Potash Corp./Saskatchewan (USA) (POT), Agrium Inc. (USA) (AGU): How to Trade Agriculture Stocks Now

With its $2 billion new buyback program, intacta soyabean launch in Brazil, and the Ground Breaker trials of integrated farm systems, there are plenty of catalysts for Monsanto Company (NYSE:MON) in the near term. The company is trading at eighteen times forward earnings and has a 1.5% yield at the current price. With its industry leading position, R&D capabilities and upcoming new product launches, I believe Monsanto is an effective long to hedge any fertilizer shorts.

To sum up, Uralkali’s decision to quit BPC has changed the complete dynamics of the potash industry. The company’s like Mosaic Co (NYSE:MOS) and Potash Corp./Saskatchewan (USA) (NYSE:POT), which have historically traded at a premium to other fertilizer companies due to significant exposure to potash fertilizers, may see a permanent compression in their price to earnings multiple. I recommend shorting them and going long on Agrium Inc. (USA) (NYSE:AGU), which has lower potash exposure, or Monsanto Company (NYSE:MON), which is poised to benefit from strong agricultural industry fundamentals but is free of any risk associated with the fertilizer companies.

Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article How to Trade Agriculture Stocks Now originally appeared on Fool.com.

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