Dear PGM Capital, Blog readers,
In this weekend blog article we want to discuss with you why investing in phosphorus which plays a key role in most life processes, va
Phosphorus is a nonmetallic chemical element with symbol P and atomic number 15. There are several forms of phosphorous, called white, red and black phosphorus, although their colours are more likely to be slightly different.
- White phosphorus is the one manufactured industrial; it glows in the dark, is spontaneously flammable when exposed to air and is deadly poison.
- Red phosphorus can vary in colour from orange to purple, due to slight variations in its chemical structure.
- Black phosphorous, is made under high pressure, looks like graphite and, like graphite, has the ability to conduct electricity.
Phosphorus is essential for plant growth. It stimulates growth of young plants, giving them a good and vigorous start. Phosphorus management and nutrition has both economic and environmental implications, it is a required element for all things that live, have lived or will live. Without Phosphorus plants will not grow, animals, including humans, can not survive, and the world as we know it will cease to exist. As a mineral, phosphorus is what living organisms use to convert food into energy. In humans and other animals, phosphorus is literally what holds our DNA together. In plants, Phosphorus is what allows plants to make cell walls, and to reproduce.
PHOSPHORUS CHEMISTRY IN SOILS:
Phosphorus exists in soils in organic and inorganic forms. Organic forms of P are found in humus and other organic material. Phosphorus in organic materials is released by a mineralization process involving soil organisms. The activity of these microbes is highly influenced by soil moisture and temperature. The process is most rapid in warm, well-drained soils.
The dominant application of phosphorus is in fertilisers, which provide phosphate as required for all life and is often a limiting nutrient for crops. Phosphorus, being an essential plant nutrient, finds its major use as a constituent of fertilizers for agriculture and farm production in the form of concentrated phosphoric acids, which can consist of 70% to 75% P2O5. Global demand for fertilisers led to large increase in phosphate (PO43–) production in the second half of the 20th century. Due to the essential nature of phosphorus to living organisms, the low solubility of natural phosphorus-containing compounds, and the slow natural cycle of phosphorus, the agricultural industry relies on fertilisers that contain phosphate. A major form of these fertilisers is superphosphate of lime, a mixture of two salts, calcium dihydrogen phosphate Ca(H2PO4)2 and calcium sulfate dihydrate CaSO4·2H2O, produced by the reaction of sulfuric acid and water with calcium phosphate.
Below image shows the Phosphorus Cycle from Soil to Crop and visa versa.
Phosphorus movement of agricultural land to surface waters can accelerate eutrophication. This is the process in bodies of water of stimulating algal growth which ultimately die and decay in the water, and deplete available oxygen. The reduced oxygen levels ultimately result in reduced higher-order aquatic plant and animal populations. Animal manures and bedding materials contain significant amounts of phosphorus in organic forms.
PHOSPHORUS ESSENTIAL TO BONE HEALTH:
Calcium and Phosphorus are essential to human life. In vivo, the ionic forms of calcium and phosphorus combine to form calcium phosphate.
There are several stages of human life when the calcium and phosphorus requirements are most critical. First, in utero, followed by childhood anabolism, and later during puberty when there is a strong requirement for growth hormone. Bone mineralization
only slows after the epiphyseal plate has closed.
Below Image shows the cycle of Phosphorus in the human body
PGM CAPITAL COMMENTS:
Phosphorus is a limited natural resource that is non-renewable. Phosphorus, unlike nitrogen and carbon, does not have an atmospheric source. It does not rain to earth in precipitation. It is a land based element that is found when mountains have been uplifted and then are eroded. The phosphorus cycle is from the land to living organisms and back to the land. The thing to remember is that there is only a finite amount of phosphorus. As the human population expands, there is less phosphorus available for things like crops. Like Oil, Phosphorus is reported to have peaked in 1988, according to an article posted by Professor Chris Rhodes called “Peak Minerals.” On the other hand data from the Global Phosphorus Research Initiative (GPRI) indicates peak production of Phosphorus to happen in 2033 as can be seen from below chart.
According to Petter Jensen, professor at the University of Biotechnology and Environment in Oslo, phosphorus will soon be a rare and valuable resource.
Based on the above mentioned information, we expect that the price of phosphorus should increase dramatically because of current usage and economic practices that are tied directly to other natural resource peak events. Peak oil, peak coal, and even peak water are all putting pressure on alternative energy sources such as bio-fuels. That is the link to phosphorus. Phosphorus is needed to grow plants, to make fertilizers, and increase crop productions.
Bio-fuels expand to include not only grains, but also corn stalks, wheat chaff, and other items, which means that all of the phosphorous that was recycled in plant waste is now consumed in the bio-fuel process and lost to the system. This also means that peak phosphorus is going to reach a critical limit faster. That means that natural resources needed to grow food are going to become exhausted more quickly.
Due to the above, it does not matter if Phosphorus peaked in 1988 or if it will peak in 2033. The fact remains that as one of the critical natural resources supply is not going to live up to demand. Therein lies the opportunity not only for peak phosphorus, but also in all of the factors that lead up to it. Knowing where to invest as times change is a critical component for controlling income in the future.
Below chart shows the correlation between the global population and phosphate production.
Our research team has discovered several ETFs that invest in fertizers, Phosphorus producing companies and companies in the food value chain.
Before following any investment advice, please consider your investment horizon, financial position and risk tolerances and keep in mind that commodity prices as well as stocks of their miners may be very volatile and that sharp corrections may happen in the short term.
Until next week.
Dear PGM Capital Blog readers,
In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of October 12, 2015:
- Anheuser-Bush Inbev agrees to buy SabMiller for 68 billion British Pound
- Walmart warns that strong US-Dollar will hurt its earnings.
AB-INBEV TO BUY SABMILLER FOR 68 BILLION BRITISH POUND:
On Tuesday, October 13, SABMiller (LSE: SAB) announced, that it has agreed to sell itself to Anheuser-Busch InBev (NYSE: BUD) for US$104 billion (£68 billion) in a deal that will be the biggest takeover of a British company and create the world’s first global brewer, with a value of around US$275 billion, in what could be one of the top six corporate takeovers in history.
AB InBev – which brews Budweiser and Stella Artois – proposed to pay £44 a share in cash for each SABMiller share. As can be seen from below chart, based on the news SABMiller shares rose 8.6% to £39.31.
The takeover, one of the top six deals in corporate history, will create a brewing empire making about a third of the world’s beer. AB InBev is already the world’s biggest brewer, and SABMiller is its closest rival.
The deal would create a company generating more than US$ 70 billion of annual revenue from brewing 80 billion liters of beer a year. The giant corporation will have big operations in Europe, north America, Latin America and the Asia Pacific region, and will give AB InBev, the brewer of the US’s favorite beer, Bud Light, access to the fast-growing African beer market.
WALMART GIVES EARNINGS WARNING:
On Wednesday, October 14, Wal-Mart Stores Inc. (NYSE: WMT) suffered its worst stock decline in more than 27 years after predicting a drop in annual profit, underscoring the giant retailer’s struggles to reignite growth.
As can be seen from below chart, it slid further on Thursday. Wal-Mart dropped about 5.7% on Thursday to post a new 52-week low of U$58.61 against a 52-week high of US$90.97.
Earnings will decrease 6% to 12% in fiscal 2017, which ends in January of that year, the Bentonville, Arkansas-based company said at its investor day on Wednesday.
Investors were stunned and its stock plunged 10% on Wednesday, instantly wiping out more than $21 billion in shareholder wealth. That drop was bad for anyone who owns shares of Walmart.
PGM CAPITAL COMMENTS:
AB-Inbev - SABMiller merger:
Anheuser-Busch InBev’s proposed $106 billion deal to buy SABMiller will create the world’s largest brewer — an intercontinental giant with 30% of global beer sales.
The deal is partly motivated by both companies’ need to defend their market share in mature markets as younger consumers abandon big brands and move towards craft beers; but perhaps more importantly, it offers AB InBev access to the beer industry’s last great growth frontier — Africa.
Analyst forecast that 40% of profit growth in the brewing industry over the next decade will come from Sub-Saharan African markets, but InBev, which owns brands including Budweiser, Corona and Stella Artois, has yet to establish a foothold in the region. By contrast, SABMiller has around 40 brands in Africa, and makes around a third of its profit and revenue across 37 African markets.
The man behind it all is, Brazilian riches man Jorge Paulo Lemann, the head of private equity firm 3G Capital, which has done deals with Kraft, Heinz, and Burger King.
In 1999, Lemann and two partners created AmBev, a master company of all the brewers they had acquired.
Then in 2004 AmBev bought Belgian brewer Interbrew to create InBev. Then InBev bought US-based Anheuser-Busch for US$52 billion in 2008.
Now Anheuser-Busch InBev is bidding for SAB Miller.
WalMart Earnings Warning:
Wal-Mart faces tough competition on multiple fronts, from the relentless expansion of online leader Amazon.com Inc to dollar stores and supermarkets fighting for a piece of its grocery business. Its international operations are also under pressure with a stronger dollar eating into sales.
Wal-Mart also announced a US$20 billion share buyback but the drop in its share price wiped out close to the same amount in market value, and the 10 percent drop was the worst one-day percentage performance since January 1988.
As can be seen from below chart, the company's shares are down more than 30% YTD and currently trading at a 4-year low.
The company said it would slow the pace of new-store openings in the U.S., where it operates about 4,600 outlets. Last fiscal year, Wal-Mart opened 354 U.S. stores, including Supercenters and its smaller Neighborhood Markets. Next fiscal year, the company estimates it will add between 135 and 155 stores.
Because of the slowdown, Wal-Mart now expects capital investments of about US$11 billion next business year, down from the US$12.4 billion it expects to spend this year.
Until next week.
Dear PGM Capital Blog readers,
In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of October 5, 2015:
- The Chinese Yuan, overtook the Japanese Yen as the world fourth most used payment currency.
- Suncor Energy hostile take over bid for Canadian Oil Sands.
- Central banks around the world are selling U.S. government bonds at the fastest pace on record.
CHINESE YUAN SURPASSES JAPANESE YEN IN GLOBAL PAYMENT:
China’s Yuan has become the fourth most-used world payment currency, overtaking the Japanese Yen, global transaction services organization Swift has said.
The Yuan has surpassed seven currencies in the past three years as a payment currency and now only comes after the US dollar, the Euro and the Sterling.
Overall, global Yuan payments increased in value by 9.13% in August, while payments across all currencies decreased by 8.3%, according to Swift.
Below chart shows how the Chinese Yuan or RMB went form the 7th place in January 2014 to the 4th place in August this year as World Payments Currency.
Based on this, the Yuan reached a record high market share with 2.79% of global payments for the month Augustus 2014, compared with 1.39% in January 2014.
More than 100 countries used the Yuan for payments in August, but more than 90% of flows were concentrated in 10 countries. Singapore processed 24.4% followed by the UK with 21.6%.
Foreign exchange transactions in the Yuan by value also increased by 20% in August from a month earlier.
SUNCORE HOSTILE BID FOR CANADIAN OILSANDS:
On Monday, October 5, Suncor Energy, (TSX: SU) the largest integrated energy company in Canada, announced a hostile takeover bid for Canadian Oil Sands (TSX: COS) taking advantage of plunging crude prices to seek to add production in Alberta.
Suncor is offering to exchange one-quarter of its shares for each Canadian Oil Sands share, a bid it valued at 4.3 billion Canadian dollars. It will also assume 2.3 billion Canadian dollars in debt, which is a 43 percent premium to Friday’s closing share price and promised higher dividends to Canadian Oil Sands shareholders if the proposal is accepted.
Canadian Oil Sands, which owns but doesn’t operate any oil-sands assets, has seen its stock slump due to lower oil prices and its surging debt load. It recently said it was looking at selling some of its future production to shore up its balance sheet.
The Calgary, Alberta-based company responded coolly to Suncor’s proposition, advising shareholders on Monday to reserve judgment until its board has vetted the offer.
CENTRAL BANKS AROUND THE WORLD ARE SELLING US TREASURIES AT FASTEST PACE EVER:
In an article on Wednesday, October 7, the Wall Street Journal reported, that for the 12-month period ended July, sales of U.S. Treasuries by central banks around the world reached a net of US$123 billion, the biggest decline since data started to be collected in 1978.
Below 10-year chart shows, that foreign central banks have started curtailing their purchases of U.S. Treasuries, already in 2013, when the end of the Fed’s QE.
The five (former) large purchasers of US Treasuries - China, Russia, Norway, Brazil, and Taiwan - are now dumping them, at the fastest rate on record, each for their own reasons.
China, the largest foreign owner of Treasuries – its hoard peaking at US$1.317 trillion in November 2013 – has been unloading with particular passion.
By July, China’s pile was down to US$ 1.241 trillion. But in August, China’s foreign exchange reserves, which include a variety of currencies, dropped by a record US$93.9 billion. And in September, they dropped another US$$43.3 billion, to US$$3.51 trillion. It was the fifth month in a row of declines.
RUSSIA, NORWAY & TAIWAN:
- Russia unloaded US$32.8 billion in Treasuries in the 12-month period ended in July.
- Norway, which like Russia was hit by the oil price rout, sold US$18.3 billion.
- Taiwan sold US$6.8 billion of U.S. Treasuries Securities in the 12-month period ended in July.
PGM CAPITAL COMMENTS:
Chinese YUAN, Now World's 4th Most Currency:
In August 2012, the Renminbi (RMB) was sitting in the 12th spot, with a 0.84 per cent share of the world's payments currency market. But since then it's steadily gained more market share.
This August, the Yuan surpassed the Japanese Yen, securing a 2.79 per cent share of the market as can be seen from below chart.
The Chinese Yuan or RMB has surpassed seven currencies in the past three years as a payment currency.
Since 2011, the Yuan, has steadily progressed along its path to become a global currency in international trade.
In overtaking the Yen to break into the world’s top four payment currencies, the Yuan has passed another milestone in its rapid evolution and now looks set to become the leading global currency from Asia.
Growing use of the Yuan for cross-border trade and investment shows that demand isn’t simply driven by China’s domestic markets but that the currency’s becoming deeply embedded into the international economy.
The Yuan is well on its way to become a top three currency and is likely to replace the British pound within three to five years. This is especially true if the Yuan becomes part of the Special Drawing Rights currency basket at the International Monetary Fund.
The Suncor - Canadian Oilsands Deal:
Suncor’s unsolicited bid, if successful, would boost the company’s ownership stake in the Syncrude Canada Ltd. joint venture to 49 percent from 12 percent currently. It comes after Canadian Oil Sands’ board rejected an overture from Suncor executives in April, leading Suncor to reduce its offer as oil prices skidded to under US$50 a barrel through the summer.
Canadian Oil Sands has net oil reserves of 1.4 billion barrels of oil with an estimated production life of over 46 years. Such a long production life is almost unheard of in the oil industry, and is one of the most attractive features of the Syncrude project.
At the end of 2014, these reserves were independently valued at just over CAD 9 billion after income taxes. After deducting Canadian Oil Sands’s net debt of CAD 2.3 billion, this gives them a value of about CAD 14 per share. This is about 60% higher than Suncor’s offer.
The hostile offer, which includes the assumption of CAD 2.3-billion in Canadian Oil Sands’ debt, is an indication that companies are chasing bargains as oil prices at current low oil prices. Suncor's hostile take overbid can also be seen as an indication that company believes thats the oil price has bottomed.
On Wednesday, October 7, Canadian Oil Sands Ltd. has rejected Suncor Ltd.'s CAD4.3-billion takeover offer, and says it needs more time to consider any similar offers.
Foreign Central Banks Selling U.S. Treasuries:
The fact that China once the biggest buyer of U.S. Treasuries, starts dumping U.S. Government Debt, combined with the fact that China as well as Russia are hoarding Gold, might be a sign that something is cooking.
Keep in mind that for every sale their must be a buyer and if push comes to shove, and Treasuries begin to spiral out of control under toxic selling pressure, the Fed, which stops before nothing, would jump in and buy whatever China is selling.
Until next week.