agricultural stocks, there is quite a bit of earnings and revenue.

[helios]

swosh ... MM advisor is very efficient!

Just saw the excerpt on TheEdge magz, this issue.

[millionairemind]

Not sure about this one.

There was very little earnings and revenue on some of the dot.com companies. People also did not know how to value them.

For agricultural stocks, there is quite a bit of earnings and revenue.

Actually the leading stocks of the dot.com bubble were stocks like JDS Uniphase, Yahoo, Cisco etc.. and these had real earnings...

[winston]

Actually the leading stocks of the dot.com bubble were stocks like JDS Uniphase, Yahoo, Cisco etc.. and these had real earnings...

Hi MM,

I dont have any figures with me. My impression is that a lot of the dot.com companies do not have any real earnings. And for those with some earnings, their valuation were very high.

Take care,
Winston

[millionairemind]

W,

You are correct. If you are referring to stocks like The Globe.com and The Street.com, yes.. these had poor or no earnings.

mm

[winston]

STOCK ALERT - China fertilizer producers lower in HK on higher export tax news

HONG KONG (XFN-ASIA) - Shares of China fertilizer producers were lower after China raised special export taxes on some fertilizers to as high as 150 pct.

At 10:50 am, Sinofert Holdings Ltd (297.hk) was down 0.25 hkd or 4.89 pct at 4.86 and China BlueChemical Ltd was down 0.09 hkd or 1.78 pct at 4.96.

The Hang Seng index was down 389.80 points or 1.80 pct at 20,878.80.

China will raise the special export duty on nitrogenous fertilizer and synthetic ammonia to 150 pct from 100 pct, the Ministry of Finance said. The rate will apply from today until Dec 31.

The government will also extend the 100 pct special export duty on other fertilizer products and fertilizer materials to Dec 31. The duty was originally set to run from April 20 to Sept 30.

[millionairemind]

Enthusiasm for biofuels questioned
By Steve Johnson
Published: May 4 2008 20:07 | Last updated: May 4 2008 20:07

Jean Ziegler, the United Nations’ special rapporteur for the right to food, last month described biofuels as a “crime against humanity”.

For an industry that until recently was almost universally lauded as beneficial for mankind – and which is still showered with largesse from the public purse – the past year has produced a volte-face in public perception.

Thanks to heavy subsidies, one-third of this year’s US corn crop is forecast to be turned into vehicle fuel. At the same time, the world’s poor are reeling from spiralling food prices, not the last of which being a 78 per cent rise in corn prices since August.

The situation appears unsustainable and the first signs of an official backlash are emerging. The UK government has called for a review of the European Union’s biofuel targets, introduced only last month, which compel suppliers of transport fuels to include biofuels in their mix.

Malcolm Wicks, the UK’s energy minister, says: “It would be ridiculous if we fill up our cars with 5-10 per cent of biofuels if the consequences are that somewhere else in the world people are not being fed.”

Stephan Wrobel, chief executive of Diapason Commodities Management, says: “At the moment there is a fight between food and fuel. At some point you have to choose, and [politicians] obviously choose food. Governments only backtrack when you get to a crisis level.”

Commentators disagree about the proportion of food price rises that can be laid at the door of the biofuel industry. The UN’s Food and Agriculture Organisation estimates that biofuels have caused 10 per cent of recent food inflation. Other organisations put the figure at 20-30 per cent.

But whatever the true figure, it is clear the biofuel industry has got a fight on its hands if it is to survive as a mainstream sector.

Yet commodity analysts remain confident. Daniel Raab, managing director of AIG Financial Products, says: “I don’t think there is any potential for the US to reverse course; biofuel is very popular. But there is a question about whether it makes sense to divert a quarter of US corn production to make ethanol.”

This drives to the heart of the problem. Corn ethanol production, supercharged by the generosity of the US taxpayer, is highly inefficient, yielding very little more energy than the fossil fuel used to produce it. For cane ethanol, produced from sugar cane, this ratio is 8:1, yet import tariffs prevent it being exported en masse to markets such as the US.

Mr Wrobel believes this has to change. “There could be a massive switch to sugar ethanol, which is more efficient [and] is not a big food staple. Sugar, because of its lowly price, is losing acreage [to wheat]. But sugar will be the big winner.”

Not everyone agrees further expansion of the Brazilian sugar cane industry will be the saviour of biofuels. Mr Raab says: “The deforestation that is being done to produce sugar for biofuel is being seen as a net negative for global warming.”

Instead a new generation of biofuel crops, currently still in the research stage, may need to enter wholesale production in order for the biofuel industry to reach a sustainable footing. Much hope rests on cellulosic ethanol, produced from grasses such as switchgrass that can grow on land deemed unfit for food crops, as well as agricultural residues and forestry and domestic waste. According to some estimates, this might yield as much as 36 times the fossil-fuel energy used to produce it.

“I don’t think biofuels are a short-term fad. The structure of how biofuel is produced is going to change as more effective models are developed, but I don’t think it is going to disappear any time soon,” Mr Raab adds.
Copyright The Financial Times Limited 2008

[winston]

THE LATECOMERS ARE GETTING BURNED... AGAIN by Brian Hunt

Our POT prediction is coming truer by the day.

POT is the ticker for the world's largest fertilizer company, Potash Corp. In April, we claimed latecomers to the uptrend in fertilizer stocks were buying shares at crazy levels. Every financial television show, newspaper, and magazine carried news of big fertilizer demand for corn and soybeans. This produced a huge amount of buying interest.

What the latecomers missed is what we said back then: A media frenzy is not a sign to buy. It is a sign to sell overpriced shares to the last ones in the door – the speculators buying assets with no regard to the value they're getting for their money.

They haven't got much for their money in Potash. The "ExxonMobil of fertilizer" has fallen 35% from its June high. On Wednesday, shares plunged on massive volume to reach a five-month low.

We're not picking on Potash. The charts of all the major fertilizer producers look the same... and the trend of all 'em is down.