Greed, Fear and Rumors for Sale

September 26, 2013 06:26 AM

Warren Buffet has been quoted as saying, "When others are greedy I am fearful. When others are fearful, I am greedy." I spoke to an industry expert recently and his comment was, "If Warren Buffet were a farmer, he'd be buying potash now."

Rumor has it that potash prices are going to continue to decline, but the old traders' adage applies here -- buy the rumor, sell the fact. From the growers perspective, in this case, the rumor of lower prices has buyers on the sidelines. The expectation of lower prices is our rumor here, but the fact is, potash is already $100 below year-ago pricing and is not likely to move lower before fall applications.

The situation that cooked up all these rumors is quietly resolving and while I am in the minority to expect that the Belorussian Potash Company is dead and gone forever, the tension between Belarus and Russia has lifted slightly as Uralkali CEO Baumgertner's detention has shifted from a KGB gulag to house arrest. This is likely Belorussian President Aleksandr Lukashenko's way of returning Buamgertner to Russia incrementally, so as not to appear to cave.

By the time spring application season rolls around, the situation will have settled, and the rumors of continued declines will no longer pressure prices. When others (fertilizer manufacturers) are fearful that potash prices will continue to tank, growers must take advantage and become greedy.

Potash prices this week are down $5.43/short ton on the week, but down $96.02 year-over. DAP is down $108.26 year-over but moved $14.42 higher in this week's Index. Rumors of continued price declines will hang some out to dry this year. The year-over setback is to be rewarded and as upstream fertilizer producers betray a growing climate of fear, growers must be greedy and claim the price declines where they stand today.

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