Fertilizer Shortage & Dutch Farmers' Protest

Nate Crosby |
Categories

Control your destiny (as much as you can)

Time and time again, we’ve seen the importance of producing critical resources within our own borders – this year is no different. Things like food and energy have been used as a form of ‘war’ against certain countries, rendering control to those that perhaps should not be in control. 

Who’s hungry? Today we talked about farmers – here are some areas we went deeper into on the podcast:

  • Do you know Fritz Haber? He’s a German chemist that is known as someone that has saved billions of people while at the same time killing millions of people. He was awarded the Nobel Prize in 1918 for inventing a process that created ammonia that was used to produce fertilizer. 
  • European fertilizer producers – Grupa Azoty & ANWIL – have halted operations because it costs more to produce than sell due to the rising natural gas prices. This is causing a chain reaction around food prices and other fallout. This is creating an opportunity for US companies to capitalize. 
  • Why are farmers so underappreciated? In fact, the farmers in the Netherlands are getting some heat right now. 

Knowing where things are headed is the key to any good strategy. So, you may be asking yourself if there’s an investment opportunity for fertilizer companies and we think – potentially yes. Here are two that we’re watching:

  1. CF Industries (CF) – American producer of fertilizer located in Illinois with a $20B market cap, PE 8.2, dividend 1.6% PEG ratio 1.8
  2. Mosiac Co (MOS) – American producer of fertilizer located in Florida with a PE 5.9, PEG ratio .67%, price to sales 1.18, dividend of 1.14% 

Often, we don’t consider all the impacts that things have – if you take the farming example, fertilizers have enabled farmers to far out-produce what was estimated they ever could with the available land. Farmers take a lot of heat for their growing practices – think fertilizers, chemicals, etc. – but yet they are feeding the world. Local farms are extremely important to sustaining communities – big and small – and when optimized can bring healthier foods to people for less money. 

How clean is clean energy

Speaking of not considering all the impacts, have you ever looked at what it takes to build a single battery for an electric vehicle? Derek just so happened to research it and here’s what he found:

  • 60 lbs cobalt
  • 30 lbs lithium 
  • 130 lbs nickel
  • 90 lbs copper
  • 190 lbs graphite
  • 500 lbs steel, aluminum, plastic, and other materials 

We’re not advocating for or against clean energy but given all the focus on EV, we also aren’t quite sure what the plan is for mining these materials. 

Another good reminder that anytime you hear of a new technology, product, or process that is changing the way we do things, it’s always good to question the why and how. You might be surprised by what you learn. 

September 13, 2022, goes down in history 

Well, the CPI report was released, and Tuesday was the worst day for the stock market in 2022, as it fell nearly 5%. Here’s a run-down of what’s been going on with the market: 

  • Many of the categories the Fed looks at regarding inflation had been showing material improvement up until the report came out and it was the complete opposite. CPI was essentially flat and the only thing driving value up was the price of oil.
  • We started to see some of the teasers from the Fed – possibly of 100 basis points is on the table – and markets reacted negatively to that.
  • Most of the S&P 500 stocks were down close to 4% (some as high as 7%) across all asset classes. There was no place to hide, everything was impacted.
  • Discretionary spending may be the next thing on the chopping block for consumers – is Netflix a need or want?

It’s important to remember that there will always be ways to invest, even if inflation is here to stay. Stay consistent with your goals and overall strategy but be open-minded to what is happening in the market. Learn from the (some may say) missteps that Cathie Wood has made over the last year and put risk management first. Don’t put yourself in a position where you’ll get wiped out, your allocation should be proportionate to how sure you are that you’re right (and dial it back because you’re probably not right). 

Let’s end on a crypto note 

There are two newsworthy things for our listeners to be aware of: 

  1. Terra LUNA had launched a stablecoin, backed by bitcoin (we talked more about this in a recent podcast), a while ago but it recently collapsed to 0. The creator timed selling his shares just at the right time and made quite a bit of profit (he also landed himself an arrest warrant). This incident may lead to some real-time crypto regulations as a result. 
  2. When it comes to crypto, most are considered “bad” other than Bitcoin. For crypto to be taken seriously, then it’s guilty until proven innocent and thus far Bitcoin has been just that. Surviving the ups and downs for 14 years now, it seems to be the shining star amongst the options. It’s a long-term investment but a viable one for many portfolios.