The pain of the stock market lies in the incessant and unfeasible quest to predict the future. In the myriad of articles on trends and prospects for 2022, I didn’t see anyone talking about a war in Europe, as well as in the predictions for 2020, no one suggested the start of a pandemic.
This strange succession of terrible and historic events that we experienced, beyond any prediction, shows how preparing companies for unlikely scenarios should indeed be a concern for investors.
That’s why professionals use tools (charts, correlation calculations, analysis of exposure to certain markets) to define investment portfolios. And it’s also why they measure company results as “above” or “below” expectations—not necessarily “good” or “bad.”
Far be it from me to repeat nonsense like “in a crisis, some cry and others sell handkerchiefs”. This shallow appeal mostly ignores that you don’t choose how you’re going to be hit by a crisis. Anyone who has their neighborhood bombed or loses family members to a devastating virus doesn’t need lessons in entrepreneurship.
That said, looking at the economic aspect, the war in Ukraine immediately put us at risk of supplying fertilizers —essential for a country focused on agricultural production—; wheat —as if the supermarket wasn’t expensive enough already—; and oil—and take a rise in the price of gasoline.
Of the national fertilizer producers, it is worth looking at the case of Fertilizantes Heringer, which has been in judicial recovery for two years and has just filed a request to withdraw from it.
When it filed the request to exit the recovery, on February 16, its shares (FHER3) had a good increase of 3.59%. With the Russian offensive in Ukraine, however, the shares jumped more than 27%.
At first, exiting judicial reorganization is a very important step in the life of a company. With this, it opens the doors of financial institutions and the market as a whole to expand their business and grow again. In the world of fundamentals, it is where the power of the company to value itself or not in the future lies.
Still, what really stoked the investors’ adrenaline were the headlines about the war and the Minister of Agriculture, Tereza Cristina, announcing that the stock of fertilizers we have lasts until October, as well as the launch of a “National Fertilizer Plan”. .
The plan, as far as I could understand, will be a “diagnosis” on the supply of fertilizers in Brazil, which could bring legislative proposals such as changes in environmental licensing rules for exploration of deposits and permission for extraction on indigenous lands.
In other words, until now, it is just a suggestion that a study will be carried out from which legal changes should be suggested, even dealing with the demarcation of indigenous territory. This is in a presidential election year, when it is known to be more difficult to approve projects that could serve as a public arm wrestling.
Whoever looks at this when buying a share, ignores that even being a Brazilian company, Heringer is totally dependent on the importation of inputs for the production of its fertilizers. In 2020, 78% of the raw materials used in production were imported.
The warning was made by the company itself, when listing the risks of its operation: “Our profitability has been, and may be in the future, affected by the price and supply of these raw materials”.
It was there, in the lines of the reference form delivered by the company to the CVM. But those who have not stopped to understand the business in which, in the end, they will be a partner when buying shares, can easily think that fertilizers would be the “handkerchief” to sell in the crisis.
Ultimately, equities rose as the supply of essential production inputs began to fall, creating a disproportionate wave.
More than betting on a game of forecasting supply and demand, investing requires understanding where there is room for companies to grow. And when.
The political analysis on the release or not of fertilizers from Eastern Europe to Brazil is more than difficult. While Jair Bolsonaro’s trip to Russia to address the issue before the start of the war may bring relief, the fact that Brazil was the only BRICS member to vote against Vladimir Putin at the UN weighs on the other side of the scale.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
