Commodities & Metals

Commodities Watch: Checking in on Fertilizer Shares; Beer to Cost More; Wheat to Cost Less (POT, MOS, AGU, CF, MON, SYT, BUD, TAP, SAM, DBA, MOO)

Today’s commodities news leads off with a quick look at how fertilizer stocks are doing. There’s also some bad news out of Europe on malting barley, which could be equally bad news for beer drinkers and maybe good news for US farmers. Russia has said it will begin exporting wheat again in July, pushing down wheat in both Chicago and Kansas City.

Analysts at Citigroup have raised both Potash Corp. of Saskatchewan (NYSE: POT) and Mosaic Co. (NYSE: MOS) from ‘hold’ to ‘buy’. Citi also raised Mosaic’s price target from $84/share to $85, and raised its price target on shares of Agrium Inc. (NYSE: AGU) from $94/share to $96, while maintaining a ‘hold’ rating on the shares. Fertilizer makers have gained anywhere from about 40% to more than 120% in the past 12 months.

CF Industries Holdings, Inc. (NYSE: CF) is the big gainer and the stock is trading off slightly today, at $153.03, down about -1.4% in a 52-week range of $57.56-$158.42. CF gained more than 12% just last week. Monsanto Co. (NYSE: MON), which has posted a 40% share price gain in the past year, and Syngenta AG (NYSE: SYT), up about 50% in the same period, are just following along.

There’s no big mystery about what’s going on. Demand for food is up and perhaps the cheapest way to grow more food is to add more fertilizer. It beats clearing new land (if that’s even possible).

A dry year so far has boosted prices for malting barley in Europe. Prices have jumped from about $300/metric ton in November 2010 to around $380/metric ton in May.

The long delays in corn planting in some parts of the US could lead farmers to plant barley, a crop that can thrive with a shorter growing season. The drought in Europe has hit the barley crop very hard, and the number of US acres already set for planting is just 2.95 million acres, the second lowest total on record. Canada’s recently boosted its barley price to about $360/metric ton.

Rising prices for barley are not the only thing hurting brewers — demand is falling as well. Anheuser-Busch InBev SA (NYSE: BUD), Molson Coors Brewing Co. (NYSE: TAP), and Boston Beer Co., Inc. (NYSE: SAM) are all feeling the effects of lower sales, and the coming rise in barley prices won’t help. Anheuser-Busch InBev is trading up about 3% today, at $60.32, in a 52-week range of $46.19-$60.38. Molson Coors is trading down fractionally at $46.59, in a 52-week range of $40.35-$51.11. Boston Beer is down about -0.5%, at $82.97, in a 52-week range of $60.95-$100.93.

Finally today, Russia announced over the weekend that it would resume wheat exports in July. The country could export up to 20 million metric tons of wheat out of a crop that could be as high as 85-90 million metric tons. The news has hit European markets hard and US wheat futures in Chicago are down more than -5%, at about $7.78/bushel.

The PowerShares DB Agriculture Fund (NYSE: DBA) is off about -0.4%, at $32.70, in a 52-week range of $22.85-$35.58. The Market Vectors Agribusiness ETF (NYSE: MOO) is up nearly 1%, to $55.22, within a 52-week range of $35.62-$57.93.

Paul Ausick