SYMBOL : PON-TSXv LAST : 0.33 CHANGE:
0.02 (5.71%)
SYMBOL : PON-TSXv LAST : 0.33 CHANGE:
0.02 (5.71%)
November 7, 2008
October 16, 2008
Industry Fundamentals
In the last five years, the global potash market has been experiencing rapid growth due to greater demand for food, fiber, livestock feed and biofuels.
The two main drivers of the potash market are population growth and economic growth.
The world's population is currently increasing at the rate of approximately 75 million people per year. Population experts predict that by the year 2050 the earth will be inhabited by 9 billion people - an increase from 6.7 billion people in 2008. The majority of this growth is occurring in the developing nations.
As the incomes in these developing nations grow, there is a natural inclination for a more protein-rich diet, which means people tend to eat more meat. As meat consumption soars, more grain is needed to feed the livestock. This has an amplifying effect on the demand for fertilizer, because it requires about 2, 4 and 6 kilograms of grain to produce 1 kilogram of poultry, pork and beef, respectively. In order to satisfy demand for additional grain supplies, further improvements of yields are required from arable lands, driving the demand for fertilizers.
As the world's population continues to increase, increasing stress is put on the world’s arable land. As the cities and the suburbs continue to expand, there is less arable (fertile) land to grow food on. Crops must be appropriately fertilized to maximize crop yields in order to meet global food demands. More production must be squeezed out from the remaining farm land, which means the farmers need more fertilizer.
The potash supercycle does not end with the increased human food consumption. Bio-fuels are also an important driver of potash demand. In 2000, 14% of the corn grown in the US was used in ethanol production. Currently, 30% of US grown corn is used in ethanol production and is expected to increase by another 30% by 2015. Bio-fuels are creating additional yield demands on existing farm land which is further fueling demand for potash.