What factors impact potash supply and demand?

According to the US Geological Survey's latest data on potash, global output came in at 39 million metric tons (MT) in 2023 and consumption sat at 37.1 million MT. The potash sector is suffering from oversupply, and that has created lower prices and put pressure on potash producers.

Canada stands out as the top potash-producing country with output of 13 million MT in 2023, the vast majority of which was from the province of Saskatchewan. Russia was the second largest producer last year, with potash output of 6.5 million MT. China came in at a close third place, with production totaling 6 million MT of potash.

Once the third largest producer, Belarus' potash output has fallen significantly in the last two years, and it ranked at fourth place in 2023 with production of 3.8 million MT. Russia's war in Ukraine and its use of Belarus as a staging ground have led to export sanctions on the two countries, which prior to 2022 accounted for a combined 40 percent of global potash supply. Today, that figure is closer to 26 percent.

The potash market has faced volatility in recent years, but analysts are looking for prices to stabilize in 2024 despite the potential for more geopolitical upsets.

“Wars continue to rage between Russia and Ukraine as well as Israel and Hamas, with fears of other nations joining the fight,” Josh Linville, vice president of fertilizers at financial services group StoneX, told the Investing News Network via email. “Normal vessel flows are being threatened with attacks which could impede global flows. We continue to believe that all fertilizer markets will be much more mundane compared to recent years … but we are not many events away from returning volatility.”

In addition to the Russia-Ukraine war, attacks by Houthi rebels in Yemen on merchant ships in the Red Sea are also weighing on the potash market as the Suez Canal accounts for 7 percent of global potash shipments and 5 percent of phosphate rock shipments.

Research and Markets expects the world's potash demand to grow at a compound annual growth rate (CAGR) of 3.2 percent between 2024 and 2029. The value of the global potash market is forecast to see a CAGR of 5 percent to reach US$38.44 over the same period.

How to start investing in potash?

Given the encouraging outlook for the potash industry, many investors are interested in entering the space.

One popular way to do so is by investing in potash stocks. There are many companies to consider, so it's important to do your research. Investors often choose to begin with large producers — in the potash sector, some of the biggest players are Nutrien( TSX:NTR,NYSE:NTR), Mosaic (NYSE:MOS) and K+S (OTCQX:KPLUF,ETR:SDF).

Our lists of potash companies on the TSX and TSXV, as well as on the ASX, are also good places to start. And for more on potash in Australia, check out How to Invest in Agriculture in Australia.

Those who want more broad exposure may want to buy shares of an exchange-traded fund that includes potash companies. Examples include the VanEck Agribusiness ETF (ARCA:MOO) and iShares MCSI Agriculture Producers ETF (ARCA:VEGI).