E DuSolo Fertilizers: Brazil's Best Agricultural Play

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

The Situation:

Due to the success of capitalism within private business, the tyranny of socialism has for the most part, taken a back seat ride. It is the ever present human desire to achieve a better standard of living for themselves and their families through hard work, that has enabled countless hundreds of millions of people to be pulled from the decrepit state of starvation and malnutrition.

It is the constant advancement of technology that has given people the ability to produce more with less, to derive bigger returns with less inputs. It is the dreamers, those with an imagination that dare to make their mark on history, that have provided us with the ideas and designs that enable us to enjoy the quality of life we now enjoy.

In the realm of the limited, exponential growth is a rarity. Constant innovation is needed to flatten the speed bumps nature throws at us. One such speed bump is the amount of food that can be produced per square hectare.

The Dilemma: 

The best agricultural practices that can be utilized whilst still maintaining a profit margin can only produce a portion of the food humanity needs to survive. The sad reality is that without certain nutrients, the plant life we depend upon will not grow in the quantities demanded by the marketplace.

The three primary nutrients that are essential to plant growth are Nitrogen (N), Phosphorus (P) and Potassium(K). The secondary nutrients are Calcium (Ca), Magnesium (Mg) and Sulfate (S).

These nutrients are often lacking in the soil and without them, plants suffer from diminished growth, increased proneness to disease and the inability to provide humans and animals with nutritious food.

In the next 50 years, humanity is going to have to produce more food than it has in the previous 10,000 years. This may seem like it is a daunting task, especially when you consider all the factors that hinder the expansion of the food supply. That being said, it is completely achievable.

(Source: DuSolo Fertilizers/United Nations)

The Solution:

Whilst the world is making great advancements in the area of genetically modified organisms, this does not replace the need for nutrients. Since man discovered that if he mixed manure into the earth before he planted his crops he would receive a bigger harvest than if he did not, humanity has been applying fertilizer to crops to increase yields.

Having lived and worked on a farm, I know first hand the impressive yields that result in the correct application of fertilizers. If no fertilizer is applied, there can be a difference of at least 30-50% in the yield.

The greater adoption of the use of fertilizer in developing nations is going to feed the world. The wealth that will be created within the agricultural sector in the next 50 years is truly mind boggling.

As an intelligent investor, it behooves you to identify a trend like this and find the companies that stand to benefit from the trend. Following on from the interview with the CEO Eran Friedlander, I bring you Duolo Fertilizers. 

The Company - DuSolo Fertilizers Inc (OTC: ELGSF

History

Three years ago, the management team of DuSolo Fertilizers Inc. (formerly Eagle Star Minerals Corp) identified that the explosive growth in the agricultural sector within Brazil would cause the demand for fertilizer to substantially increase.

Acknowledging the fact that Brazil is a major importer of agro-minerals, the team set out with the goal of becoming a domestic producer of Phosphate based fertilizers. Their strategy would capitalize on the ability to sell Direct Application Natural Fertilizer (DANF) and other phosphate based fertilizers at a later stage, to local farmers at a significant discount to its competitors imported products.

On the 14th of October 2014, DuSolo received all necessary mining and environmental permits and successfully transitioned to a producer. No mean feat considering the short time frame.

The Country - Brazil:

  • Ranked as the leading agrarian (agricultural exporting) country in the world.
  • 1st in global exports of sugar, coffee, orange juice, soybeans and poultry.
  • 4th largest consumer of agro-minerals.
  • Economy expanding at a rapid rate, 3rd behind China and India.
  • Leading economy in South America. On pace to be the 5th largest economy in the world.
  • Small scale agriculture occupies 23% of Brazil's arable land (4.1 million small farms).
  • 388 Million hectares of arable land, 90 Million not yet cultivated – largest arable land deposit in the world.
  • 2nd largest importer of Phosphate ($1.1 Billion in annual sales revenues).

This has created a tremendous opportunity for local producers to gain significant share of arguably the world’s best market for this commodity, based on cost differentials. 

The Commodity - Phosphate

  • No substitute for phosphorus in agriculture.
  • Essential for plant growth and high yields.
  • More than 70% of global phosphate supplies are located in Morocco (high transport costs).
  • Other major producing nations consume almost all domestic supply.
  • Brazil imports 50% of its Phosphate demand.
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Disclosure: I'm a shareholder of Dusolo Fertilizers.

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Comments

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Joe Economy 5 years ago Member's comment

Thanks Tom.Some interesting stats here. I'm going to add the ticker to my watch list to see if the stock shows any momentum. Right now it appears to be trading very close to its 52 week low of 0.14 which may or may not be a good sign. Is there a strong seasonal element with this stock ie is it affected by the different agricultural seasons?

Tom Wallace 5 years ago Author's comment

Hi Joe,

I've been buying more as its been falling. The company can only produce once the rainy season is over so there may be some seasonality baked into the share price, but I'm of the opinion that the market is waiting to hear more sales contracts announced, along with a revised 43-101 with an expanded resource base.

Tony Daltorio 5 years ago Contributor's comment

great article, Tom!

Tom Wallace 5 years ago Author's comment

Thanks Tony! Much Appreciated!