With China cutting its bank reserve requirements and lenders ready to rush into the markets with new money, we’re due for a sector rotation. Get ready to buy commodities, and keep a lookout for the ripple effects that come with demand for agriculture and metals.
The commodity markets are interpreting last week’s corn harvest estimates as a negative for both food prices and the fertilizer group. Do not be misled.
Russia’s biggest potash producer has allocated up to $2.5 billion to buy back its own shares, both to reward shareholders and because they find the company’s stock “highly attractive.”
Much-anticipated numbers from Mosaic show that the fertilizer market remains healthy, with no drop-off in demand in sight. While Mosaic itself has problems, this is great news for its rivals.
Look for a note from Credit Suisse to give the fertilizer group a jolt this morning. Potash Corp., Agrium, and Israel Chemicals remain the best performers in this industry.
Analysts are fretting over whether high potash prices will create a once-a-decade plunge in fertilizer usage and demand for potash and other soil enrichment products. Don’t bet on it.
Things appear to be looking up for the agricultural chemical industry, despite the Russians’ diffidence over potash prices.
Israel Chemicals got a delayed boost a few days ago on recent news that the U.S. corn harvest will miss earlier targets. Look for the bullish action to spread once New York stocks start moving.
Between corn and rice, food prices seem to be building up strength again. This could challenge the thesis that inflation in emerging markets has been defeated.