• Alex Laan

Smelly stuff is gaining popularity

Apologies for the headline, perhaps it did catch your attention? The reason for me writing is due to the on-going bull market in grains which includes, but not limited to futures of corn, soybeans (+ oil and meal) and wheat of various sorts.

Riding out the bull market in grains is no easy feat for those of us not willing to give positions in this market much wiggle room to the down side, especially so for positions towards wheat being the laggard in this complex. If you are among those wise enough having held onto positions towards corn or soybeans, congratulations!

Coming back to the headline of this blog post, stocks of companies offering exposure towards fertilizers and other agriculture related industries enjoyed a massive rally during the commodity booms of 2007-2008 and 2010-2015.

I'll refrain from adding lots of charts in this post for a change, I will instead encourage you as the reader to look up some of bullet points below.

  • Since the summer of 2020, the broad Agribusiness ETF MOO:US is performing stronger than the broad S&P500.

  • Same applies to stocks such as CF, MOS and NTR, I wish the Norwegian listed Yara also performed similarly, unfortunately not.

  • German listed K+S ag (SDF:GR) and Dutch listed OCI are performing better than Yara. Buying those with the highest relative strength to the broad market tend to yield better results than buying laggards.

Below are a few key metrics. The least profitable companies are also among the top performers lately as those offer the highest leverage to increasing prices. It is also bearing in mind which companies are consistently delivering the best returns.

Disclosure: I am long Yara at the time of writing.

Disclaimer: This article does not constitute a buy or a sell recommendation, as a market participant, one must solely rely on your own research and risk management.

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