Is Farming Finally on the Up?

A report on FT.com late last week suggested that the price of wheat has jumped 90% in the past month and a half: “boosted by a scramble by corporate consumers to secure scarce grain and speculative buying by investors.”

This may have galvanised short investors to close out their positions in certain companies related to the commodity.

Monsanto (MON) is a provider of agricultural products for farmers, including seeds and herbicides. The percentage of the company’s Market Cap on Loan (%MCOL) has decreased from 0.55% to 0.29% since January 29^th. These figures may be relatively small but the decline in short positions is still notable. The company’s share price has risen from 104USD to 115USD since February 7^th, and Utilisation has declined from 0.8% to 0.6% since February 5^th. The Utilisation for the rest of the North America Materials Sector is 12%. For those wishing to buy back shares there are just 0.65 Days to Cover (also known as “Short Interest Ratio”).

The agribusiness Syngenta (SYT) has also seen a decrease in its %MCOL since February 13^th, from 0.11% to 0.09%. However the company’s share price has also dropped, from 55USD to 53.5USD in the same timeframe. Two years ago the company’s share price stood at the 30USD mark, and it has climbed steadily since then to 53USD today. Short interest has remained fairly constant at approximately 0.5%. There are 0.88 Days to Cover.

Despite a very slight rise since Friday, the %MCOL in Deere & Co (DE) has also decreased from 0.92% on February 5^th to 0.55% today. The company, who supply farming equipment, has also seen a rise in its share price, from 82USD to 85USD since February 8^th. Deere’s Utilisation stands at 1.3%, compared to the S&P 500 average of 7.5%. The Utilisation for the rest of the North America Capital Goods sector is 9%. There are 1.4 Days to Cover.

Mosaic’s (MOS) share price has risen consistently since January 24^th – from 80USD then to 103USD now. The company, who produce phosphate and potash combined, as well as nitrogen and animal feed ingredients, has seen a decline in its %MCOL from 0.52% to 0.39% since February 8^th. You will see from the graph above (please click to enlarge) that Mosaic is the direct opposite to many of our “successful shorts,” in that the share price has risen as the %MCOL has gone down. Mosaic’s Utilisation stands at 3%, compared to the US Equity (Others) of 20%. There are 1.00 Days to Cover.

Terra Industries (TRA), who produce nitrogen products for agricultural markets, has a significantly higher %MCOL than the stocks listed above. The company’s %MCOL stands today at 20%, however this has decreased from 22% in early January. The company’s share price has also risen from 22USD to 47USD since August 2007, rising from 40USD to 47USD since February 2^nd. Terra’s Utilisation is 27%, compared to the rest of the Russell 2000’s Utilisation at 26%. Terra is listed as number three in the top ten holdings of the Russell 2000.