Cartels Should Be An Investment Red Flag

Losing nearly a quarter of your investment in one trading day can't leave the best taste in your mouth, but that's exactly what many investors in fertilizer producers experienced on Tuesday. With news coming out of the Belarusian Potash Corporation, a cartel-like organization along the lines of OPEC, that its two key members would be splitting apart, companies like PotashCorp plummeted more than 20%. 

Because the potential supply of potash is so much larger than current and forecast demand, the fact that Belaruskali and Uralkali will now be competing on price rather than keeping it artificially high through supply restrictions sent shivers through higher-cost producers' mines. Russian producers are notably lower on the cost curve than Canadian and other miners around the globe.

This is quite unfortunate for investors given that prices had finally appeared to turn the corner after many companies experienced record quarterly sales of the yield-boosting potash. So, while first-half statistics looked great and might have convinced a lot of new money to join the fold, boy does the remainder of 2013 look like rough sledding. For more on this topic, tune in to the video below.

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Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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