Agricultural businesses beginning to draw investment attention

Agricultural-related companies are the latest big thing in investing.
The agricultural investment scene has traditionally been scary and unstable. Commodity prices swing up and down as farmers grow crops for human food, livestock feed and some cotton fibre. The farmers had no market power.
Demand was fairly stable, changed only by supply shortages, usually weather related. Commodity price increases caused by supply shortages were soon reversed as the 'sheep' all planted more of the crop.
It has not been a place into whichprofit-driven investors want to put money - until a new demand for biofuels competed with acres for food, feed and fibre.
Given the steep and sudden increases in agricultural stock prices, investors have to wonder if they missed the party. Will an investment now still generate good returns? Or will it generate losses?
The answers, based on fertilizer stocks, are probably yes and yes.
This column presents six fertilizer stocks to watch with price comparisons and comments.
The Potash Corporation in Saskatoon, the world's biggest producer of the fertilizer, enjoys record price gains.
Three-quarters of revenue is potash with the rest in nitrogen and phosphate fertilizer. Expansions in Saskatchewan mines and a new mine in New Brunswick will boost revenues. Focused on North American and offshore markets. Potash Corp plans to tackle African and Russian markets.
At $159 a share, Potash Crop trades at a rich 46 times earnings. Consensus earnings place the price at still strong 21 times 2008 and 19 times 2009 earnings.
Mosaic, with a potash mine at Belle Plaine, has moved from a money-losing basket case to a cash machine. Number one global producer of phosphates, number two in potash, the American based company has expansions that will add to cash generation.
Priced at a recent $111.45 US, up from $12 three years ago, Mosaic stock has seen tremendous price increases. Current price is a rich 52 times earnings, 30 times the 2008 consensus, and 17.5 times the 2009 estimates.
Agrium, the world's number four fertilizer company, has more diversification than competitors.
Just over half of fertilizer revenues come from nitrogen fertilizer with potash and phosphates following. Two acquisitions have set up a significant U.S. crop products dealer network with stable cash flows.
The Saskatchewan company has a small investment, three per cent of revenues, in specialty fertilizer companies - micronutrients and lawn care - that will grow. The sleeper is a 19.9 per cent interest in rapidly expanding Chinese nitrogen fertilizer company, Hanfeng Evergreen. The Chinese company has potential to be a world player.
At $72.50, Agrium trades around 22 times earnings, 15 times 2008 earnings estimates and 13 times 2009 estimates.
Norwegian fertilizer company Yara International of Olso roots trace to 1905 and the invention of nitrate fertilizer. A United Kingdom fertilizer subsidiary goes back to 1843.
Nitrogen fertilizer makes up the largest chunk of Yara's volume, but the company has a solid position in micronutrients, industrial gases such as dry ice, gases for food, medical and industrial uses and industrial chemicals.
Business, strung over 50 countries, has major volumes in Europe, Africa, Brazil, Caribbean and China.
Priced at $58.55 US, Yara is the lowest priced of these players trading at 14.4 times earnings, 12 times 2008 estimates and 11 times 2009 earnings.
Those investors, willing to take on more risk might want to look at Handing, trading at $12.95 C$, a rich 44 times earnings, and 22 times 2008 estimates. Or look at China Agritech, trading at $2.50 US, six times 2008 and 2009 earnings. This small organic fertilizer company has aggressive expansion plans.
One crucial thing to weigh: Natural gas price increases impact operations of nitrogen fertilizer plants considerably more than potash or phosphate mining operations.
Some analysts predict natural gas prices, currently around $10 US per thousand cubic feet, could run to $16.
Bizword columns do not solicit buying or trading of securities. Investors need to do their own homework or consult advisers.

Ron Walter can be reached at 691-1264.