Competition Hits Potash Market
Source: Resource Investing News, Leia Michele Toovey††(12/2/10)
"Over the next few years, potash demand is expected to increase in the range of 3 to 5% per annum."
This is exactly what we witnessed with BHP Billitonís (NYSE: BHP) purchase of the Jansen Project in Saskatchewan, and their hostile attempt to acquire Potash Corp. of Saskatchewan (NYSE:POT). Other diversified miners, including Vale, have been open about their intentions to enter the potash market.
The potash industry is poised to grow. Potash increases crop output, and with a growing population and shrinking amount of arable land, fertilization to increase output is necessary. Over the next few years, potash demand is expected to increase in the range of 3 to 5% per annum.
This year, we have witnessed a microcosm of what can drive up potash prices. A Russian drought has crimped the wheat supply, and the United States witnessed lower than anticipated crop yields. These two major data points have combined to create a run-up in grain and oilseed prices. The price of corn has shot up to $6 a bushel. As grain prices climb, farmers have the cash and incentive to increase output.