Description

This will be a very short LONG idea

The Mosaic Company produces and distributes DAP made and mined from phosphate and used as one of the world's three main types of fertilizers. It holds a 20% share of the U S DAP market which is the principal phosphate product Mosaic owns and operates mines and processing plants in Florida which produce phosphate fertilizer and feed phosphate and processing plants in Louisiana which produce phosphate fertilizer. The Company also has some potash and nitrogen fertilizers.

Key to this being a 4 bagger in the course of time is the following.

1-There is a rational management running things and a very rational long term owner in the private giant Company CARGILL which owns 55% of MOS.

2-DAP is at an all time high now of some $250/ton.

3-The company is closing plants in the face of likely rising demand.

4-Developing new phosphate rock mines is impossible as a result of environmental issues. So supply will not be increasing. It will be decreasing

5-Ethanol from grains such as corn is going to be on the rise over the next decade.

6-China is going to need to feed its rising urban manufacturing employment which previously raided on rural farm lands. Cheap farm labor will increasingly give way to improved farm productivity/yields which come from use of none other than fertilizer.

7-Annual world demand for food is maybe 3% and fertilizer follows this trend with variant swings due to weather (e.g. too much or to little rain.

8-The futures prices right now indicate higher prices for DAP next year.

9-On the margin it will take little added demand to cause major upward swing in pricing.

10-At some point year in time a major price swing will occur I know not when but it will due to the factors outlined and one more. When they do the grosz margins will soar and the profits will multiply geometrically.

11- The one more is this. Cargill at some point in time is going public. The way they are going to do it is to merge with its investment baby MOS. That time can come at the end of the five year (over 3 years to go) standstill negotiated when it made its purchase of what is now, and named by Cargill, MOS. Ask why Cargill named the Company Mosaic. Mosaic is a variety of different pieces an that is what Cargill is today. Cargill is an international provider of food products of all types and descriptions, a huge variety of agricultural and nutrient and feed ingredients, ingredients for pharmaceutical and dietary supplement and risk management products and services. It is a vast international empire with annual volume probably approaching $100 billion annually.

If the price is right Cargill will "acquire MOS in the next maybe 4 or 5 or 6 years. If it does not it will be because MOS has risen far too high. Either way we profit from MOS with fertilizer earnings soaring from likely a doubled DAP price level with production held back or Cargill buying us out.

This is the big picture macro view and the details I leave to others who must kick tires and find out what makes the feet grow.

Catalyst

Production facilities being reduced(rationalized), prices for fertilizer DAP soaring at some point, as China likely will require substantial additional tonnage and the excitement of farms raising raw material for ethanol come into reality and possibility of Cargill buying the remainder of MOS which they do not now own in the next 5 years or so.



MOS which they do not now own in the next 5 years or so.