Opportunity in fertilizers (Part 2 of “You can’t fix stupid”)

“The conventional view serves to protect us from the painful job of thinking.”
—John Kenneth Galbraith, Canadian-American economist, diplomat, public official, intellectual, U.S. Ambassador to India 1961–1963; 1908–20

As an emerging worldwide food crisis emerges, Justin Trudeau is introducing new constrictive fertilizer policies to our farmers. I’ll get to how that might affect our country, but more pertinent to this blog discussion is how such policies might effect fertilizer stocks. They have declined of late. Is the game over for these stocks, now that Dutch and Canadian farmers are likely going to be using less of the products?

 

Nutrien, which we hold in the ValueTrend Platforms, (NTR-T) produces products in the Retail, Potash, Nitrogen, and Phosphate arenas. In taking a quick glance at their financials, they anticipate increased demand in potash and fertilizers in the coming year. The company sells to USA and major international markets including Europe and Asia.  I STRONGLY encourage you to view this video I produced on commodities to view population growth in Asia and anticipated long termed commodity demands. We like the potash/fertilizer space – and here’s why: Our foolish boy in parliament may repeat his strategy that he burdened the Canadian energy industry with (to appease his Reset Overlords) by limiting local farmers production. But NTR, like other companies in the industry, has plenty of other customers demanding their products.

The chart tells us that the stock has corrected a parabolic move. It must maintain its trendline. So far, so good….

And its not just Nutrien…

The main competitors of Nutrien include CF Industries (CF), Mosaic (MOS), Scotts Miracle-Gro (SMG), CVR Partners (UAN), American Vanguard (AVD), Marrone Bio Innovations (MBII), AgroFresh Solutions (AGFS), China Green Agriculture (CGA), Save Foods (SVFD), and Calyxt (CLXT). These companies are all part of the “agricultural chemicals” industry. It is my strong opinion that they are worthy of your consideration. Below is the MOS chart, which we do not hold. We like it fundamentally at this time, and have considered adding it to our platforms in the near future. Similar technical profile to NTR.

 

Clearly, the fertilizer capping policy by the Canadian government is quite controversial.  Especially during a growing food crisis. This situation reminds me of the 2020 policies by Trudeau to cap fossil fuel exploration and cancel pipelines. That was right on the cusp of the global supply chain problem and energy crises. Timing is everything, and the timing on that decision was immeasurably bad. I cannot help but feel deja vu at this moment regarding the Potash/fertilizer sector.

However, as I noted waaaaayyyyy back in January 2022  and before then, you can’t fix stupid. But you can profit by it!!Smart readers who heeded my advice back in 2020 to buy energy and other commodities were rewarded. Making money by playing off of ignorance and ideology.

I feel the same situation may be in place for fertilizer makers. Despite losing a small amount of demand due to Trudeaus mistimed and misdirected fertilizer policies, the need for fertilizers in other developed countries, along with developing nations like Asia and emerging markets, will grow. Again….I strongly encourage you to visit this video for more on that story. Supply/demand is the basic premises of economics, and I discuss it on the video. Something our drama teacher won’t understand. But you will.

Controversy erupts over fertiizer emissions regulations | CTV News

As an aside – The Trudeau government is seeking expert help on establishing best practices for both humans and animals to eat bugs. This, to deal with the food shortage crisis – which he will no doubt contribute to here in Canada.

Meanwhile, Justin Trudeau billed Canadians $370,000 for food and $3,200 for booze, all during just six trips on a government Airbus in 2019. And he’s burning the carbon in our taxpayer funded private jet going to Costa Rica right now.

Trudeau increases air miles and carbon footprint with Costa Rica trip | Toronto Sun

In one month, Trudeau used enough fuel to power a trucker convoy | Vancouver Sun

I’m sure his high priced food menu doesn’t offer any bug alternatives on this Costa Rica trip. Picture Trudeau in his mansion, and his band of elites in their mansions, eating crickets – along with the rest of us.  I just don’t see this happening.

 

Opportunity in stupidity

In the past year, we’ve been dealing with  repercussions of policies like excessive spending/ debt & money supply overflow, pipeline shutdowns & capping of energy exploration, and new carbon taxes during an energy & inflation crisis.  This, causing Canadians to pay far more for gas and goods.

This isn’t the UK – we’re an energy producing nation!

And now, a fertilizer reduction policy during a food crisis – hitting farmers and citizens of Canada. This, much as citizens were hit in 2021/22 by the same government over misdirected energy policies.

In the end, I can’t help but think that once again, Trudeau will win against common sense, and we may indeed harm our farmers, meaning less food for our nation. I guess we will have to learn to live with high food prices and supplement our diets with bugs. This, just as we have learned to live higher fuel prices, leaving the private jet travel and filet mignon to the elites like Trudeau.

Meanwhile, by owning shares in fertilizer and energy stocks, we should profit by the immediate demand for their products coming from other nations -even as our farmers are struggling. As an opportunistic trader, I intend to play every opportunity I see. The next one may be in nutrients.

But as a human being, I am disturbed by the growing trend towards political optics rather than common sense.

 

14 Comments

  • Great article on Nutrien which I also own. Fortunatly I took half off the table when it skyrocketed. Now that the S&P 500 is nearing 5170 I was considering selling some assets for cash. Nutrien was one I considered but you imply it is a good investment. I agree “fundamentaly” long term it is but if we expect further decline in the S&P “technically”, then why not sell Nutrien now, and buy it back when the market has bottomed? The yield is only 2.4% so we are not giving up a whole lot while waiting.
    Thanks

    Reply
    • Indeed– see my comments to Wendy–we too sold half. I will not discount the potential for the SPX to blow through 4170, so I am still waiting before selling. As noted, I will sell on a sign of weakness, meaning 2-3 negative days. Although, you know that my thoughts are that we wont likely see a material break – so much supply at that point, it would need a big pile of buying pressure to go through. Still, it could happen. Don’t predict. Do prepare.
      Personally, I am going to hold the NTR as its no longer a huge position and its upside is there – we would add to it per my note to Wendy. I am looking to sell an index ETF we hold and one other stock with a technically broken profile. I will sell if as when 4170 proves not to break. I expect (if that failure happens) that we will get to 40% cash from 32% right now.

      Reply
  • Hi Keith,
    I wasn’t aware of Trudeau’s fertilizing cap policy🤦‍♀️ Given the high risk environment as per your last blog, would you wait for NTR to fall back below $100 before initiating a new position? I sold NTR awhile back for over $130. Also, given Trudeau’s stupidity, would one of the others that you listed possibly provide more upside?

    Reply
    • I am waiting for the general market environment to prove a bottom before adding to any positions. So yes, there could be a bit more noise left on the sector. Regarding which stock to own–I recommend examining the entire list. NTR – we sold half but kept half a while back. We view the sector and stocks from the vantage of the chart (prime importance) and the revenue (favor international for the reasons given)

      Reply
  • might make sense as a trade for a few weeks/months. It is such a political commodity so who knows what will happen given Asian supply and the largest potash mine in the world is now under construction by BHP in Jansen & they recently advanced SOP to 2026. They might advance it again. Which will take prices down all other things equal. Trudeau is powerless to do anything lasting to affect this market. he is spitting into the wind. He just makes noise

    https://financialpost.com/commodities/bhp-accelerates-work-on-its-saskatchewan-potash-mine-as-prices-soar

    Reply
  • Kieth, as always a good read. Any good AG ETF’s to tease the Coming food shortage? Do you see a correlation between energy and AG, energy taking a beating of late I wonder if AG will see a similar fate.

    Reply
    • COW-T is the best known one and I have traded it in the past- trades on TSX but, of course, most of the companies in the index are US and Int’l–the stocks it holds are directly and indirectly linked to agriculture. So take a look at the holdings before you decide to buy
      DBA-US tracks the agricultural commodity futures – so rather than a bunch of stocks, you are buying the actual products (via futures). This is reasonably close to a “pure play” on food and other ag’s – keeping in mind the inherent costs of futures and rolling costs and inefficiencies that will be incurred by the fund
      You can also look at MOO, VEGI, FTAG all listed in USA
      Or–You can look at farmland REITs: https://www.farmlandriches.com/best-farmland-reit/

      Reply
  • Keith, Your observations re: Trudeau are accurate. In your opinion, who amongst the current CPC leadership candidate would be most likely to convince voters to turn away from Trudeau? (At least from an economic policy standpoint.) This would be a good topic for your next “rant post.”

    Reply
    • I support Pierre Polliviere – have been following him for many years. He is a man of high integrity, and he is a finance man, not a part time drama teacher. Very quick mind, vastly Trudeaus intellectual superior. Although admittedly, its not a feat to be smarter than Trudeau. More than that, he is the real article. Came from a small middle class neighborhood, worked super hard to succeed in life. No rich-boy privilege’s living in a mansion with servants and never having to get a real job. He did it like all of us did…the hard way.
      Another bonus–He is a master of using social media, and he genuinely likes to hear from young Canadians.
      Most importantly – he is not a fake.
      His talk of freedom is something very true to his heart, not just a political slogan like “building the economy from the heart out” BS.
      Many people are not aware (he doesn’t even talk about this)–way before the current government began their totalitarian authorisms – in 1999, Pierre submitted an essay to Magna International’s “As Prime Minister, I Would…” essay contest. His essay, titled “Building Canada Through Freedom”, focused on the subject of individual freedom and among other things, argued for a two-term limit for all members of Parliament. As a finalist, Poilievre won $10,000 with the essay being published in the book that collected the essays.
      Pierre has always believed in freedom. Its not just some slogan or campaign. I have met him in the past, and I am thrilled that he appears to be doing well in the PC leadership race. I do feel that he is what the majority of Canadians want, and a man who they can relate to.

      Reply
    • Honestly–Don’t know much about it–I think its on the venture exchange?–less liquidity. Cant really comment, I tend to view the stocks with enough volume/ capitalization to allow me an efficient entry /exit price

      Reply
  • This is not a reply just another comment. I could not resist pointing to a glaring political Optics “Justin Trudeau holding a teddy bear, kneeling at a little flag marking the site of a grave near the former Marieval residential school on the Cowessess reserve in Saskatchewan’s Qu’appelle Valley.
    Except it wasn’t a just-discovered residential school burial ground. The graveyard where Trudeau knelt was a Catholic cemetery, a community cemetery. Children and adults, Indigenous and settler, were buried there, going back generations” From an article in the National Post by Terry Glavin, May 28 2022

    Reply
    • Yes I read that–although, not in the CBC or, for that matter, in any of the mainstream Lib media. Funny how that whole thing was brushed under the rug.

      Reply

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