Posted by: usset001 | September 2, 2008

Corn prices and Mosaic stock

The Mosaic Company is one of the world’s largest producers and marketers of phosphate and potash fertilizers. It was formed by the 2004 merger of IMC Global and Cargill Crop Nutrition – Cargill remains the majority owner. In my mind, the stock price of Mosaic has become a poster child for the impact of rising corn prices on related markets like farm land, machinery or (in the case of Mosaic) the value of fertilizer.

 The attached chart leaves no doubt that as the price of corn goes, so goes the value of Mosaic stock. At the start of 2008, new crop corn futures were under the $5 mark and Mosaic traded at $85 per share. By the time corn futures prices neared $8 per bushel in late June, Mosaic stock had nearly doubled. This morning December corn futures are down 25 cents to $5.60 per bushel. True to form, the stock price of Mosaic is also off sharply (down $7 plus) and trading back under the $100 mark.

I owned shares of Mosaic – I purchased IMC Global for less than $14 per share in 2000 and they became Mosaic shares in 2004. Why did I purchase IMC Global/Mosaic in 2000, at the height of the dotcom boom? Let me quote from my own notes, “IMC Global is at a 10-year low, but the stock is poised for a great rally with grain prices, if and when the next bull market begins.” What was my price objective? Again from my notes, “$50-60 per share in the next 3-5 years (or the next bull market in grains).” I sold my shares in early April for $120 per share. Within 10 weeks it reached $160 (!$#^&!) and, as I said before, it’s back down around the $100 mark.

Does my story have a point? Other than a nifty chart that shows the Mosaic stock price chasing corn futures, I wanted to remind producers of the value of writing down financial decisions and objectives, whether a personal investment or the execution of a grain marketing plan. Are you planning to fill your storage bins with $12 soybeans at harvest? Write down your price objectives and tell yourself how long you are willing to wait for higher prices. I find it very valuable to be able to go back into my own files and review old decisions – why did I do it and what was my goal. Markets change and change quickly. A few brief notes can help you assess the wisdom of old decisions. 

My story may sound like bragging (and maybe it is), but I can assure that I did not own enough shares of Mosaic to consider early retirement. And if you would like me to review some of my less than stellar investment decisions, please prepare for a lengthy discussion.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: