July 13, 2012
Foreign fertiliser stocks shape bases on weak corn harvest
Due to a weaker-than-expected corn harvest this year, a handful of foreign fertiliser stocks are shaping bases amid expectations that farmers will boost production.
The Agriculture Department said Wednesday (July 11) that this year''s corn harvest will fall 12% below June''s forecast for a record crop. It also slashed its outlook for inventories next year by 37% amid a drought in the Midwest.
It''s not clear just how much production will rise, given that the department also cut its outlook for demand due to a 40% jump in corn prices this year.
Fertiliser stocks have been rising with the price of corn, which is the biggest US crop and usually requires the most fertiliser to grow.
Canada-based Agrium (AGU) may be forming a handle after it broke out above a 90 buy point July 3 in light volume. The stock has since slipped back below the buy point.
Agrium''s 94 Composite Rating is by far the highest among non-US fertiliser makers in the Chemicals-Agricultural industry group.
Weak fundamentals are a reason the group''s ranking stood at just 93 out of the 197 groups as of Wednesday''s IBD. Agrium''s base has shown tight action, and it shows signs of accumulation.
Like its competitors, Agrium''s Accumulation-Distribution Rating has risen sharply in the past month, a sign that fund managers are starting to take an interest in these stocks despite weak sales and profit growth rates. Potash Corp. of Saskatchewan (POT) and Mosaic (MOS), two other Canadian fertiliser makers, are working on cup-type bases, though each has formed mostly below key support lines.
Potash is shaping its base within a much larger consolidation and is about 30% from its 52-week high. Mosaic also is forming a pattern inside a long consolidation.
Like Agrium, the Accumulation-Distribution Ratings of Potash and Mosaic are pointing to healthy investor demand. However, Potash and Mosaic have low Composite Ratings of 56 and 28, reflecting weak fundamentals.
Switzerland''s Syngenta (SYT) is forming a tightly shaped base. In this case, the pattern is developing much closer to new highs. Its earnings rose 11% and 52% in the past two six-month periods.
Sociedad Quimica y Minera de Chile''s (SQM) earnings gains ranged from 25% to 50% the past four quarters. The stock is basing.