America's Failure to Approve the Keystone XL Is Now Punishing Farmers

With so much oil heading across the country by rail, it’s creating a backlog in fertilizer supplies and ethanol deliveries, both of which could have an impact on American farmers and fertilizer makers like Mosaic, Agrium, and PotashCorp.

May 31, 2014 at 10:20AM

Oil Train

Source: Flickr/Roy Luck 

The Wall Street Journal published a very interesting article a few weeks back detailing the disturbing issue facing American farmers. Booming oil production in North America is leaving producers with only one option to transport oil as several key pipelines, including the Keystone XL, are being delayed. This surge in rail traffic due to the oil boom, when combined with horrible winter weather, is creating a big backlog in fertilizer supplies and slowing the delivery of corn to ethanol makers, both of which are hurting farmers.

Springing up worries
The backlog in fertilizer supplies is springing up worries among farmers that there won't be enough crop nutrients this spring to help the corn, wheat, and barley grow. Farmers in the Dakotas, Minnesota, and Wisconsin, states that are finally getting the warm weather needed to plant crops after a really rough winter, are feeling this fear.

The lack of rail capacity has been plaguing farmers for a while now, as last fall, grain in storage surged as there wasn't enough takeaway capacity to bring these grains to processing plants. This year, storage might be an even bigger factor as there might not be enough storage space to go around if there is a delay in the spring planting season due to delays in getting fertilizers.

Corn Black And White

Source: Flickr/Thanasis Anastasiou.

Hurting more than farmers
Rail delays are also hurting the revenue of fertilizer makers like Mosaic (NYSE:MOS), Agrium (NYSE:AGU), and PotashCorp (NYSE:POT). According to Mosaic CEO Jim Prokopanko in the Journal article, this spring's fertilizer backlog is unlike anything his company has ever seen before. He noted that his company was "many hundreds of thousands of tons behind" on shipments. Transportation issues plagued Mosaic's first-quarter results, causing a 43% decline from last year's first quarter.

Meanwhile, Agrium noted similar problems in its first-quarter results. The company reported net income from operations of just $12 million in the first quarter, which is substantially below the $146 million it earned in last year's first quarter. Agrium noted in its press release that its first-quarter results were "exacerbated this year by a record cold winter across North America." It was this record cold that forced railroad operators to take shorter routes, causing a buildup in fertilizer supplies as an increase in oil shipments really put a heavy load on the shoulders of railroads.

Potash

Source: Flickr/Just a Prairie Boy.

Even PotashCorp noted that it experienced "an especially challenging environment" in the quarter. In PotashCorp's earnings press release, it specifically pointed out that "ongoing rail constraints -- precipitated by difficult winter conditions and record grain harvests in Canada -- kept dealer supplies tight," something that factored into its results. These issues contributed to PotashCorp's earnings falling to $0.40 per share from last year's $0.63 per share.

Investor takeaway
America's failure to approve the Keystone XL is causing a lot of oil to be shipped on railroads. That likely wouldn't have been such an issue if it wasn't for the extremely harsh winter we experienced in North America. That being said, there is no guarantee last winter was an aberration, meaning America really needs to do something to get its oil shipped without taking up so much precious cargo space on our railway system. While approving the Keystone XL isn't the only answer, it would certainly help the situation. 

Pipelines, the IRS, and you
While environmentalists might not want pipelines to be build, you should. Thanks to a small IRS "loophole" these companies are lining their investors' pockets with cash. To learn their secret, and how you can profit from it, you need to check out our special report "The IRS Is Daring You to Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers