Ryan Barnes

Vale May Bid for Mosaic: Let the Great Potash War Begin

To Taojaxx: Yes, I read all the same reports that you have in the past 24 hours. Yes, Vale denied interest in MOS, just like every acquirer in the past 20 years has done when faced with a potential leak.

And yes, inventories are up at Potash Corp, and Agrium has announced price cuts in the range of 20%; this is why share prices have been cut in half as I mentioned. As to the broader thesis of global demand for protein being higher...if you think that's comparable to real estate, that's your right...I just don't see any comparison.

The increased demand for real estate was based on the increased access to cheap credit, making ever larger patches of the demograpic quilt feel that owning a home was their "right". That part of the fundamental equation has changed. The increased demand for proteins in a growing population has not changed to date, and I don't see anything stopping it.

Best of luck to all in your investing efforts.

Potash's Negative Price Implications

Barry's comments are right on point. There is a tremendous amount of pressure coming from Russia to secure tax revenues and keep up employment this year, and Silvinit is indeed in a dire financial state. The company paid $2.4 billion at the peak of the market last year to secure new deposits in a Russian auction, and current accounts are likely negative as a result. Canpotex and BPC aren't as "tight" as they used to be, and there may be a break or break-up of the two exporting co-ops.

Canpotex has already stated they might resort to spot-only pricing if contract talks with China aren't fruitful in the next go-around.

It's a fluid story worth keeping tabs on, but the North American potash is indeed of better quality, and stories of global oversupply are PR ploys at best. Every demographic trend points to higher levels of demand, the need for higher crop yield, etc. The only thing that can really get in the way of the industry's long term growth is for stupid strategic moves that involve collusion. I'd personally like to see Canpotex break apart, but that isn't likely to happen until the next market upswing.

EpiphanyOne