Stock pick of the week: Yara International
Yara International produces, distributes, and sells nitrogen-based mineral fertilizers and related industrial products.
Yara is a pure play on increased fertilizer demand driven by high soft commodity prices.
We expect fertilizer prices to remain healthy during 2011 and into 2012 as industry fundamentals remain robust supported by near all-time highs in the price of corn.
According to estimates, world grain output will have to double by 2050 to meet growing demand.
Water scarcity, availability of arable land, dietary change and rising per capita food intake all point towards steady growth for the agriculture sector.
Yara is valued at only at 7 times 2011 earnings, very low valuation given the strong market fundamentals.
The company is further supported by its robust balance sheet and share buyback programme.
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