Potash price surge could lead to higher food costs for billions

We are on the precipice of a food fight among 7 billion people, and potash will be right at the center of it.

If you can add 200,000 people every day to the global population and account for a significant loss of farmland at the same time, you can begin to understand the dire food situation facing the planet. This is why potash is so important: It’s the fundamental element that everyone takes for granted, despite the fact that a projected 7.7 billion lives will depend upon it by 2020.

No commodity is more fundamental than potash—and there is a lot of pressure riding on an element that many people aren’t even familiar with. Of the key commodities taken for granted, potash is on the top of the list.

The challenge for farmers—and for the world—is to increase crop yields on less land, which is being lost to climate change and increasing urbanization. This means not only steady demand for the three main elements of fertilizer—potash, phosphate and nitrogen—but significantly higher demand.

"A growing population needing to be fed from a limited amount of arable land makes fertilizer and particularly potash a robust commodity," Potash Ridge President and CEO Guy Bentinck told Oilprice.com. "Additionally, as the middle class grows, the demand for higher-end food increases, and with that the demand for potash and related fertilizers increases."

For such a critical element, it’s hard to believe that potash remains so elusive. It took a high-profile US$40-billion hostile takeover attempt of Saskatchewan’s Potash Corp., which failed, by major miner BHP Billiton in 2010 for even the Wall Street Journal to decide to figure out what all the fuss was about.

Potash, and various potassium-containing compounds are used to fertilize crops as a necessary resource for the growth of plants. In many regions of the world, there are large potash-bearing deposits from ancient sea beds that dried up millions of years ago. Most potash comes from these sources and is separated from the salt and other minerals and then graded into a form that can be used to make fertilizer.

So even if you haven’t heard of it, Potash is so big that it eludes radar—until the giant miners start aggressively positioning themselves for bigger pieces of this pie.

If you’re still not sold on potash, consider this: As far as commodities go, though it’s been a tough couple of years, Potash outperformed gold, silver, copper and oil and gas in 2015, and this year, as its cycle comes full circle, it’s back by popular demand.

The Potash Playing Field

This is a huge playing field with some of the biggest miners in the world—all vying for market share.

Russia, Belarus, China, Germany, the U.S., Israel, Jordan and China are all major potash miners, with Canada currently holding the top position for the commodity--producing 11 million tons last year and the year before, compared to Number 2 producer Russia’s 7.4 million tons.