Potash is one of three essential ingredients for grain and plant growth, known as K (potassium), N (Nitrogen), P (phosphate). As such, potash is a key ingredient in fertilizers whose role is to restore and strengthen soil, while maximizing crop yield and disease/pests resistance.

The primary obstacle faced by the grains market is that weather is a key factor in predicting supply. Any sign of bad weather can potentially send grain prices higher. Alternatively, perfect weather could cause a steep price correction. Fertilizers will mirror this pattern, as a great deal of the sentiment behind potash and phosphate relates to its use as a means to increase grain output. (Leia Toovey- sept. 21 2011, PotashInvestingNews.com)

Without fertilizers a third of the global population would not have adequate food. Potash prices have steadily increased over the past years and they are forecasted to remain strong over the next decade and beyond.

Behind this growing demand for potash are some of the following factors:

  • In the short term, current world potash consumption of some 50 million tpy is predicted to increase 3-4% per year by 2011 and beyond, meaning 2 million tpy are needed and must be added annually.
  • Increasing demand from BRIC (Brazil, India, China) countries who are big potash users.
  • World population is growing at a rate of some 75 million inhabitants per year. FAO predicts that world population will grow to 9.2 billion people by 2050 from the current 6.7 billion people. More people means more food needs to be produced, more food means more crop which means more fertilizers to increase yield.
  • There is an overall tendency to protein-rich diet especially in developing countries such as China and India due to stronger economies and higher income enabling people to improve the quality of their lives. This means an increase in meat intake thus driving more livestock and poultry causing an increased demand for feed grain. Studies have indicated it takes 2.4 to 6 kg of feed grain for 1Kg of meat.
  • The acreage of arable land particularly in China and India is limited resulting in nutrient depleted soils which require replenishment. Soils of countries such as Brazil are acidic, they thus require more nutrients.
  • Potash is essential for the production of high energy content crops such as corn, palm oil, sugar cane.
  • High oil and gas prices are driving the production of biofuels such as ethanol and palm oil. These in turn are driving the increase in the production of crops such as corn and sugar cane.

  • Potash deposits and mines of commercial size are limited worldwide, with only 20 commercial size projects in 12 countries in the world, while potash is consumed in about 160 countries.
  • Sudden and sharp increases in production are difficult due to project timeline and numerous long lead time items necessary. Each conventional greenfield potash project has a 5-8 years timeline to production.
  • Capacity surplus is difficult to develop, as 85% of current global potash operations are over 25 years old, and many use outdated conventional underground mining and processing technology.