Constructive Agriculture fundamentals to benefit fertiliser equities :: Macquarie Research,

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Constructive Ag fundamentals to
benefit fertiliser equities
Feature article
 We highlight in this report the diverging price action of grains and fertiliser
equities. We show that fertiliser equities have had minimal price reaction to
the shift in positive fundamentals for the grains in recent months. This is
especially pertinent considering the shocking changes the USDA made to
corn supply in the August WASDE report.
Fertiliser equities miss the change in US corn
fundamentals
 Fertiliser equities have not reacted to the change in fundamentals for the
grains markets during Q2 and Q3. Up to February 2011 a large production
reaction from the US corn farmers had been expected, but with excessive
rains during the planting window and extreme heat during the pollination stage
any production reaction has been significantly restricted.
 To analyse the difference in performance between the grains and fertiliser
equities, we create a basket of 5 fertiliser companies that Macquarie has rated
as Outperform, and compare to the performance of the old crop new crop
corn spread.