strawtogold

Investing in a Resource-Constrained World (Part IV)

Facts, not hyperbole and factual misrepresentations are the essence of analytical review. Mr. Anthony has failed in many respects. Not only is his representation that POT is abusing its worldwide leadership position to extract obscene pricing incorrect, POT took a hit on its share price by not matching currently the Russian price increase to $1,000 per ton.

When Don Carson of Merrill ($265 price target) asked Bill Doyle, the CEO of POT, about affordability issues at current price levels ($700/ton June 1, 2008 and $1,000/ton later in the year), Doyle replied "that affordability, while an issue, is not really a problem since US farmers make $3 for every $1 of fertilizer they purchase and in India that ratio is $7.60 for every dollar, in Indonesia it is $9 for every dollar of fertilizer purchased." As to the $1,000 price increase by the Russians, Doyle was unsupportive. Doyle just believes that Potash's customers need time to adjust and plan for the price increases to come compelled by demand vs supply issues. He said, " I want them to drink from a garden hose not a fire hose."

Doyle further stated that POT will be spending $5 BILLION to increase production.

Doyle's comments on pricing were taken as "meek".

Credit Suisse analyst Mark Connelly suspected that rising raw material costs, compounded by Potash's meek pricing strategy compared with those of its main competitor, rattled investors.

"Hold what you own through this rough patch," Connelly advised Thursday. "While Potash may arguably be not moving as aggressively on pricing …the direction of prices is clear, the prices are moving up sharply. Global concern over food has finally become front-page news, which may end up speeding up farm commercialization in several regions of the world -- that process will lead to demand for even more fertilizer."

These are facts and not innuendo. There is no economic substitute for potash and the growing worldwide demand for increased yields is essential to meeting the growing shortfall of production. POT is in an eviable position as are the Saudis with crude. The US now accounts for one of the smallest percentages of potash usage in history. Farm reports in the US have no bearing on potash consumption since all companies are producing at 100% and unable to meet demands. The Chinese miscalculated in holding off negotiations on pricing while their inventory was depleted. They did not count on India and Brazil grabbing the last capacity, leaving them with only 1 million tons available for the remainder of the year. And they have been told by Doyle that they will have to pay more in subsequent contracts to tie up significant volume. They simply tried their usual powerplay with the producers and to their dismay, realized too late that they not only had no leverage but there was no supply to be had. Product is not being held off the market as you infer (that may have happened in the past), it simply isn't there. Mr. Anthony, please don't play the potash bubble card - the numbers aren't there. Demand exceeds supply by several million tons per year and the only increased production for several years is from POT. That is simply good business and they and their owners will reap the benefits.

Investing in a Resource-Constrained World (Part IV)

Your credibility as a knowledgeable and enlightened analyst and author are now permanently in disrepute from anyone following the fertilizer business. Your article presents unsupportable opinion as fact and demonstrates your ignorance and absolute bias.

You state, " think POT is abusing its dominance power for the short term gain, but will hurt itself in the long term, like killing a hen to retrieve all the eggs at once. Natural plantations grow without potash fertilizer, because dead plants decompose on the spot, releasing potash back to the soil. Traditional agriculture removes only a very small eatable portion of the grain plantations, and return the bulk of the plant bodies to the fields, after decomposition or burning as cooking fuel. So the fields remain fertile. In recent years, Chinese farmers abandoned the traditional methods in favor of the easier potash fertilizer, due to increased income and affordability. Excessive application of fertilizers do not always result in the expected result, as potash is quite solveable in water. Rain water washes off the excessive amount of fertilizers, polluting major rivers. Will the Chinese farmers return to more sustainable traditional husbandry methods, in face of skyrocketing potash.?

You make accusations and present them as fact. By doing so, you have embarassed yourself in the business community. The price of potash was raised to $1,000 per ton by the Russians. Consumers of potash will pay that price. By linking the meteoric rise in prices to POT, where are your facts to back up your accusation that "POT is abusing its dominance power for the short term gain." I call you out to present proof of your incendiary accusation. We all know the answer to that -you have no facts or credibility. I guess you are also calling Chinese, Indians, Brazilians, and US farmers morons - after all, they dont need to buy potash and obviously paying $1,000 per ton is absolutely non-economic. You are obviously more brilliant than millions of farmers that have spent generations farming or an idiot.

As businessmen and investors, we require an ethical standard that is absolute. We also expect the truth and assertions based on fact. We all expect a retraction when you espoused unsustainable opinions or a presentation of facts. Here again, your editors and yourself should be ashamed of your unabashed bias and flagrant stupidity.