Vancouver Investment Advisor Ritch Wigham

What is the Price of Potash?

There was a rumored shipment of potash negotiated last Thursday (July,09/09). Supposedly a shipment of some 850,000 tons from a minor producer in Russia was sold for $460/ton and delivered to a port in India.The reason I am bringing this forward is that it stinks. I don’t mean it physically smells, I mean it carries the stench of some form of collusion or even corruption. The company involved Silvinet is the smaller of the few companies in Russia that produce potash. This also makes it a relatively minor player in the world of potash. It supposedly bid for this contract $160.00 under the current prevailing price being negotiated for Chinese and Indian delivery and it is also more than $200.00 under the current spot price for the commodity. This would be like Husky selling gasoline at the pump in Western Canada at $.75/lire while Chevron, Esso, and the rest are still charging $107./litre as is the case this morning in Vancouver. It is possible but I don’t remember it ever happening.

My inclination is to believe that if this is true that the broader story is much more complex. I don’t usually trust this type of story from what is widely regarded as one of the top most corrupt countries in the world. I have seen this type of disparity in the past. It used to regularly occur in the grain and precious metals markets when the Russians didn’t need to disclose their activities. One of the most recent was the huge squeeze in the Palladium market a few years back when they held back supply and drove the price to over $1000.00/ounce. I saw it many years ago when the wheat crop went from a disaster in the Ukraine (pre Glasnost) that became a bumper crop after the price of wheat soared.

If this story holds up, look for the major producers to hold back on any contract with the Chinese and Indian governments and simply supply the spot market until supplies become so tight that a new contract is negotiated at a fair ($625+) price for all concerned.

Ritch Wigham 

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