January 31, 2017 | The price recovery may take longer than expected due to the imminent startup of new mines. … Read MoreGet Potash Stock Investor Kits
The world population is increasing rapidly and considering it is expected to reach over 9 billion by 2050, it has become evident that the world needs to produce more food to keep up with the growing number of mouths. However, the increase in people also means further urbanization and therefore, less farmland to work with, meaning that farmers must increase crop yields.
This is where fertilizers like potash come in, as they not only provide essential nutrients to the food being grown, they provide higher output from farms as potassium improves water retention in plants and strengthens their roots and stems.
Potash is an alkaline potassium compound that is most commonly used in fertilizers, with 95 percent of the world’s supply being use to grow food. Historically, the term “potash” came from the practice of extracting potassium carbonate (K2CO3) by leaching wood ashes and evaporating the solution in large iron pots. Today, it refers to potassium compounds and potassium-bearing materials, such as potassium chloride (KCI) which is a salt-like mineral that is naturally white or colorless, but sometimes takes on a pink or red color due to impurities such as clay.
Fertilizers currently aid in 40 to 60 percent of the world’s food supply, as they help replenish soils every harvest season and provide nutritional value to the foods we eat, which means they must be replaced annually to ensure the nutrients are replenished.
According to the US Geological Survey (USGS), the global potash production capacity is expected to reach 61 million tonnes by 2018, a large increase from the 55 million tonnes produced in 2014. In 2015, the total world consumption of potash for all uses was 36 million tonnes, a number that is expected to increase to 38 million tonnes in 2018.
Last year, the top potash-producing country was Canada at 9.8 million tonnes, which marked a decline from the previous year. Saskatchewan is responsible for producing 90 percent of that total and accounts for about 50 percent of the world’s supply. Canada was followed by Russia, who produced 6.2 million tonnes, 100,000 more than 2013 and China, with an output of 4.4 million tonnes. As it stands, there are only 12 countries currently producing potash, with some of the top producers like China relying heavily on imports to feed its domestic demand. The Asian nation is also traditionally responsible for setting the benckmark sales price for the year, although India has begun to ink large supply deals with major producers in Russia and North America.
Why invest in potash?
As mentioned, the need for fertilizers is expected to increase with the population and the three largest importers of potash: China, India and Brazil will likely increase their demand. While the current supply and demand imbalance has led to lower potash prices, the increase in demand from certain regions in coming years will likely restore that balance.
According to The Food and Agricultural Organization of the United Nations, the world average per capita availability of food for direct human consumption improved greatly, to 2,700 calories per person per day in 2005/2007, but many still aren’t getting enough food mainly due to poverty and not being able to develop agriculture as well as having limited access to food produced in other countries.
The organization sees the overall demand for agricultural products to grow at a rate of 1.1 percent per year to 2050, which is actually a drop from the average 2.2 percent per year in the past four decades. The main drivers for these expected changes includes population growth, increases in per capita consumption and changes in diets leading to the consumption of more livestock products.
When it comes to developing countries, the report shows that roughly 80 percent of the projected growth in crop production in these regions would come from intensification in the form of yield increases and higher crop intensities.