Fertilizer Stocks Are A Global Phenomenon, but is organic fertilizers the future?
The reality is that the fertilizer market is in for a big increase due to global demand for food. An agricultural boom immediately following the financial crisis with UN announcements stating that the world is going to be grossly under fed with an expected population boom over the next four decades… Corn harvests in the United States, the world’s biggest corn producer and exporter, are down, encouraging farmers to spread the fertilizer more liberally, and the BHP Billiton Ltd takeover bid for Potash Corp, and the rejection based management opinion on the offer being undervalued at roughly $39 billion… fertilizer is a short and long term investment strategy.
There is no doubt that fertilizer stocks have room to run. I have taken the time to make a list of various fertilizer companies that have been actively mentioned in the news and elsewhere. However, I will also reflect my opinion that only a small number of these firms focus on Organic Fertilizers. Although the shortage of resources within the Lithium, Nitrates, Phosphates, and other resources, I firmly believe in a future global trend investing in Organic Fertilizers, and thus Humic Acid based fertilizers and alternatives like Guano which is naturally rich with nutrients is on my radar for future growth in the long term. Undoubtedly the list of companies here in are the current companies getting the most press, and a bright future for fertilizers:
Sociedad Quimica y Minera de Chile (SQM)
Brazil Food SA (BRFS)
Yara International (YAR)
Monsanto Co (MON)
Potash Corp of Saskatchewan (POT)
Mosaic Co (MOS)
CF Industries Holdings, Inc. (NYSE:CF)
Agrium Inc. (USA) (NYSE:AGU)
Intrepid Potash (IPI)
Scotts Miracle-Gro (NYSWE:SMG)
China Agritech Inc (CAGC)
Companies well known and poised for the Asian market include:
China Green Agriculture (NYSE: CGA). Organic . Headquartered in China’s Shaanxi Province, China Green Agriculture develops, manufactures and distributes humic acid-based, liquid compound fertilizer throughout China.
Yongye International (NASDAQ: YONG)Organic, a fulvic acid-based nutrient product manufacturer and developer. Yongye’s fertilizer is used to increase the yield of plants and animals.
It is actually the Chinese Government who brought to our attention the market growth within the Organic Fertilizer Sector. Take into consideration that the use of phosphate fertilizers and water supplies is a point of concern in the emerging countries, Asia is home to roughly two-thirds of the world’s one billion hungry people, so it’s no surprise that the region needs increased investment in agriculture to meet its food consumption needs. The United Nations and Asian Development Bank have stated that the current annual $80 billion investment in the region’s agriculture needs to rise by 50% to $120 billion to contain hunger and spikes in food prices. Add to this the rapid population growth, climate change and deep water shortages, and the necessity of governments there to act to increase agricultural investment is clear.
China Pushes For Organic Fertilizers, we think organic is the sleeper fertilizer market looking to BOOM
On May 28, 2008, Premier Wen Jiabao reiterated that “[we] guide farmers to apply fertilizer to encourage the growing of organic fertilizer companies.” Since then, local governments at all levels have been introducing various organic fertilizer subsidies. 2009 Central Document No. 1 clearly stated “encourage farmers to increase organic fertilizer usage.”
The Chinese government also exempted value added taxes of organic fertilizer producers, wholesalers, and retailers.
The central government official document says: “…enjoy the above-mentioned policy of duty-free products are the organic fertilizers, organic – inorganic compound fertilizers and bio-organic fertilizer. “
This policy from China raises an interesting question, will more Countries begin supporting organic fertilizer usage and investment and if so which fertilizers. In this case, one should look at the following, humate deposits and guano deposits.
In this case, Yonge (YGII.OB) and new firms on the edge of the organic paradigm include new firms such a Ecoland International (ECIT.OB) a Guano distributor within Africa who has made small numbers of sales into the UK/EU, but show a business model of organic fertilizer. Every hectare of arable farmland in China must support 10.3 people, and support 5.1 people in the European Union, compared to 1.3 in the United States. Companies catering to China and the EU are bound to take advantage of these unfavourable numbers.
It is our opinion we will see more companies like ECIT.OB begin to go public within the coming months and years from the multiple deposits of both organic and inorganic fertilizers available within Africa for shipment into Europe and Asia. However, ECIT is definitely a first mover with Ecoland Guano already selling in UK stores retail as well as shipments in bulk as fertilizer.
When one looks at the average nutrients of organic deposits such as those mined by Ecoland International, it is encouraging that in addition to the inorganic fertilizers, certified organic alternatives are still available to the market for the over $90 billion home retail gardening market and to the several billion dollar fertilizer market in general:
Look at the Ecoland Guano (ECIT.OB) Nutrient Analysis for example, this is organic fertilizer with almost perfect mixture ratios for growers:
|Organic Matter %||5.5|
|Dry Matter %||90|
|Sulphur Total %||5.87|
|Boron Total mg/kg||27.8|
|Zinc Total mg/kg||2,312|
|Iron Total %||0.94|
|Phosphorus Total %||8.26|
|Nitrogen Total %||2.45|
|Calcium Total %||11.88|
|Copper Total mg/kg||606|
|Manganese Total mg/kg||1,382>|
|Potassium Total %||1.21|
|Magnesium Total %||4.46|
Other international fertilizer companies mentioned in the press include:
India Fertilizer Companies
Rashtriya Chemicals & Fertilizers
Australian Fertilizer Companies
BHP Billiton Ltd (ASX:BHP)
Reward Minerals Ltd (ASX:RWD)
Rum Jungle Uranium Ltd (SAX:RUM)
Minemakers Ltd (ASX:MAK),
South Boulder Mines (ASX:STB)
Red Metal Ltd (ASX:RDM)
Incitec Pivot Ltd (ASX:IPL)
If you believe we should add other fertilizer companies to this list, please contact us to add or make a comment.