On Commodities and Fertilizers

For a start, just teaser for everyone:

1. Jim Roger is a firm believer in the commodities. He admitted that volatility of the commodities still exist but he also believe that the general trend of commodities is upward.

2. China with its bursting population growth will need to produce more food to feed its population.

3. Talks about importance of commodities is all over the papers. You cannot possibly miss it!

4. Though land is not scare, but I believe that farmer's - plot ratio has a optimal figure because nowadays not many people are still engage in this work of being a farmer.

In this post, I am not going to delve into discussion on the impact of commodities. I am moving down the value chain further and the area that I am looking at is:

"FERTILIZERS"

I believe that this is an important yet often neglected industry. It may not be an exciting business but its relevance in the world facing food shortage should spell "OPPORTUNITY" for investors who takes a long term view of the unfolding events around the world.

Just browsed through a IFA report on the "Fertilizer Industry in China" and I will like to share the findings on the long term trend of fertilizers by the authors.

1. Population increase in China will continue to drive increase in fertilizer but at a slower rate.
2. Growth in the consumption of single fertilizers will not be rapid. Instead growth in the consumption of compound fertilizers will be the main contributor. The application of compound fertilizer will accelerate the consumption of P and K fertilizers.
3. The small quantity of organic fertilizer applied in China is the chief reason why the demand for P and K fertilizers to continue to grow and this has promoted the consumption of compound fertilizers.

Insofar, there are a couple of stocks that I am reading up on. Clean balance sheet with zero debt and growing EPS. They are:

1. China Agritech (NASDAQ: CAGC)
2. China Green Agriculture (NYSE: CGA)

I dont any position in them but they are definitely worth reading up.