Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Potash Sector Heating Up…Again

Companies / Agricultural Commodities Aug 15, 2010 - 10:15 AM GMT

By: Richard_Mills

Companies

Best Financial Markets Analysis ArticlePotash producer Agrium (AGU-TSX) just announced earnings of US$506-million in Q2, or US$3.20 a share - a healthy 37% increase over Q2, 2009. AGU’s revenue rose 7% to US$4.37 billion as sales volumes soared 860% year over year (yoy). The company’s share price rose 3.6% after its second quarter earnings sailed past expectations.


"We anticipate North American crop nutrient demand to be strong in the second half at both the grower and retail level, due to firming crop prices, weather-induced constraints on nutrient application this spring ... and the current low inventory level of crop nutrients in the U.S. retail system." Agrium Chief Executive Mike Wilson

Potash Corporation (POT-TSX) also announced bullish Q2 earnings of $472-million, or $1.55 a share, a 253% increase over Q2, 2009. POT’s share price rose four percent on the news.

 “With growing demand for food and supportive crop economics farmers have been motivated to begin addressing nutrient deficiencies in their soils.” Potash Corp CEO Bill Doyle


Potash is a major source of potassium. Potassium is found in every plant cell, it helps plants:
  • Grow strong stalks
  • Resist stress - weeds, insects, disease and changes in temperature
  • Improves water retention
  • Strengthens roots and stems
  • Assists in nutrient transfer
  • Activates vital plant enzymes
  • Ensures the plant uses water efficiently
  • Helps keep the food you buy fresh

China, India, Southeast Asia, Brazil and North America account for over 50 percent of the world’s population and 70 percent of total fertilizer consumption - over the past 20 years consumption has increased by 85 percent in these countries.

Brazil is an agricultural superpower and accounts for seven percent of world potash consumption. Brazil is the largest South American consumer of potash (its fertilizer market represents 65% of all South American consumption) and has a consumption growth rate of 7.6% per year. The countries soils are potassium-deficient and require potash to remain productive - 90 percent of their potash requirement is imported.

China's (28 percent of world fertilizer consumption, historically 75 percent of potash is imported) current grain production is over 41 million tonnes. By 2030 grain demand is expected to triple to 156 million tonnes – meeting this increased demand will have to be accomplished by huge potash rich fertilizer applications. Domestic consumption of meat has risen nearly seven-fold in 30 years, while fruit and vegetable consumption is 10 times what it was just 30 years ago. China’s per capita water renewable resources are well below the global average.

India has 17 percent of the world’s population and only 11 percent of the world’s arable land. It’s renewable water resources are, per capita, well below the global average. India has no potash of its own and is the world’s biggest potash importer - the countries potash use is increasing at over 5% yoy.

Southeast Asia has a combined population of 517 million and while they have abundant water resources the countries making up this region all collectively suffer from a shortage of arable land. Indonesia, Malaysia, Vietnam, Thailand and the Philippines account for seven percent of world fertilizer consumption and have no indigenous potash.

The US and Canada are major suppliers of food to the world and are among the most efficient agricultural producers. They consume 14 percent of world fertilizer production.

Potash demand is increasing yoy. To meet this increasing demand it’s been estimated that two million new tonnes of potash are required each and every year - the equivalent of one new mine being built every year.

And potash is still being significantly under-utilized in many countries. It’s been estimated that the world's leading emerging economies Brazil, Russia, India, and China (collectively known as the BRIC’s) will require an additional 28 million tonnes of potash annually to maximize fertilizer application rates - the equivalent of 14 new potash mines. Potash inventories in June 2010 were reported to be 34 percent lower than June 2009.

Since 1950, the world’s population has gone from 2.5 billion people to 6.7 billion. No less than 75 million people a year are added to this number, the world’s population is expected to exceed 9 billion by 2050 - according to the United Nations. This will lead to an increased need for staple crops for human and livestock consumption. The United Nations Food and Agriculture Organization (FAO) projects that more than 85 percent of this additional demand will come from densely populated, developing countries – Asia and Africa.


From the peak of 1.814 billion acres in 1981 total harvested area of world grains is down 6.8 percent. Arable land covers just 3% of the world's surface. Based on historical data arable land decreases by 25 million acres annually - it is estimated that one hectare (one hectare equals 2.47 acres) of productive land is lost every 7.67 seconds.


This shortfall between grain demand and supply has led to a significant decline in global grain inventories.

Major droughts in the world’s bread baskets (major crop growing regions) are exacerbating this problem and causing serious crop failures, prices for wheat on the Chicago Board of Trade in the last month have risen by 20%  - concerns about the condition of wheat crops in Europe and drought  (the worst drought in more than 30 years, highest temperatures in 130 years and raging wildfires) in Russia has led to a significant increase in wheat prices in July – Russia is one of the world’s top exporters of grain responsible for 10% of global output.

Kazakhstan is one of the world’s top five grain producers and the countries production will be cut by a third, seven million tonnes, because of the same drought that effects Russia.

The Ukraine is the world’s third largest grain exporter and has also been hard hit by the drought. Production and exports are forecast to be down by 20 percent in 2010 with possible more downward revisions coming.

Needless to say all these considerable challenges are causing some strain on world food markets. Commodity analysts are predicting sharp price hikes for essentials such as bread, pasta and grain-fed poultry.


The world's options for increasing food production are limited by the supply of land and water. Either we must a) place more of the world’s land under cultivation or b) increase yields on existing acres, or, much more likely, both of the above.

It seems to this author that a huge increase in the application of potash-rich fertilizers will have to happen - the increased use of plant nutrients is the most effective way to increase crop yields in the face of:
  • An increasing global population
  • Water shortages
  • Decreasing arable land
  • Improved and diversified diets

Conclusion

Fertilizers replenish the nutrients in our soil after harvest. These nutrients are mostly taken up by and removed with the harvested crop. These nutrients must be replaced, given back to the soil, in order to ensure next year’s crop. This replacement of nutrients is not an option, sure farmers might skip a year, even two, but…

“Failure to feed the fields is a trend that can’t last for long. While the global recession severely impacted fertilizer demand, the science of food production has not changed. The significant volumes of potash and phosphate that have been mined for crop production must be replaced to sustain the productivity of the soil.” Potash Corp.

Today fertilizers are responsible for between 40 and 60 percent of the world’s food supply. The United Nations Food and Agriculture Organization estimates that the total world demand for agricultural products will be 60 percent higher in 2030 than it is today.

"They key to really understanding what's driving this globally is the pressure on food production and the shifting diets that you're starting to see in China and other areas in southeast Asia. In terms of what's driving our business, that is it. The volumes, I think, reflect the fact that there's tremendous pressure on potash globally. It's a very tight market and it really all comes back to the intense pressure on food production around the world. Farmers are trying to bring their yields up and really, fertilizer is a critical part of that." Denita Stann, Potash Corp's director of investor relations

Unlike many resources, potash markets are never disrupted by political interference. Food shortages trigger social and political instability and all governments fear a hungry populace. So the future for potash giants like Agrium and Potash Corp. looks good. But these are mature companies (combined market cap: $43 billion) which have already experienced major growth spurts. An investor would almost have to think a massive surge in earnings by POT and AGU bodes well for the few small junior companies with big potash resources. Potash should be on every investors radar screens.

Is it on yours?

By Richard (Rick) Mills

www.aheadoftheherd.com

rick@aheadoftheherd.com

Copyright © 2010 Richard (Rick) Mills - All Rights Reserved

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules