– Russia and Belarus account for 37.6% of 2019 potash production. It's been sanctioned by the largest economies in the world. China was another 10% of the market and they are severely limiting and banning exports on fertilizer.
– Potash fertilizer is irreplaceable. Using more nitrogen or phosphate won't help. All of these fertilizers do their own unique things to support crop growth. Potash is actually known to be good for water absorption, drought protection and generating protein.
– Saskatchewan, Canada is a major producer and thankfully is friendly with USA, but they have something called “Canpotex” (Canadian Potash Exporters) which controls all of their potash supply – you should think of Canpotex like its OPEC (oil). It's organized as a cartel. They share the same rail infrastructure, they hold back supply of potash (“spare capacity”) to keep prices higher. It's just TWO companies! Nutrien (“NTR”) and Moaic Company (“MOS”). If you've never heard of Nutrien, some of you people that have been paying attention for a few years might recognize Potash Corp of Saskatckewan and Agrium — Nutrien is the combined company. They control the vast majority of potash mining supply in the only major potash ore bed in the world that isn't sanctioned.
– I've followed this industry for 15 years. BHP tried to buy Potash Corp of Sask. in 2010, but Canada blocked it b/c potash was too strategically important. I have a friend whose wife worked at one of these companies and they were all celebrating in 2006 when a Russian potash mine flooded, and in 2014 when a massive pothole formed from a Russian potash mine that became ruined (google search the image…you might remember this from 2014). Those were just single mines, and now all of it is off the market. That's 37.6% of 2019 global production. For comparison, Russia is only 11% of global oil production and Belarus isn't an oil producer.
– This is serious business. In crazy Russian drama, in August 2013, the CEO of Uralkali (Russia potash), he was detained at an airport in Minsk, Belarus and thrown in jail for 14 months for breaking up the Belarusian Potash Cartel in June 2013. Look it up, its a crazy story. Belarus normally gets along with Russia but this seriously pissed them off!! If you look up the dictator Alexander Lukashenko, this would make sense…that man is way crazier than Trump.
– Their phones in Saskatoon are ringing off the hook right now. The world really needs more potash or else crop yields will be a lot lower without this essential crop fertilizer. Especially from countries worried about doughts from climate change b/c potash is good for water absorption to help plants grow.
– NTR, MOS and IPI are the plays. IPI is the higher cost producer in America with more beta to potash prices. Think of IPI in USA like this: NTR/MOS are the Saudi Arabia of oil (they own the the most production, massive, low cost mines from the best reserves on the planet), and IPI is the oil frackers in USA…higher cost that feels pain downturns but is en fuego in bull markets. So if you look at these stocks and wonder why IPI is more volatile/higher beta, that is why.
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