Thursday, January 17, 2008

Ag Stocks Get Crushed (AGU; DE; MON; MOO; MOS; POT)

From MarketBeat comes a follow-up for this post*:

MOO Boo-Hoo

Posted by David Gaffen

Scott Patterson has a report on how today’s economic data is hurting agricultural names.

One corner of the market that had been holding up even as most other stocks fell is continuing a recent freefall: agribusiness.

The Market Vectors Global Agribusiness exchange-traded fund (which sports the way-too-cute ticker MOO) is down 6% in early trading. The ETF includes seed maker Monsanto, Mosaic, which makes fertilizer, and Deere, the tractor behemoth....

...The chain of thinking may be this: Weak manufacturing activity could mean demand for oil will soften. That could lead to less demand for ethanol. Pop goes agribusiness, which had the early signs of a bubble in the making.

*Agricultural Stocks Take a Hit (AG; ADM: MON; MOS

Dow Jones & Co. really is an empire. Three hours ago we linked to a column from Barron's
"Agriculture Sector Still Sprouting Winners (MOO)".

Now David Gaffen is reporting via MarketBeat:

Meanwhile, back at the ranch, Notable Calls has this:

Agricultural Chemicals: A Small Chink in the Fertilizer Armor? - MSCO

- Morgan Stanley notes yesterday’s declines in fertilizer shares seem to be largely due to a somewhat surprising gain in potash inventory. While the bulls would argue that this inventory build is seasonal, the firm notes that historically inventory build generally starts in August or September and not in December. If the potash market is so strong, how could inventory have risen so sharply in the month of December? Firm believes the issue may go a bit deeper and may turn out to be a bit more ominous as customers may be over-ordering in light of tight supply and rapid price increases. This would distort what producers see as “demand.” While producers continue to maintain that they are unable to keep up with orders and sales are on allocation or some degree of restriction, the inventory gain may have shown otherwise. The potash inventory gain may only be a small “hiccup” in the perfect stream of data we have been seeing, but points to a certain degree of vulnerability in the shares if the data turns less buoyant.

Firm maintains Cautious industry stance but does not have enough data to call for a sustained downturn. Maintains Underweight rating on PotashCorp (NYSE:POT) and Agrium (NYSE:AGU) and are currently Equal-weight on Mosai (NYSE:MOS).

Notablecalls: Just so you know. Not making any calls here.