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Proprietary Data Insights Financial Pros Fertilizer Stock Searches Last Month
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Hidden Russia Exposure Lurking Shell faces a $400 million writedown on Russian downstream assets. Goldman Sachs (GS) reported $650 million in credit exposure to Russia as of December. Citigroup (C) has 3,000 employees in Russia with a total exposure of $9.8 billion. Most corporations will let us know in their upcoming earnings reports the impact of the war. But this is just the tip of the iceberg. Russia’s government told sovereign bond holders their default depends on sanctions, creating the first potential default for the country since the 1917 Bolshevik revolution. Additionally, the government said payments made to residents on foreign currency-denominated bonds in rubles, which have lost significant value Given the size of Russia’s economy and length of history, it’s near impossible to truly know how much exposure exists, especially amongst hedge funds and private investments. This is the real risk to credit markets that we simply don’t know. It’s not something to panic about. More a point you need to watch for in the news. You don’t trade off this or make long-term investment decisions based on a possible black swan catalyst. Instead, you keep an eye out for signs of the problem expanding. The first places you would start to see it would be deep in the headlines of major financial news sites like Bloomberg and CNBC. These won’t be front-page stores, so you’ll need to set news alerts to get updates on the stories. You can look for keyword topics such as Russia credit risk, hedge fund exposure. |
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Russia Hits Back With Export Bans |
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Stopping short of ending the export of energy and raw materials, Russia announced a ban for more than 200 products. Knight To Rook 3 The restriction is limited to items previously imported to the country including medical equipment, agricultural machinery, railway cars, and turbines and applies until the end of the year. However, there may be waivers for members of the Eurasian Economic Union – a bloc of regional allies. Additional actions include:
Fertilizer Exports Halted Back in February, Russia roiled global agriculture markets by banning exports of ammonium nitrate, a key input into fertilizers for wheat, corn, and cotton. Today, its Interior Ministry suspended all fertilizer exports. Russia accounts for 14% of global urea and 21% of potash. CF Industries (CF) CEO recently said fertilizer reserves are “as low as we’ve ever seen.” And that was before the recent ban. That’s helped US fertilizer stocks like Mosaic (MOS), CVR Partners (UAN), and Nutrien (NTR) skyrocket in the last few months. Protect This House Most market observers believe that other than Russia’s fertilizer ban, all its other moves are meant to hold local inventory against shortages. Global sanctions created shortages in basic goods such as medical supplies like insulin. Just today, President Biden called for Russia’s preferred trade status to be revoked. Bloomberg Economics forecast Russia’s full-year GDP will slump 9% in 2022 while the Institute of International Finance predicts a decline of 15%. Meanwhile, oil and natural gas, Russia’s lifeblood, continue to flow into the European Union. Even with the U.S. ban on Russian energy, that isn’t likely to change the E.U.’s stance anytime soon. The Bottom Line: As the war continues, expect more pressure to be put on global supplies for everything from metals such as aluminum to grains such as wheat. But don’t expect oil and gas exploration companies to make out like bandits. Recent coverage suggests that a lack of investor appetite and long-term outlook are hindering further investments in shale production. In fact, it likely means higher energy prices are here to stay. That drives up the cost of everything including transportation, which will get passed along to the consumer. If you want to counteract some of these inflationary pressures, consider local farmers’ markets. The food is usually fresher, it injects money into your community, and it doesn’t require long-haul transportation. |
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