NEW YORK (TheStreet) -- I was talking today to Joe Deaux about the collapse of the fertilizer stocks and whether there was an opportunity being created. I think there is.
What happened overnight was a statement from the CEO of one of the six largest providers of potash in the world, which collectively control 90% of the world market. CEO Vladislav Baumgertner announced his company, Uralkali would be breaking up its sales venture with another of the big seven providers in Belarus -- Belaruskali. He predicted that potash prices would plummet to under $300 a ton by the end of the year, a 25% drop from current prices.
The rumblings between old Soviet states' companies arguing and playing chicken games with price wars has the rest of the potash-producing company stocks, including Potash Corp. of Saskatchewan (POT) and Mosaic (MOS), reeling. A breakup in the cooperation of the Russian potash providers threatens a market flooding designed to destroy the lesser players.
I don't believe it much. The Russian commodity titans created by perestroika are world renowned for big-money hardball threats. The truth is that sales arrangements between the Russian companies have been routinely ignored by many of the bigger players. That overproduction of "quotas" has hurt the price of potash in 2013, angering the smaller producers like Uralkali and leaving them few options besides threats to explode the collective price-fixing arrangement entirely.Canadian potash giant Potash is down about 20% Tuesday and U.S. potash company Mosaic is down about 19%. But none of these companies wants a price war, and I think they'll ultimately avoid one. Uralkali is looking for promises from the largest potash producers to stay in line with production limits that they've already defined. With those promises, all will again be well with the potash "cartel." One way to try and take advantage of this quick downturn in fertilizer shares would be to buy calls in a company like Mosaic. At the time of publication the author had no position in any of the stocks mentioned. Follow @dan_dicker This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV