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Mosaic (MOS US)

Take Profit: Potash prices reaching their peak

WEALTH FLASH -Mosaic 220422
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Mosaic tracks fertilizer prices. We originally recommended Mosaic (MOS US) because we expected high agricultural prices to drive the demand for fertilizer. After our recommendation, the outbreak of a war in Ukraine sent the price of Mosaic’s primary product, potassium chloride (potash), skyrocketing. Russia and its ally Belarus are major exporters of Potash. Mosaic shares have returned +83% since we recommended it on Nov 8, 2021, and +28% since our reiteration on the stock on Mar 2, 2022. Potash is near an all-time record high. We expect that potash prices may peak soon. Russia and Belarus potash production will find its way back onto the global markets. We recommend investors take profit from Mosaic shares.

Mosaic’s shares dropped sharply on Thur. There was no significant news on the company. We believe the drop reflects a growing opinion that fertilizer prices have peaked. Bloomberg Intelligence analysts recently noted that the prices of two types of fertilizers, urea and phosphate, have fallen in parts of the US. 

Before the war, the supply/demand situation was already tight. The war has made it tighter.  The war in Ukraine has impacted Russian fertilizer exports because of logistical problems. Many foreign shipping companies stopped or suspended cooperation with Russia. 

In early March, Russia’s Ministry of Industry and Trade recommended that Russian manufacturers suspend the shipment of fertilizers until carriers can guarantee freight will be completed in full.

Our view is that logistical problems will be overcome. In fact, just three days ago, Reuters reported at least 24 vessels carrying almost 678,000 tonnes of Russian fertilizers from ports in the country are expected to reach Brazil in a few weeks.

At the moment, western sanctions have not hit Russian fertilizer production. Experts are urging caution on issuing sanctions against Russian fertilizer exports, as this would threaten global food production.

Take profit. Investors who want to give Mosaic’s shares a chance to rebound from Thurs’ drop may consider “tightening trailing stops” to protect their profits. A sell trailing stop order sets the stop price at a fixed amount below the market price with an attached "trailing" amount. As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price does not change, and a market order is submitted when the stop price is hit.

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