Crops & Ag Pulling Back; Buying Opportunity Or Just Starting? (MOS, POT, MON, BG, ADM, MOO)

When you see sectors that have been key leaders fall it’s often just another buying opportunity.  But when you start seeing an exodus you have to wonder if letting the good times roll is smart. In this market there are very few safe havens. That is particularly true if new valuation metrics being reevaluated come true.  Enter agriculture and fertilizer.  The charts on these are not indicating any major uptrend violations,although by now you know they never do until they already have (sorry for theredundant jab).

The potash sector has been hot until today.  Today, shares of Mosaic Co. (NYSE: MOS) is leading the sector lower with a 6% drop to under $103.00, up from a 52-week lows of under $20.00.  Potash Corp. of Saskatchewan, Inc. (NYSE: POT) is down over 3.7% at $144.50, although its 52-week low is $45.82.

Monsanto (NYSE: MON) is down almost 2% to $124.85, and its 52-week low is $50.01.  Share of Bunge Ltd. (NYSE:BG) are down 3.3% to $128.55, up from its 52-week low of 70.97.

Maybe with the DJIA trading down another 200 points there just aren’t any safe havens.  Even the core defensive go-to stocks have been trading lower today and we noted some higher valuations starting to look like a premium at the time.

Archer-Daniels-Midland (NYSE: ADM) is bucking today’s trend as it is down less than 0.4% at $45.00, up from a 52-week low of $30.46.  The fairly new ETF in the sector is the  Market Vectors Global Agribusiness ETF (AMEX: MOO), and it is down some 2.8% to $57.76.  Since coming public late in 2007 it has traded as low as $40.19 and as high as $59.49, so it isn’t exactly looking like hard troubles are setting in yet.

The ethanol competition for food is a real one and most of these fertilizer and potash companies have discussed major pricing power.  We’ll be keeping an eye on this sector as this has been perhaps the brightest spot in the market that traders have traditionally ignored.

Jon C. Ogg
January 15, 2008