Agriculture has been in a bear market since February 2011 as evidenced by the Rogers Commodity Index for Agriculture (RJA). But surprisingly, since June 2012 something interesting happened. We got a spike of 16% in the agriculture price due to supply concerns in the corn, soybean and wheat market (Chart 1). This spike is also felt in stocks like Potash Corp. of Saskatchewan (POT) and Mosaic Company (MOS). As agriculture prices increase, so will the fertilizer prices increase.
Agriculture is one of the sectors I'm very bullish on and it's not just me. Marc Faber's recent outlook for agriculture has been very positive. Marc Faber expects more weakness in industrial commodities, though he said agricultural commodities "look better".
In the past year, fertilizer developers have been decimated. One of these developers: Western Potash ( (WPSHF.PK ), had additional problems due to development doubts in their project due to market speculation that a deal with a potential Chinese investor in the company fell through. Another company, Ethiopian Potash (FED) has been on the brink of collapse due to its dire financial situation. And more recently, BHP has been exiting Ethiopia due to weak exploration results.
On the other hand, Allana Potash (ALLRF.PK), which I talked about in this article, had increasingly positive news over the past year. Though, the share price hasn't increased yet (Chart 2).
I will give a quick update on Allana Potash in this article.
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| Chart 1: Rogers Commodity Index Agriculture (RJA) |
In the past year, fertilizer developers have been decimated. One of these developers: Western Potash ( (WPSHF.PK ), had additional problems due to development doubts in their project due to market speculation that a deal with a potential Chinese investor in the company fell through. Another company, Ethiopian Potash (FED) has been on the brink of collapse due to its dire financial situation. And more recently, BHP has been exiting Ethiopia due to weak exploration results.
On the other hand, Allana Potash (ALLRF.PK), which I talked about in this article, had increasingly positive news over the past year. Though, the share price hasn't increased yet (Chart 2).
I will give a quick update on Allana Potash in this article.