Even in day filled with less-than-stellar economic data and enough stocks trading in the red to pull the perma-bears out of hibernation, there is cause for optimism.

Today it comes from the companies that have anything to do with the world’s potash market.

Thanks to news that a key Russian producer is raising its prices due to increased potash demand, American firms like Intrepid Potash (NYSE:IPI), Potash Corp (NYSE:POT) and Mosaic (NYSE:MOS) are making strong gains.

The news is yet another strong indication of the profit potential currently held by the world’s commodities market. First we saw gold prices soar. Then oil. Then silver. And now potash prices.

Next up is your portfolio balance

As the world bounces out of this recession, demand will rise, inventories will fall and prices will naturally go up. The companies that directly see their margins rise as they pull materials from the ground will reward their shareholders with increased revenues and earnings.

Out of the three companies mentioned above, Potash Corp. is the largest. With 2008 revenues of $9.5 billion in 2008, it has the power to leverage strong gains in the potash market into strong profits for shareholders.

In an industry where size matters, Potash is king.

While today’s surge does not make this the greatest time to enter a position, a weak and volatile market over the next couple of weeks will create opportunities to enter a play.

Shares of the company have already doubled since their November lows of $47.54. But even at current prices of $97.75, there is an opportunity to rack up double-digit gains over the next few months.

Investors must be prepared to see trading resistance at the psychologically important level of $100 per share. As long as the bears are threatening to attack, prices will remain volatile anywhere close to that price.

The action will force buy-and-hold investors to pull out their hair. But short-term traders will take advantage of the action to make fast in-and-out moves.

The commodity markets are alive and well these days. They may look different than just a year or two ago, but if you are into making money, there are few better places to get the job done.

Source: Potash Is on the Move

Rogers and Soros are snapping up farmland right now. These two old hands are betting that demand for food will soar, pushing up the price of arable land. This from MoneyNews.com:

Falling commodity prices aren’t bringing prices for farmland down with them. Even as the price of grain goes down, the cost of the land it’s grown on keeps going up, leading George Soros and other guru investors to bet big on agricultural land.

The fundamentals are easy to understand: Over the next 40 years the population of the world is projected to grow from 6 billion to 9 billion, hugely increasing the strain on arable farmland worldwide.

The spiking grain prices that caused food shortages and rioting in dozens of countries in spring of 2008 fell some 50 percent by December. Yet even after the correction, grain prices remain above their 20-year average, and food stocks around the world are still near 40-year lows.

“Land is scarce and will become scarcer as the world has to double food output to satisfy increased demand by 2050,” Joachim von Braun, director general at the International Food Policy Research Institute, told Fortune Magazine.

“With limited land and water resources, this will automatically lead to increased valuations of productive land. And it goes hand in hand with water. Water scarcity will probably increase even more than land.”

“I’m convinced that farmland is going to be one of the best investments of our time,” says commodities guru Jim Rogers.

Long-suffering readers will know that we’re bullish on the PowerShares DB Agriculture Fund (NYSE:DBA). But there are a number of other ways to invest in the ag sector.

These include agricultural chemical companies such as PotashCorp (NYSE: POT) , Mosaic (NYSE: MOS) , Agrium (NYSE: AGU) and Terra Industries (NYSE: TRA). Also worth considering is farm machinery outfit Deere (NYSE: DE) and farm products company Archer-Daniels-Midland (NYSE: ADM).

While the recent rally has been impressive, markets never move in straight lines for long. And given that we’re still 80% below the highs, we still have plenty of room to run.

So now is the time you want to be getting your cash ready to deploy in preparation for the pullback. But first, you need to have a strategy. After all, it’s tough to buy companies that nobody else wants. And it’s horrifying to watch the market drop, just as you get back in. Nobody wants to catch that proverbial falling knife.

Here’s the solution…

Calling Market Bottoms – Don’t Fall For The Fake

While many simply tell you to wait until the upward momentum has begun again, nobody can call the bottom with precise accuracy. Besides, when the market bottoms, most investors are too scared to invest anyway.

And on the way back up, they’re still too scared because they think the move is false. Then, after 90% of the move is over, just as they’re getting comfortable, they jump back in and get whacked backed down. Better just to stay away from stocks completely, right?

Not at all. For most, having money in cash is a disaster for the longer-term and a prosperous future depends on successful investing. This is what you need to do to prepare…

4 Strategies For Buying On Stock Market Dips

• Set Price Levels At Which You Buy Your Stocks:

For example, this strategy would involve buying stocks in stages, each one lower than the one before.

Let’s say you want to buy Bank of America (NYSE: BAC). Buy the first chunk at levels 30% below the current price (given the volatility of financial shares these days, big drops are more common). Then, the second entry point should be 30% below the first entry point… and so forth. Of course, the percentages I have given are just for sake of this example.

• Use A Strategy That Limits Your Upfront Outlay:

For example, buy LEAP options. You’ll have less money at risk and at least a one-year, possibly two-year, holding period.

• Sell Put Options:

The premium on put options soars when stocks are falling. It also means that as shares fall, you can place a bet on a much lower entry point and get paid for trying to own it. For example, if Visa (NYSE: V) is at $64, the Visa $40 puts are worth $0. At $50, those puts may be worth $1. At $40, they may be worth $3.

• Sell Covered Call Against Your Stock Positions:

These don’t have to be at-the-money calls. Rather sell out-of-the-money calls and lock in some premiums from exuberance. As the market falls, you can buy back your calls for less money, as the premium will decrease. This provides you with a hedge. If the market goes higher – great – you’ll sell your shares at a higher price.

Whether the market falls from here or not is not relevant.

What is relevant, however, is that you’re prepared to invest in any environment, good or bad. That, plus the ability to act under pressure.

And our free Smart Profits Report archives give you plenty of in-depth tips and strategies to do just this.

Karim Rahemtulla

Source: Buying a Stock Market Dip: Here Are 4 Strategies to Use

Organic farmers typically use manure from farm animals, or some other form of organic compost. Large, commercial operations typically use ground potash, a rock mined in Canada and elsewhere.

I’m not going to debate organic versus conventional farming here, but suffice it to say that all plants – regardless of how they are grown – need a good source of nitrogen and potassium.

Potash – otherwise known as potassium carbonate – is essential to commercial agriculture. It improves crop yield, taste, water retention, color, disease resistance and texture of food crops. Fruits, vegetables, rice, corn, wheat, soybeans and cotton all benefit from being grown in soil enriched with potash.

In the past few years, shareholders of the largest, profitable potash producers like Potash Corporation of Saskatchewan (NYSE:POT), The Mosaic Company (NYSE:MOS), and Agrium, Inc. (NYSE:AGU) were very happy campers. The stocks traded at PE multiples pushing 30 during the commodity boom of last year.

Not anymore: they’re all off more than 70% from 2008 highs. The financial distress that hit the rest of the economy in the fourth quarter of 2008 hit farmers too. When times are tough, farmers hunker down and cut costs. And one of their biggest expenses is fertilizer.

Most farmers typically have a large stockpile of potash on hand, and not buying on a regular basis causes them to use up what they have. You see, they can’t just stop fertilizing: many soils are overworked, or are marginal to begin with. If they scrimp or otherwise cut back on their applications of nutrients, yields suffer, and crop prices rise.

Once their penny-pinching became obvious to Wall Street, the already jittery markets didn’t need any prompting to hammer shares down to today’s low single digit PE’s, where they’ve remained since last October.

The problem facing the three companies mentioned above is that several big financially strapped potash producers in Russia have dropped prices 25%, putting pressure on others to do the same. This would have the effect of continuing to hold prices low.

It’s all being watched closely by China – one of the world’s biggest potash customers – who’s set to begin negotiations with the industry for its 2009 purchases. In response to the Russian action, Potash has cut production in order to keep prices from dropping through the floor.

The key here is to keep a watchful eye on crop prices. As they start to rise, farmers will jump on the bandwagon and fertilize more to increase their yields and make more money. And given that most are depleting current potash inventories, buying could soon resume in a big way, driving prices up once again.

Growing economies like the BRIC’s: Brazil, Russia, India and China are big potash users, and let’s face it: the world’s growing population will always need to eat.

Source: Agrium, Inc. (NYSE:AGU): Stock of the Day

This from The Rude Awakening:

We have it comparatively easy in this, the crisis of 2008. We may have to make do with fewer Swatch watches and Coach handbags. We may have to pass on the latest iPod and make do with last year’s winter coat. These hardships are not important, except for people selling those goods. But the credit crisis is also affecting the world’s ability to produce one thing important to everyone: food.

It’s harder for farmers to get credit for next season’s crop, especially farmers overseas. They need fertilizer, seed, fuel and more. And most farmers need to borrow money to obtain these essential items. No credit; no crops.

Therefore, the global credit squeeze might reduce plantings of key grains, even as world inventories of these grains hover near historic lows. In Russia, for example, cash-starved banks have cut off funding for the industry. The head of the Russian Grain Union says, “Many farmers probably won’t be able to borrow money for the spring sowing.” This is important because Russia is no lightweight in the grain division. It produces 9% of the world’s wheat, for instance. No surprise that the United Nations considers Russia a critical component of the global food supply.

Ironically, Russia just had its best harvest ever. And still, global grain inventories remain low. Bloomberg reports that global inventories of corn, wheat and soybeans are the second lowest they’ve ever been since 1974.

A number of countries already fear what might happen next year. The Washington Post Foreign Service in Shanghai reports that China adopted a number of measures to protect itself from the worsening food crisis: “Among the most extreme measures [China] took was to impose new export taxes to keep critical supplies such as grains and fertilizers from leaving the country.”

These taxes are extremely high, on the order of 150%-185%. China worries that richer countries may outbid its own farmers for supplies and weaken China’s own food supply. One Chinese fertilizer company, which produces 150,000 tons per year, already said that the new taxes mean exporting is no longer profitable.
China was the biggest exporter of certain types of fertilizer. No longer. That’s a lot of supply off the market.

Fertilizers are absolutely critical in maintaining (and improving) crop yields. Without them, we’d produce far less per acre. As a result, in parts of Africa where people depend on Chinese fertilizers, the food supply problem is now more acute. China’s export taxes and bans follow those of other grain producers, including the Ukraine, India, Pakistan and Argentina.

Amazingly, despite these various maneuvers around the world to prevent grain exports, the prices for wheat, corn and soybeans are all half of their mid-summer highs. It seems the market believes a global recession will dampen demand. Maybe so, or maybe the market doesn’t know anything. The severe commodity selloff during the last few weeks might be saying a lot more about the desperation of hedge fund managers to raise cash than about the prospect that grain demand will fall – in which case, we could see another surge in prices next year.

Demand for grains is still very strong. In China, each wage-earner devotes about 40 cents of every dollar earned to buying food. In India, that number is a staggering 70 cents out of every dollar earned. In other words, the food budget in these countries is hardly a discretionary item. It will remain constant, or even rise, no matter what the global economy does.

Meanwhile, the people in these countries who have a couple of extra rupees to toss around are upping their consumption of meats, which increases the per capita demand for grains. As PotashCorp chief William Doyle recently pointed out: “The average daily protein intake in China has increased by 40% over a 20-year period, with the greatest percentage of that increase coming from meat consumption.” You can see it in the size of the people themselves: The average 6-year-old Chinese boy is 12 pounds heavier and 2 inches taller than 30 years ago. These people aren’t going back to the ways thing were. This is a long-term story, and these trends should continue.

Yet even if demand growth for grains slows, it’s not likely that those low global grain inventories will improve. Even if grain demand fell to 2% per year, we’d still need record production to keep grain inventories from falling further.

For all these reasons, I think the future is still bright for agriculture and all that it entails. I think the fertilizer companies look cheap again. We owned Agrium (NYSE:AGU) for nearly three years, and it more than tripled our money. The stock is now a good one-third below what we bought it for initially.
PotashCorp (NYSE:POT) and Mosaic (NYSE:MOS) are other names I’m looking at hard right now – both have been crushed in this troubled market.

Beyond that, irrigation companies have come way down, even after posting outstanding results. Lindsay (NYSE:LNN) and Valmont (NYSE: VMI) are two irrigation equipment makers, for example, both coming off great quarterly results.

Source: Meal Ticket

But Andrew Mickey says the soaring price of natural gas will hit fertilizer manufacturing profits hard — and hurt potash stocks in the process.

In the last twelve months, two leading potash producers, The Mosaic Company (NYSE: MOS) and Potash Corp (NYSE: POT) have seen share prices rise 260% and 176% respectively.

But Andrew says expectations in the fertilizer industry are too high for the short term. The soaring price of natural gas – a key ingredient in fertilizer manufacturing – is going to take a big lump out of profits…

When it comes to commodities, sometimes one man’s ceiling is another man’s floor. The faster the price shoots up for a basic input like crude oil or natural gas, the tougher it gets for some producers to maintain profit margins. Why does this matter, you ask? Because price patterns in oil and gas can sometimes tell you when not to buy into a certain sector or group — in this case, fertilizer stocks.

The fertilizer industry uses a lot of natural gas… and I mean a lot. Fertilizer can’t be manufactured without gobs of it. According to the GAO, “Natural gas is a key feedstock in the manufacturing of nitrogen for which there is no practical substitute.”

We can see the impact of soaring natural gas prices on fertilizer costs. In the chart below, the National Agriculture Statistics Service shows us how natural gas prices can destroy profits of fertilizer producers.

In 2001, natural gas prices spiked from $4 to $10 in three months. Meanwhile, nitrogen fertilizer prices only rose from about $200 per ton to about $325 per ton.

A lot of factors play a part in a 150% move (the amount by which gas prices rose). What’s perfectly clear is that fertilizer companies paid the price. While they had to pay 150% more for one of their major inputs (natural gas), they were only able to charge about 60% more for their product. When companies are unable to pass increased costs onto consumers, their shares can experience drastic sell-offs.

The dreaded natgas spike hit fertilizer stocks in late 2000… then hit them again in 2003… and then yet again in 2005, when the hurricane season pushed natural gas prices to extremes.

Following Hurricane Katrina, the fertilizer sector was hit with a 20% sell-off. The most natural-gas-dependent producer fell 40% after Katrina made the official leap from tropical storm to hurricane.

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Priced for Perfection

Of course, we’d expect it all to be priced in by now right? After all, three times in the past decade natural gas prices soared and fertilizer companies got hit hard. And yet, in this case, history has been forgotten once again. The price of natural gas has risen 80% this year, yet fertilizer stocks are still going strong.

Expectations are high — too high. Any fertilizer company that comes up short this earnings season is going to pay a heavy price.

Potash Corp is a good example. There have been seven analyst upgrades for Potash Corp in the past month. Consensus estimates for Potash Corp’s Q2 profits were $1.98.

Now, Wall Street is expecting $3.23. That’s a 63% increase in estimates in only a month! Potash prices are up, and the long-term picture can hardly look better… But Potash Corp is now a $70 billion behemoth. Earnings rarely grow that fast when you’re that big.

Again, expectations are just too high for the near term. And natural gas prices are going to cause a lot of fertilizer stocks to miss expectations. Given current market conditions, this is no time to come up short in the earnings department.

It’s Just Business

The next big opportunity I see is going short some of the major fertilizer stocks. Soaring costs and lofty expectations are rarely a profitable combination for investors looking to buy and hold.

In my premium investment advisory, Fear & Greed, we started tracking this situation almost two weeks ago. I warned “the race to fertilizer stocks is about to take a pit stop.”

Since then, the bubble showed the first signs of popping. All of the hot fertilizer stocks we were avoiding have been hit hard. On average, they’ve fallen 15% in two weeks. But they’re starting to rebound now, and things are shaping up for another big drop. Out of fairness, I can’t reveal the three fertilizer stocks that are most dependent on natural gas (and thus likely get hit the hardest).

But I can tell you a few things… like the fact that during the Katrina aftermath, these three stocks fell 20%, 35%, and 40%.

One of the three stocks — which I originally recommended two years ago this week — is up 280% in the past year. All three had upward revisions of earnings estimates from the money chasers on Wall Street in the past four weeks.

Most importantly, we have a very near-term catalyst when all three of these fertilizer companies report earnings at the end of July.

The bottom line is this: If you’re looking at buying into fertilizer now, it’s best to wait — and you might even want to join me in going selectively short.

If history and the price of natural gas is any guide, there’s probably a much better buying opportunity for fertilizer stocks just a short distance away.

Source: Natural Gas Boom Spells Short-Term Doom for Fertilizer Stocks