Robert Kronenberg_

Investing in a Resource-Constrained World (Part IV)

Mr. Anthony - There are some interesting opinions and some good information in this article. Presentation of opinion often provides the impetus for useful thought and debate. If everyone agreed on things, the markets would provide no opportunity for profit. Presentation of opinions and ideas should be actively debated, but never criticized for having been stated.

Unfortunately, neither side in this debate has presented adequate facts to support their opinion. After reading the commentary on both sides, as a holder of large positions in POT, MOS, CF, and TRA, I will still need to research on my own the economic feasibility in the long term of capturing KCL from the sea.

Stating as fact that it is economically unfeasible is not better than stating that Israel has been doing it from the Dead Sea. I don't know the concentration of KCL in the Dead Sea, but I do know there is only one Dead Sea, and there is no basis for the assumption that economically evaporating KCL from the Dead Sea extends to the ocean or any salt lake either. I do, however, appreciate the opinions on both sides that provided me with the question that I now must research.

The problem with this article is not the statement of opinion. Rather, Mr. Anthony, you should examine the following:
1. Your security and sector analysis does not appear to be objective. It is interspersed with political opinion that simply does not belong in security analysis.
2. You draw conclusions based on faulty and unsupported assumptions.

As an example of both problems, you state:
"Food is both perishable and completely renewable. The world will never run out of food. The next harvest is always less than 6 months away. So the grain bull market can not last for much more than a year or so. The food price can not go up indefinitely, either. When the food prices exceed the level where the poorest people can afford, they stop going up further. Rich people have money but they only have one stomach. So although I agree with Jim Rogers who predicts many more years of commodity bull market despite of the coming recession, I disagree with his emphasis on agriculture as the most bullish of all commodities."

The conclusion is colored by your politico-social beliefs. My only thought when I read it was, "Really?" The argument for increasing food prices is increasing demand. The argument for increasing demand is that the industrialization of countries such as China and India are creating more "rich" people with their "one stomach" to feed. More stomachs that can afford food = higher demand. Further, prices are not limited by what the poor can afford. Presumably the poor can afford some food or they will starve to death. If they are dying in droves, presumably the government or some charitable aid organization will step in and buy food to feed the poor. Larger populations always create larger demand for food, and larger populations of "rich" people also create larger demand for food. Your conclusion is based on the erroneous assumption that the numbers and ratios of rich and poor are staying static.

You state a conspiracy theory about China hording fertilizer and keeping it a secret. This is not based on any actual fact-based analysis of the amount of fertilizer purchased over the years, the amount used and any left for storage. I suspect that POT has a much better handle on those numbers than you do, and if they believe that China has depleted in its reserves it carries a great deal more credibility.

Sure. China may in our imagination have some sort of secret horde that they release on the market and kill fertilizer prices, but French Canadian dissidents from Quebec may also decide to bomb the Saskatchewan mine for failure to post enough signs in French. I am not about to invest on either of those far-fetched "maybe's."

Indeed, the argument about releasing reserves on a market is better placed where we actually know such a reserve exists -- the US Oil Reserve for example. Nevertheless, even where it does exist, it is unlikely that the US is going to manipulate the oil market with it at this point. They accumulated the reserve for security reasons that override. In the case of fertilizer, we have no evidence of a reserve let alone any inclination for China to use it to manipulate prices.