Agrochemical Sector a Bright Spot in Slowing Global Economy

Agrochemical companies are expected to hold up better than the overall chemicals industry in the current global economic slowdown, with credit ratings remaining stable through the end of 2008 and 2009, according to Standard and Poor’s Ratings Services.

Thanks to continuing world population growth, improving standards of living, energy diversification into biofuels, and a cap on the amount of arable land available, the outlook for agrochemicals companies..remains favorable.

Record U.S. farm income is forecast for 2008, which should boost farmers’ purchasing power of fertilizer, as well as the latest state-of-the-art seed varieties. In addition, fertilizer prices should remain high because of tight supplies and strong demand globally, S and P said.

As a result, companies such as Monsanto Co. (MON) and Potash Corp. (POT) have seen their credit ratings upgraded in 2008, with the entire sector seeing S and P ratings improvements over the past 18 months. (Click chart to enlarge.)

For details, see “Strong Fundamentals Boost Agrochemicals Firms Worldwide.”

Comments

[Globel E:]

Ah so--- nicely stated - timely, short, and accurate. Unfortunately, that S&P is the same S&P that is being exposed (on-going Congressional hearings) as about as trustworthy as the average snake.

Like many others, I had taken some comfort in such facts as this article offers UNTIL it became clear that this is what S&P suggests. Now, it must be suspect. Were they, politely and quietly, to go out of business, that might improve the capacity of anyone interested in the market to trust the wisdom of "experts". If anyone can take comfort in the opinion of an old, retired, (state university, ag. school) professor. this article offers very reasonable bases for long term, legitimate, strength in fertilizer stocks. In cost/benefit terms adding fertilizer adds considerable relative value. The demand increase resulting from inevitable population growth and from the newly acquired taste for, especially, animal proteins, guarantees increased use of N, P and K fertilizers.

In addition potash-related stocks (think - guano) gain strength from the difficulty of developing new commercial sources and nitrogen-related stocks gain from the absolute requirement for high nitrogen Inputs (think - amino acids all include N) in any food chain leading to animal protein.

Thanks to the contributor, we could all use some positive information today!

2008 Oct 23 09:04 AM

[Richard Col...:]

I agree with Global E that it's good to get some positive information for a change.
I also agree that S&P plus Cramer and Moody's and quite a few other so called analyst should be ignored and exposed for their corruption or uneducated guesses.

Daniel Kowkabany

2008 Oct 23 10:36 AM

[dirtfarmer:]

This old news. Fertilzer prices are tanking. Monsanto is hated in farm country. They are thugs. The credit crises will bring these companies down, too.

2008 Oct 23 11:43 AM

[joeevan:]

Yes, I've been adding to shares of AGU, which is now close to 52-week lows. Yesterday, Syngenta reported favorable earnings and projections, and the CEO had positive comments for the agricultural sector:

Mike Mack, Syngenta CEO, said: "The sales figures we have presented today attest to the strength of our business in a turbulent global environment. The fundamental drivers for agriculture remain unchanged, with rising food and feed demand inevitably requiring increased use of agricultural technology in a context of limited land availability. Our confidence in Syngenta's near term as well as its longer term performance allows us to reaffirm our target for earnings per share* growth of more than 35 percent in 2008 and high teens in 2009."

2008 Oct 23 01:27 PM

[Pipo:]

Potash had a good report. If Jim Rogers is right about agriculture, POT must be a great buy here.

jimrogers-investments..../

2008 Oct 23 01:35 PM

[einstein p ...:]

POT beat estimates by 36 cents!

Yes, they lowered guidance (which they raised last quarter) down to a mere 12-13 dollars a share for 2008 which would have them at a multiple of 7X this years earnings while growing revenue at a sluggish 500% year over year.

I'm not quite sure what it takes to get the stock moving anymore. Clearly, earnings, growth, and value is not the answer.

2008 Oct 23 01:57 PM

[Urbane Gori...:]

Syngenta reported good numbers and MOS tanks 12% the same day.... Hmm

jegan ;-)

Disclosure : Long MOS, Short Patience.

2008 Oct 23 03:06 PM

[nybangali:]

This stock has been showing up on my fundamentals screen for a while now. I post them for free on my website

2008 Oct 23 07:13 PM

[einstein p ...:]

I haven't scene any evidence that fertilizer prices are tanking, particularly the price of potash. The stock prices have completely detached from the fundamentals and the underlying value of the companies.

POT was buying a stake in an Israeli competitor, as well as buying back their own shares. Not just the company, but management.

Agree with John Egan. I'm even beginning to wonder if patience is still a virtue or a sucker play in this market.

2008 Oct 26 12:43 PM