Fertile Future for Phosphate and Potash

Source:

"Fertilizer is a leading candidate for the title of the 21st century's metacommodity."

We usually try to avoid jargon, but there's no getting around "metacommodity."

That's a commodity formed by, or about, other commodities. Fertilizer is just such a commodity related to potash and phosphate. They are all joined at the hip when it comes to issues of price, demand and supply.

Fertilizer is a leading candidate for the title of the 21st century's metacommodity.

One of the main reasons, as we have pointed out on several occasions, is that—as the report puts it—"on current trends the world faces a serious arable land crunch." The Food & Agricultural Organization forecasts that food production will have to grow by 70% between now and 2050 to support the expected world population of 9.1 billion.

With fertilizer at present used in 60% of world food production, it is inevitable that fertilizer use will grow, especially with more land disappearing under urban growth.

Local investors initially got enthusiastic about potash and phosphate a few years back. Potash rose from $US150 a ton to $US1000/t in 2008, but these markets collapsed along with everything else when the global financial crisis hit.

But here's the key point: the report shows that, while fertilizer prices fell substantially, they did not plunge to levels seen before 2005, and certainly nowhere near prices in preceding decades.

FAO forecasts for the 2008-13 period show that East Asia will account for 32% of extra consumption of fertilizer and South Asia another 22% of growth.

In the potash market, much will depend on whether BHP Billiton (BHP) goes ahead with its $US10bn ($11.5bn) project in Canada. This would be the world's biggest potash mine and would have considerable impact on the supply-demand situation.

Not that this is deterring those potash explorers at the junior end of the market.

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