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Did Government Cause Todays Fertilizer Dump?

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June 22, 2009 – Comments (7) | RELATED TICKERS: MOS , POT , CF

Or was the news a rumor?

Hopefully none of you were caught long for todays fertilizer company crap-out.

Here at the Devoish BS Market Watch, we were taken by surprise today when fertilizer stocks took a double sized dumping in todays market movement. With drops of 10%, 7%, 5% and 4% CF, MOS, POT and TRA easily out dumped the S&P. Usually fertilizer moves smoothly through the system, catching up to sudden bursts in gas, or S&P. Todays 10% dropping was extraordinarily sloppy, and warrants a careful examination.

We determined that, despite excessive rains and droughts, their was no sudden change in the amount of plantable land from last weekend.

None of the aforementioned companys anounced new production facilities.

Competing fertilizer source, BS, has been and continues to be found in abundance.

President Obama, did not say anything.

There were no changes from the EPA or the Justice Department concerning where or how deep you could spread fertilizer.

China made no changes to its fertilizer import quotas. From January's China DailyChina set the import tariff quota for fertilizers this year at 13.65 million tonnes, said China's Ministry of Commerce on Friday.

The quota, under which the imported goods could enjoy favorable tarrif, included 3.3 million tonnes for carbamide, 6.9 million tonnes of diammonium phosphate and 3.45 million tonnes of compound fertilizer, the ministry said.

China has removed all government control over fertilizer prices starting on January 25, leaving the prices of domestically produced fertilizers and all fertilizer imports except potash fertilizers to be decided by the market.

Perhaps there is new competition;

 BEIJING, June 22 (Xinhua) -- China will abolish export duties on some grains and industrial products and cut the duties for chemical fertilizers and nonferrous metals from July 1 to promote exports, the Ministry of Finance said in a statement Monday.

    The Customs Tariff Commission of the State Council will eliminate the export tariffs for wheat, rice, soybeans, vitriol and steel wire. Grains are now subject to a 3-percent export levy.

    Special export tariffs of 50 percent on chemical fertilizer and fertilizer raw materials including yellow phosphorus, phosphate rock and phosphoric acid are expected to be canceled.

    Export duties for some nonferrous metals including molybdenum, tungsten and indium will be halved to 5 percent, the statement said.

    The move follows several increases in export tax rebates to support overseas sales amid the global downturn. Since last August, China has increased export tax rebates seven times.

    Exports fell 26.4 percent in May from a year earlier to 88.758 billion U.S. dollars, following a decline of 22.6 percent in April.

    Exports in the five months to May totaled 426.14 billion U.S. dollars, down 21.8 percent.

Did Government Cause Todays Fertilizer Dump?

Or was the news a rumor?

7 Comments – Post Your Own

#1) On June 22, 2009 at 11:55 PM, angusthermopylae (39.74) wrote:

One thought would be that fertilizer is a long-term product...you gotta think way ahead to get a good picture of what might happen...and there's still rain, weather, famine, etc.

I wasn't aware of today's big drops until your post--good catch.  (I  just thought it was part of the overall background drop in the markets...but maybe not...)

I would believe that it might indicate that either a) China is pulling out (almost) all stops to up their exports, or b) they think basic food production will be a lot more important in the future than most people realize.  Doesn't bode well, that line of thinking...

As one who actually lives on a farm, and grows a small portion of my own food, I have come to the belief that fertilizer is very important.  That simple mix of basic chemicals and minerals makes the difference between feast and famine to most of the world.

I'm going to be  watching this one more closely, thanks to you.

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#2) On June 23, 2009 at 1:11 AM, lucas1985 (< 20) wrote:

@angusthermopylae,
"As one who actually lives on a farm, and grows a small portion of my own food, I have come to the belief that fertilizer is very important.  That simple mix of basic chemicals and minerals makes the difference between feast and famine to most of the world."
Current fertilizers are not sustainable (1, 2) If you want a stable supply of fertilizer, just invest in a composting toilet (3)

1- http://en.wikipedia.org/wiki/Phosphate#Mining
2- http://en.wikipedia.org/wiki/Haber_Process#Economic_and_environmental_aspects
3- http://en.wikipedia.org/wiki/Ecological_sanitation

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#3) On June 23, 2009 at 1:15 AM, checklist34 (99.71) wrote:

its all quite possibly heathy over even the intermediate term.  Last week and today saw moves out of "risky" stocks, which has created a number of cheap stocks where on may 8th (tthe peak for many high beta names was around then) there were few.

a healthy step back isn't bearish over the intermediate term.  :)

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#4) On June 23, 2009 at 1:36 AM, grunions (< 20) wrote:

Fertilizer is driven by planting.  Monsanto, MON, is the industry leader in seeds, the genesis of planting.  To see if planting is "growing" see MON's earnings report due this week.

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#5) On June 23, 2009 at 1:59 AM, Tastylunch (29.33) wrote:

I blame program tarding. Evere notice how whole sectors trade exactly alike now?

Solar e.g. basically mirrors Oil.

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#6) On June 23, 2009 at 3:00 PM, angusthermopylae (39.74) wrote:

lucas1985

I don't have a composting toilet, but I do compost other material.  We have 35 goats, 3 mules, 2 llamas, and a horse...as well as 25 chickens.  All that hay, sawdust, and manure are put to good use, and the volume from those animals is significantly more than my little household could produce.  Plus, the smell is better than dealing with human waste.

Composting is a great way to save money, clean up the farm, and get a good percentage increase in crop production.  However, on less than an industrial scale, it's not going to save the world.  It takes a huge portion of "resources" to produce a useful amount of product, and most of the original mass is lost as CO2 in the process...actually bad for global warming, not good.

OTOH, I absolutely agree--current industrial fertilizer methods aren't infinite.  That's why I stated that the Chinese might foresee a future where any food production is extremely valuable.  Forget peak oil--is there a peak food?

grunions

Great point.  I haven't paid any attention to Monsanto (other than their gen eng crops and enforcement policies...*yuck*)  I'll be watching that.

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#7) On June 25, 2009 at 9:12 AM, farmnut1985 (22.81) wrote:

It is hard to tell what drove the change, fertilizer costs had tended to follow crude and natural gas cost changes, but recently when crude and nat gas dropped, fertilizer stayed high.  Potash especially has stayed so high that it is difficult to justify putting it out.  My brother just started up a large hog finishing building in January that will start replacing our purchased K, but we will still be buying P and N.  This recent drop might be a correction in actual value of the products.  Also saw Potash Corp cut workforce due to overproduction.  Go figure, when its $800-$900 a ton a farmer can't justify going over a certain investment value per acre of a crop as it is not a sustainable investment meaning the amount used gets reduced. 

We look at current and future grain prices, average yields, land rent (farm payments and taxes if owned), seed cost, fertilizer cost, herbicides, equipment maintenance, fuel, and insurance to make descisions on application rates of fertilizers.  We have been cutting fertilizer rates for about 4 years now on most of our ground and most the rest of the country has been as well.  Part of the issue is I think they price gouged this last fall and spring and found out that if it is too expensive we will just cut back, still need some to make things grow, but will make do.  This also cuts into yields as well but the cost benefit ratio is better to cut back and pray for rain and sunshine in the right amounts. Sorry went on a bit of a rant.

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