Conference Call Highlights: The Next BRIC to Fall on Agro-Chem Co's

Those who are banking on the BRIC countries to recover quickly should note a Reuters report about the deteriorating job situation in Brazil.

Brazil's economy shed the most amount of formal jobs in nearly 10 years in December as the global financial crisis took a toll on Latin America's biggest economy.

The economy cut 654,946 formal jobs in December, the worst loss since May 1999 and more than double the 319,414 jobs cut in December 2007, government data showed on Monday.

The figure was higher than the 600,000 job losses predicted by President Luiz Inacio Lula da Silva last week and more than double the 300,000 considered normal for the month of December because of seasonal factors.

The bulk of the job cuts came in industry, services, agriculture and the construction sectors, with the latter two especially hard-hit.

A look at some agro-chemical companies and related industries with exposure to Brazil through their conference calls:

From Monsanto's FQ109 conference call: (MON)

Latin America as a whole continues to shift to premium corn seed hybrids, and that, combined with a richer trait mix in Argentina and Brazil specifically contributed to the gross profit improvement in the area. Based on our early read, we are on track to gain corn seed market share across the region, even as we are taking a cautious approach to credit through the second season in Brazil.

Deere & Co. (DE) gave an inkling on its Q408 conference call:

In South America our outlook is for the industry to be down 10% to 20% in fiscal 2009. Major factors weighing on the region are access to credit in Brazil and the drought conditions that plagued Argentina early in the planting season... There is a relatively large range in forecast farm net income for 2009, illustrating the extent of the market uncertainty in this part of the world.

An indication of the difficult credit situation in Brazil: Last year soybean farmers provided about 25% of their own crop input funding. This year it is twice as much, at 50%.

According to Chemical & Engineering News:

Within the chemical industry, companies as diverse as industrial gas maker Praxair and fertilizer producer Mosaic have warned of weak earnings in the fourth quarter of 2008 through the first quarter of this year.

Energy company Praxair’s Q308 conference call: (PX)

Year-over-year growth in the manufacturing sector has slowed a bit... It has remained reasonably strong in South America and Asia driven by infrastructure spending. We see the impact of this primarily in our packaged gas volume but also in the slower but still positive growth in merchant liquid.

Mosaic’s FQ209 conference call: (MOS)

Our offshore segment experienced a fall off in demand due to a full distribution pipeline and weak farmer economics primarily in Brazil. Along with the inventory write-down noted earlier, this resulted in an operation loss of $120 million compared to operating earnings of $26 million a year ago.

Potash (POT) mentioned the huge growth it was experiencing in Brazil back on its Q208 conference call.

Agro-chemical giant Archer Daniels Midland’s Q308 conference call: (ADM)

I’m pleased to announce a new joint venture with Grupa Cabrera to produce sugar cane-based ethanol in Brazil… Bio diesel results have improved, especially in Brazil, with our new bio diesel facility at Robinopolous, Brazil… We see robust bio diesel demand in Brazil.

International Paper Co.’s pulp exposure on its Q308 conference call: (IP)

Brazilian Paper shipments declined due to lower demand in export markets… Input costs in Brazil and Europe are expected to be unfavorable in the fourth quarter… I would have to say all around the world probably that the demand dynamic is best in Latin America then it is anywhere else in the world now then I isolate it from what’s going on. But I was with 150 of our customers in the region and they were feeling pretty good about their business, which was two weeks ago, but not today.

There are lower exports going out of Brazil, little bit of weakness in the surrounding economies, but the Real strengthening has helped us. So, as regarded to opportunities for the pulp market down there. Our focus right now is to run what we have.

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Comments

[long_on_oil:]

If all the ag compaines called it then why should their stocks be down. This bad news should already be priced in. DE called a 10 to 20% drop so apparently DE is a company that has foresight.

Jan 20 08:43 AM

[legmaker:]

Very good article with excellent research. Although I do believe much of the downturn is already priced in. After the drop in prices, most of these companies are a bargain. With respect to agriculture, fertilizer has really taken it on the chin. Seems most farmers are putting of application as they either think prices will get better (usually do for the few months of the year), or they think prices for fertilizer will come down. I think we will see a terrible crop this year, with respect to corn, wheat and soybeans. This should push the price up this year, and the glut of fertilizer sitting in storage will soon be bought as most of the retail fertilizer will end up selling for the price they want it as production has been cut across the board. Tomorrow is CNH's earnings, and I dont think they will crush earnings, but I do believe they will be a little better than in line. Analysts are looking for $.69 but I believe they will come in the low seventy cent range. I still think sales of combines will be strong which CNH has been taking market share in. God Bless

Jan 20 08:10 PM

[tagthatstock:]

legmaker: "I think we will see a terrible crop this year, with respect to corn, wheat and soybeans"-------i agree,,,,,,,,,so why waste your time on POT/MON/MOS etc.............when you can buy GRU $6.49 and YOU can control how well the world eats.---------'the next global war without a bullet being shot'

Jan 26 10:07 PM

[legmaker:]

I do believe that GRU is a good investment right now. I just like the potash producers much better. Potash has held up real well in this poor economic environment while nitrogen and phosphate have been beaten. As for controling how well the world eats, it can be done with MON, as you can't grow a thing without planting a seed. This company looks to have unbelievable revenues going forward. Also, CMP and SQM sell a nonchloride potassium blend that works well with specialty crops with real high margins. These stocks have been doing real well as of late, watch them as I think their earnings will be especially strong this upcoming earnings.


On Jan 26 10:07 PM tagthatstock wrote:

> legmaker: "I think we will see a terrible crop this year, with respect
> to corn, wheat and soybeans"-------i agree,,,,,,,,,so why waste your
> time on POT/MON/MOS etc.............when you can buy GRU $6.49 and
> YOU can control how well the world eats.---------'the next global
> war without a bullet being shot'

Feb 05 12:58 AM