By Stockpickr Staff
Posted at 10:14 a.m. EST on March 3, 2009

The recent credit crisis has dampened short-term loans made by banks to farmers for fertilizer, seed and various chemicals, all of which are desperately needed to improve the health and duration of their crops.

Nevertheless, agricultural companies should not be shunned here. They offer a unique long-term opportunity for those investors who believe in the global growth story.

Despite a global recession, people around the world need to eat. As the demographic trend shifts from starch-based diets to protein-based diets, agricultural companies that are positively positioned to capture this trend will likely move higher.

Additionally, the proposal of several strategic acquisitions within the agricultural sector supports the long-term value thesis within the agricultural sector as a whole.

Last week, Agrium (AGU) offered $3.6 billion in cash and stock to shareholders of CF Industries (CF), one of America’s largest nitrogen and phosphate producers. Agrium offered $76 per share to CF shareholders, which at the time of the offer represented a 37% premium over the company's $55.58 closing price on Tuesday of last week.

Additionally, Agrium noted that it expects the merger between Agrium and CF to have revenue of $14 billion and noted that the transaction offers shareholders of CF Industries an annual savings of $150 million in terms of strategic synergies.


CF Industries is also involved in a hostile takeover of Terra Industries (TRA), a pure play on methanol products for agricultural and nitrogen. The offer, which values Terra at roughly $2.1 billion, has been rejected by the board of directors of Terra Industries.

The board said: “We concluded that your proposal does not present a compelling case to create additional value for the shareholders of either company, and that it substantially undervalues Terra on an absolute basis and relative to your company. Accordingly, our Board has unanimously concluded that your proposal is not in the best interests of Terra and our shareholders and we decline to accept it.”


Finally, reports are that Syngenta (SYN), the world’s biggest maker of farm chemicals, is interested in buying Dow Chemical’s (DOW) agricultural-science unit.

Here are several stocks worth watching in the agricultural space going forward:

Monsanto (MON): Monsanto is the largest player in the space of genetically engineered seeds and food. Think of Monsanto as the scientists who develop genetically resistant seeds and crops, all in the hopes of returning the highest possible yield to their clients.

Currently the global corn-stocks-to-use ratio, or the ratio of the amount of corn stock that can be sold right now to the amount of corn that can be consumed, is at its lowest level in 50 years.

In the first quarter of 2009, Monsanto projected that gross profit from its seeds and genomics segment will grow by more than 60% starting in 2009 until 2012.

For the first quarter of 2009, Monsanto earned $2.7 billion in net sales, up 29% from its first-quarter 2008 net sales of $2.1 billion. Gross profit was $1.6 billion, up 49% from about $1 billion in the first quarter of 2008. More important, gross margins, a measure of a firm’s profitability on a percentile basis, was up 8 full basis points to 59% for the quarter, compared with 51% in the first quarter of 2008.

Monsanto also has several important seeds in its pipeline, including a phase IV drought-tolerant corn seed, phase III high-yield soybean seed, phase II high-yield corn seed and phase I drought-tolerant cotton seed.

For the full-year 2009, Monsanto expects to achieve 20% or more of ongoing earnings growth and to generate more than $1.8 billion in free cash flow.

In Tuesday morning trading, Monsanto was $2.14, or 2.98%, $73.89.

Potash Corp. of Saskatchewan (POT): Potash Corp. of Saskatchewan is the world’s lowest-cost producer and supplier of potash, the highest-yielding naturally produced fertilizer known to man. In 2008, Potash Corp. produced north of 15 million tons, which represents almost 25% of the total amount of potash consumed in the world. Gross margins went from just $300 million in 2003 to $3.5 billion in 2008, with an estimated figure of $5.5 billion in 2009.

In Tuesday morning trading, Potash Corp. was up $2.33, or 3.1%, to $76.97.

Mosaic (MOS): Mosaic is the second-largest producers of potash in the world, producing just over 10 million tons in 2008, which represents 14% of total potash sales worldwide and 38% within the U.S. The company has seen some heavy speculative call-buying in the March $45, $50 and $55 strike prices, totaling 46,000 calls traded. That's four times higher than the monthly average of 10,800 contracts.

Rumors surrounding a potential merger between Mosaic and Cargill, in which Cargill would bid for the 35% stake in Mosaic that it currently does not already own. Whatever the case might be, option traders are betting on a short-term move higher for shares of Mosaic.

In Tuesday morning trading, Mosaic was up $1.75, or 4.6%, to $39.39.

FMC (FMC): FMC operates in three industry segments: industrial chemicals, with full-year 2008 revenue of $1.3 billion, EBITDA of $269 million and margins of 20.7%; specialty chemicals, with full-year 2008 revenue of $764 million, EBITDA of $185 million and margins of 24.2%; and agricultural products, with revenue of $1.1 billion, EBITDA of $258 million and margins of 24.4%.

EBITDA in FMC's agricultural products business went from $111 million in 2003 to $258 million, which represents a 29% compounded annual growth rate, or CAGR. EBITDA in FMC's specialty chemicals business went from $132 million in 2003 to $185 million in 2008, which represents CAGR of just 5%. EBITDA in FMC's industrial chemicals business went from $94 million in 2003 to $269 million in 2008, which represents a 35% CAGR.

For full-year 2009, FMC projects profit of $4.6 per share to $5 per share, compared with mean analyst estimates of $5.16 per share.

In Tuesday morning trading, FMC was up $1.18, or 3.2% to $37.71.

For more stock ideas, check out the Agricultural Stocks portfolio on Stockpickr.

P.S. Where is Jim Cramer putting his own money? Take a free peek at his personal portfolio to see all his buys and sells by clicking here. When you do, Jim will also send you exclusive email alerts telling you everything he’s about to add to or shed from his Action Alerts PLUS portfolio -- before he makes his trade.