IT MAY have been a strange place for a bunch of amateur share marker traders to gather to discuss global economic conditions.
But the setting, a dusty backyard barbeque in a drought-plagued township 2.5 hours drive northwest of Perth, must have proved somewhat inspirational.
Either that, or the intelligent decisions made that day were just plain common sense.
Whatever the case, the group of hardened wheat farmers out scooped and outwitted some of the best market analysts in the land, plying their hard-earned cash into what they knew would be the world�s next boom sector.
They couldn�t really miss it � agriculture � but, more specifically fertiliser.
Maths may have not been Western Australian wheatbelt farmer Aaron Edmonds� bent or skill, but when the 30-something-year old did some research and punched out figures on why fertiliser process had almost doubled in a year, he was flabbergasted.
He had paid $210 a tonne for the product barely six months ago, was now shelling out $364 a tonne and knew he would soon be paying over $400.
The reason for the hike lay squarely at the feet of a seemingly impassable problem � the world was facing a dire shortfall of the key ingredients of fertiliser, phosphate and potash.
As a result rock phosphate prices had jumped from a mere $US50 ($54) a tonne a year ago to $230 a tonne in February. The price of potash had risen with the same intensity. Instead of whingeing and whining about the extra costs, Edmonds knew it was time to hedge some bests.
But without any futures market for fertiliser and its key ingredients, Edmonds and his fellow farmers decided to plough their cash into severely under-valued agricultural plays.
There was only a handful to choose from.
Incitec Pivot, Australia�s leading fertiliser manufacturer, was already on the march, with its share price climbing from $43 last April to a high this month of $174.
The only other key players were Coles buyer Wesfarmers, which imports phosphate from Western Sahara, tiny Minemakers, which was sitting on Australia�s biggest known phosphate resource, and potash company Reward Minerals.
There is also Joe Gutnick�s significant Legend International Holdings phosphate resource, which is listed on the Toronto Stock Exchange.
�I�ve appreciated that fertiliser prices have had the potential to rise for a good year and half now,� Endmonds said.
�So, because we don�t have a futures markets in fertiliser there hasn�t been any conventional way to look to hedge prices.�
�Thinking about other ways of doing that, I started to notice Incitec shares rally so I thought, �Let�s look at some of the junior stocks out there that actually have deposits�.
�Minemakers for a phosphate company and Reward Minerals for a Potash play,� he said.
�We have little share meetings with some of the farmers around the region and we all started to buy a few shares.
I�m fully confident prices will remain high, unfortunately, and fortunately for us farmers.�
The plunge has been a master stoke. Minemakers is currently the best performing stock on the ASX, jumping from a mere 20c to a high of $2.07 in a little over two months.
Reward Minerals was only worth 36c a share last August. Now it is selling for $1.10.
Edmonds believes the global shortage of phosphate and potash will only get worse. There will always be crops to grow and mouths to feed.
Despite the returns it could get by selling the mineral, last month China halted the export of rock phosphate on concerns any short-fall could cause a hunger epidemic.
�Because there has been so little investment in agricultural capacity really for the last 40 years, we are playing a real quick game of catch-up now. But it will take years for the fertiliser producers to get on top of demand,� Edmonds said.
�Is there a replacement? Nothing that is cheaper. You can use manure but it is too expensive, especially with oil prices going through the roof.
�The world has ignored this growing problem.
�The lesser-known commodities have been off the radar and everyone has been chasing uranium, oil and gas. But it is really these lesser-known commodities that are so essential to mankind that we can�t keep ignoring them.�
Last week, Incitec Pivot released a statement stating there was a high demand for fertiliser despite skyrocketing prices.
The company�s general manager of Australian fertilisers Paul Barber said in the statement that farmers were trying to stock up ahead of further price risers.
�Farmers and distributors are ordering fertiliser much earlier than normal to ensure product availability and lock in price in the face of global increases,� Mr Barber said.
�The precise cost is not determined until the product is loaded on to the ship at the despatch port and that is approximately three or four weeks before it is delivered into our sheds.
�In the past 12 months, the international price of DAP (diammonium phosphate) for instance has risen 150 per cent and this upward trend is expected to continue.� If the trend continues upward, Andrew Drummond, the managing director of Minemakers, knows he is sitting on a proverbial gold mine.
Minemakers� Wonarah project in the Northern Territory has an estimated two billion tonne deposit in one section of its land.
Other parts of the reserve, which was sold off by Rio Tinto in 2002 when phosphate prices were deplorably low, are set to be drilled next month.
�We are very opportunistic, and there is nothing out there that makes us feel that we are being unduly opportunistic,� Mr Drummond said.
�Nobody out there is predicting the price of rock phosphate will come down and the genral feeling from the experts is that it is more likely to go up.�
Mr Drummond said out of Minemakers 44 million shares, close to four million were owned by farmers hedging their bets against rising fertiliser prices.
�It is hard for them to see fertiliser prices coming down,� he said. �If they get into a company like ours, when the price of fertiliser goes up, so will our share price.�
* The reporter owns Minemakers shares.
AEV Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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