Introduction to Phosphate Investing

- July 18th, 2018

Wondering how phosphate investing works? Here’s a brief overview of supply and demand dynamics, as well as options for investing.

Phosphate is critical for all living organisms. Its primary function is to support strong cell development and water retention, and 90 percent of it is applied to crops to aid plant growth. 

Because of its essential properties, and since there is no known substitute for it, phosphate can be found in fertilizers all over the world. It is also used as a supplement in animal feed, as a food preservative and for several other chemical purposes.

As the world’s population grows and demand for food increases, demand for phosphate is only expected to increase. For that reason, some believe phosphate investing is compelling. Read on for a brief overview of the phosphate market, including supply and demand dynamics and investing options.

Phosphate investing: Supply and demand

According to the US Geological Survey’s most recent report on phosphate, global phosphate rock production came in at 263 million MT in 2017, up from 255 million MT in 2016. The increase was mainly the result of increased output in China and Saudi Arabia.

China was the top phosphate rock producer last year by a long shot, putting out 140 million MT. Morocco and Western Sahara were in second place with output of 27 million MT. Active phosphate mines are present in a large number of other countries as well, including Russia, Tunisia, Jordan, Brazil, Israel, South Africa, Syria, Togo and Senegal.

The largest phosphate reserves are found in Morocco, which is home to about 75 percent of global reserves. The US also holds large phosphate deposits, particularly in Florida, North Carolina, Idaho and Utah. The US produced 32.6 million MT of phosphate rock in 2017.

In terms of demand, the need for phosphate has been slowly increasing over the last few years. It stood at 40.6 million MT in 2012, and is expected to reach 48.8 million MT by 2021. As mentioned, the world’s growing population and need for food should keep demand growing steadily well into the future as well.

Phosphate investing: Consider stocks

With the future of phosphate looking bright, some investors are wondering how to get into the space. There are certainly ways to do so, although phosphate investing is a little trickier than investing in more mainstream commodities like gold and silver.

One way investors can invest in phosphate is by buying shares of an exchange-traded fund that includes exposure to phosphate. The Global X Fertilizers/Potash ETF (ARCA:SOIL) is one example. However, most market participants choose to invest directly in phosphate-focused companies. Here are three of the largest producers:

  • Nutrien (TSX:NTR,NYSE:NTR)
  • Mosaic (NYSE:MOS)
  • Itafos (TSXV:IFOS)

Information on smaller phosphate companies that have been working to advance their projects can be found by clicking here.

This is an updated version of an article originally published by the Investing News Network in 2013.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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