As Global Food Supply Concerns Continue, Ag Stocks Climb (POT, MON, MOS, AGU)

The ag sector is on fire today despite a mid-day sell off in the broader markets. Shares of Potash (NYSE: POT), Monsanto (NYSE: MON) and Mosaic (NYSE: MOS) are up about 3%, while Agrium (NYSE: AGU) appears to be the laggard among the popular ag stocks, up 2%.

The sector appears to be moving on the back of several different reports around Wall Street.

First, the USDA released its weekly crop progress report late yesterday, showing promising prospects for fertilizer companies like Potash and Monsanto. The report showed that this seasons corn crop is in worse shape than last year: about 10% of planted corn is in very good shape, compared to 18% very good last year, 53% is in good shape, compared to 60% last year, 30% is in fair condition, versus 18%, 5% is in poor shape, versus 3%, and 2% is in very poor shape, compared to 1% very poor last year. Such a report will normally boost future corn prices as traders see that demand will be constrained and farmers are more likely to replant crops, essentially using more fertilizer.

Next, presenting at a summit hosted by the United Nations Food and Agriculture Organization, U.N. Chief, Ban Ki-moon, told leaders from around the world that global food production must increase by 50% by 2030 in order to meet a drastically increasing worldwide demand for food. While this is certainly looking from a long-term perspective, traders may be reacting to the prominent figures comments in anticipation of demand that will likely continue to remain very tight.

Finally, several analysts are out with bullish notes on Monsanto today:

• Morgan Stanley raised its estimates on the company, consequently boosting its price target from $158 to $170
  
• Goldman Sachs also raised its price target from $140 to $155
  
• an analyst at BB&T maintained his Hold rating, but raised earnings estimates

Numerous analyst comments focused on one stock can often move an entire sector. Hence, shares of Potash, for example, could be moving on these research notes as many of the same catalysts that affect one company can possibly apply to the industry as a whole.

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