Ways to Invest in Phosphate

- September 2nd, 2020

Wondering about ways to invest in phosphate? Here’s a brief overview of supply and demand dynamics, plus how to enter the market.

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 as a fertilizer to crops. 

Because of its essential properties, and since there is no known substitute for it, phosphate can be found in fertilizer products all over the world as a way to aid plant growth. 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, the need for phosphate fertilizer 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.

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Phosphate investing: Supply and demand

The US Geological Survey’s latest report on the phosphate industry shows that global phosphate rock production came in at 240 million metric tons (MT) in 2019, down slightly from 249 million MT in 2018.

China was the top phosphate rock producer last year by a long shot, putting out 110 million MT. Morocco and Western Sahara were in second place with production of 36 million MT. Phosphate-mining projects are present in a large number of other countries as well, including Russia, Tunisia, Jordan, Brazil, Israel, South Africa, Syria, Togo and Senegal.

When it comes to phosphate resources, the largest phosphate deposits are found in Morocco, which is home to about 70 percent of global reserves. The US also holds large phosphate deposits, particularly in Florida, North Carolina, Idaho and Utah. The US produced 23 million MT of phosphate rock in 2019.

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 50.5 million MT by 2022.

As mentioned, the world’s growing population and need for crop nutrients should keep demand growing steadily well into the future as well.

It is clear the phosphate industry will need to look into mining expansion opportunities and increase exploration activities to meet the growing demand and future growth forecasted for the sector.

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)
  • Vale (NYSE:VALE)

Information on smaller phosphate companies that have been working to advance their projects, including firms listed on the TSX Venture Exchange, can be found 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, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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