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Varchild2008 (84.10)

Fertilize My CROPS with CRUDE OIL Please

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July 24, 2008 – Comments (3) | RELATED TICKERS: POT , MON , TRA.DL

Just want to get this off my chest.  Not only is Jim Cramer and CNBC making sound like Crude Oil prices falling means that Fertilizer is falling....  Fast Money was signalling a death nell to fertilizer for the 1 millionth time or so it seemed to my ears.

This is ridiculous.  Investors are swallowing this notion that OIL impacts Fertilizer.

(TRA) Terra Industries is a little bit different in that they carry "Methanol."  So, they could get impacted by methanol pricing I suppose.  But, I believe TRA got rid of their Methanol producing facility...or was intending too....

Nonetheless....  No one fertilizes their CROPS with CRUDE OIL.

If you want to know the pricing situation with Fertilizer you only need to focus on 1 thing.

(SUPPLY)   and  (DEMAND).

Right now demand is extremely high and supply is still catching up.  So fertilizer stocks (thank you Potash of SasPROFIT-TRON).

Some investors are wondering when the Fertilizer Madness will end....

Wake me up when Supply catches up with Demand.  When that happens...Growth Slowdown will hit hard in the fertilizer sector.  But, we'll have to wait a few years for that:-) 

3 Comments – Post Your Own

#1) On July 24, 2008 at 8:43 AM, Varchild2008 (84.10) wrote:

Another thing to get off my chest is this stupid notion that the "Banking Rally" is making people dump Fertilizer stocks.

That is insanely naive and wrong.  The fact that BANKS are doing well should help out Fertilizer Stocks just as they should help out virtually every Small and Large Cap company with financing needs for future growth opportunities.

Also.... Looks like Terra Industries is going to continue to point out the revenue hits from high natural gas prices today.  So, that's another thing to consider.... If OIL and Natural Gas prices are down.... Shouldn't Terra Industries Stock Price be up?

Are we going to see a much better 3Q simply from lower Natural Gas prices?

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#2) On July 24, 2008 at 4:00 PM, StockSpreadsheet (67.70) wrote:

Actually, a lot of fertilizers are made using oil and natural gas as its feedstock.  Therefore, high oil and natural gas prices would be major concerns to those companies.  This might not be true for Potash or Terra.  After all, POT mines its potash and doesn't manufacture it from oil/gas, though I'm sure it uses a lot of oil/gas to run its mining operations, (vehicle fuel, heat, light, etc.).  A significant output product from Dow Chemical is fertilizer, made from oil and gas.

That being said, falling oil and natural gas would help the fertilizer industries, since for those that use it as a feedstock, it reduces their input costs.  For those that just use them to fuel their vehicles, power generators, etc., it reduces their expenses.

So I agree that falling oil/gas prices are not directly related to fertilizers, (except in an inversely beneficial way, falling oil/gas prices should help the fertilizer companies).  I think that the falling oil and fertilizer stocks are just due to some unwinding by investors/hedge funds that had made big bets on these stocks and now are unwinding some of their positions to maybe move into the banks or finance companies to take advantage of the current short squeeze.

Just my two cents.

Craig 

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#3) On July 25, 2008 at 5:42 PM, Varchild2008 (84.10) wrote:

Thanks that helps me to understand what went on this past trading week!

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