Yes, it’s lazy to call things a bubble, but this is an interesting chart from Citi.
The percentage of farmers who think farm values will increase next quarter just had its biggest sequential jump in history last quarter.
The chart is part of a bigger report, which urges caution on the red-hot fertiliser companies, like Potash and Mosaic.
Says Citi’s PJ Juvekar:
fertiliser equities have been among the best performing stocks over the past eight months. Stock prices in our fertiliser universe have increased on average more than 100% since last July compared to a gain of ~27% for the S&P 500. We are not turning bearish on the fundamentals of the fertiliser cycle, which remain robust as we confirmed during our recent trip to Brazil. However, we think much of the good news is factored into current equity prices. realised fertiliser prices will improve as old contracts run off and more product is shipped at newly announced higher prices, boosting earnings. But this trend is reflected in high P/E multiples for the group. Lacking well-defined near-term catalysts, we see growing risk that the stocks could trade sideways into the summer. As a result, we move from Buy to Hold for both POT and MOS.