“Putin’s Resource Roulette” part III — fertilizer?

By Travis Johnson, Stock Gumshoe, April 20, 2008

OK, I don’t think I’ve ever had to resort to three or four different articles to cover a single teaser ad (at least, not since Stansberry’s “Secret Societies” teaser last Fall), so I hope this third writeup will be the charm for us all, and we’ll not speak again of Andrew Mickey’s Putin-icious masterpiece.

The first two writeups on this are here, by the way: the LNG play and the Nickel miner.

The third one hits the sweet spot for everyone’s favorite investing theme these days: fertilizer companies, and agriculture writ large. You can’t swing a corn stalk without hitting a fertilizer company that has doubled in the past year, so the world is full of investors who are hungry for an investment in this area, but fearful of buying the shares in a company that looks a little bubbly and whose shares have gone up so dramatically — which is why, I suppose, you’re reading this and not just gobbling up shares of Mosaic or Potash Corp of Saskatchewan.

Let’s see if we can avoid wasting too much of your precious time as this fabulous week gets underway …

Mickey says we’re looking for …

“Putin Protection Play #3: Use Putin’s Own Land Against Him! Plunder Russia’s Gold Mine Farms…”

This teaser is preceded by some fearmongering about agriculture (not necessarily untrue fearmongering, to be fair) — all about how acreage goes fallow each year because of overuse, or is lost to development. And Mickey says that in fear of Putin we should all be looking to a particular kind of agricultural investment …

“This game of “Resource Roulette” he’s playing… picking and choosing who gets what, depending on whether they’ll side with him on key issues… could end up leaving the U.S. out in the cold very soon.

“That could mean higher heating bills, gas prices, healthcare premiums and more. There’s not much you can do about that. These are events much too big for you or me to affect.

“But what you can do is make sure your net worth is as large as possible; so when the bad times do hit, your assets are secure and plentiful enough to help you ride it all out.

“And one great way to do this is to actually use one of Putin’s greatest assets and one of the U.S.’s biggest weaknesses to your advantage.

“For years the United States has raped its farmlands, tearing everything they possibly can out of them. Their quality just keeps plummeting every year, and it’s not just a problem here in the U.S.”

Here’s a good Bloomberg article that gives more of the facts on farm investing, including some quotes from Jim Rogers, who remains quite bullish on farmland. There are certainly dozens of other high profile investors and investing pundits who advise buying farmland, too … but I’m getting ahead of myself.

Mickey’s tease is this: “So, with the agricultural sector providing some very healthy profit potential, how about using some of Russia’s most valuable farmland against Vladimir Putin himself?”


Here’s more:

“Since 2005, this little-known company has purchased 277,018 hectares of land in three concentrated areas of the country. By the end of 2008, they plan to have 350,000-400,000 hectares under their control in Russia.”

Ah, now this is making a little more sense. And the fertilizer bit …

“The Secret Ingredient Fueling This Company’s Massive Potential…”

This is apparently all about “chernozem,” which is, in Mickey’s words, “black-colored soil that contains very high amounts of humus, up to 15% to be exact. It also contains phosphorus, phosphoric acids and ammonia. All of this adds up to make chernozem very fertile soil that produces huge crop loads for its farmers. The natural elements of chernozem are the exact, same materials farmers all over the world are paying thousands of dollars per ton for, to ensure their fields keep producing.”

He also calls it “chemozem” a couple times, but either that’s a typo or the more common term is Chernozem.

“there are only two ‘Chernozem Belts’ in the world. One is inside the remote Canadian Prairies.”

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...

That would be our old friend, Potash Corp. of Saskatchewan.

“And the other? Well, it’s right smack dab in the middle of this company’s land. That’s right, the over 275,000 hectares of land they own in Russia is just swimming with chernozem. And to think — they only paid $500 a hectare for it, too! Imagine what kind of price that would be going for in the U.S. With the chernozem soil boosting their crop production to untold levels and with their operating costs so low, thanks to Russia’s still-developing agricultural industry, the profits this company is going to see could be gargantuan. “

So … if you’re like me, you’ve heard mention now and then during this bull run for fertilizer that the only other real supply of Potash and similar nutrients that could potentially come online is in Russia … sounds like this is what we’re talking about here, at least to some degree.

It sounds like the company itself is more of an agricultural producer than a fertilizer producer, but you never know — I do remember reading just a couple years ago that much of Russia’s farmland was lying fallow, since the collective farms essentially all shut down for lack of funding, equipment, and labor, and that Russia was considering loosening border controls with China to allow landless Chinese farmers to come in and take over some of their vacant fields, especially off in the far eastern hinterlands. Don’t know if they ever did so, but I can accept that Russia is likely to contain the largest inventory of high quality unfarmed farmland in the world.

So what is this farmland-owning company that Mickey wants us to buy?

Well, a few moments in the Thinkolator, which makes some funny noises when you feed it Cyrilic, and we can determine that this firm is …

Black Earth Farming (BLERF on the pink sheets, also traded in Europe)

This is a