All Hail the King
April 29, 2008
If you haven’t had enough bullish fertilizer news lately we suggest taking a short break and watch this podcast from Morningstar:
Similarities between this picture
of King William The Conqueror
and any current fertilizer industry
executive are purely coincidental.
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Fertilizers - Flying Higher?
March 31, 2008
The Fertilizer market has been on quite a run. Industry graybeards are possibly even more astounded by the market’s strength than those who are enjoying their first run with the bulls. As usual, nitrogen took the lead, but Phosphates and Potash are now way out in front. The pace has been frenetic and good profitability has flowed through the entire supply chain.
High Muckamucks have had big paydays. Even those of us further down the food chain have enjoyed a few crumbs falling from the table and a respite from the daily challenges of life in a mature and consolidating (yet critical) industry.
On reflection, survival in this business seems to require a contrarian bias. We therefore keep reminding ourselves that back in 1374 Chaucer reportedly observed that “There is an end to everything, to good things as well.”
For clues as to why we are currently contemplating these bearish thoughts, for starters we suggest reading an article in today’s Baron’s entitled Commodities: Who's Behind the Boom? In essence we are told that USD 250 Billion in “naïve” speculative cash has leapt onto the long side of the commodities game in the last while, fleeing the equity (and debt) markets. The impact has been profound. For instance an estimated 83.6 % of this year’s wheat crop is owned by speculators. The article outlines a situation best summarized by a quote contained therein, “…nonsense on stilts.” Those who attended the second breakfast lecture at the TFI’s winter meeting heard similar views. One could argue therefore that commodity crop prices are heading for an adjustment, which unfortunately could also have an impact on fertilizer fundamentals.
In a related development last week, ConAgra announced that it was spinning off its trading division for a healthy dowry of USD 2.1 billion to Ospraie Management LLC. Pronounced osprey (as in the raptor), Ospraie is run by Dwight Anderson who Bloomberg crowns as “The king of commodity hedge funds”. In this context it is important to note that unlike the commodity index funds and the commodity pools, hedge funds are also able predators on the short side of the market. So with the “King” now seated at the table, one has to ask…, when will the feast begin?
In the way of a closing comment to those currently enjoying their first run with the bulls, we suggest that you get ready to run faster…
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The Boston TFI Party
September 24, 2007
It has been a long time since Beantown has seen such an enthusiastic mob of revelers.
In the same measure it has been a long time since the fertilizer industry has seen such prosperity at all levels…production, wholesale, retail, and the growers.
Boston was an excellent venue for the TFI’s ’07 World Conference: convenient, great food, lots of history and culture, and an addicted sports town. Although somewhat isolated, the hotel was good, and the TFI’s breakfast speakers were right on the money. We were particularly impressed by Jeffrey Sachs’s presentation. No doubt he touched on the genesis of our industry’s current and hopefully future prosperity. The trip to the Harvard Club for the closing cocktail party was also a great idea… and that compliment is from a guy who grew up being taught to hate Harvard.
There is not much we can add to the trade press’s hyperbole on market conditions, e.g. “Market still waits for urea tender announcement from India, but sales reported to be being made at higher and higher prices.”
Conventions are a series of vignettes. For us the most telling was the quiet side bar admission by a most seasoned buyer that he was just a “price taker” these days. Even though whispered, you could tell he didn’t like the taste of those words.
Finally the really big news at the convention… the one that had all of the trade pissing their pants… was the announcement that CF was purchasing 50% of Keytrade. The importance of this news, in our opinion, is not just our friend Melih’s good fortune but the fact that CF perceives that there is significant value in having access to the Global Fertilizer Market.
“Goods and services are increasingly global, even if your market is purely regional, purely local.”
Talking About Tomorrow - Peter Drucker - The Wall Street Journal - 1 January 2000
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