Friday, January 30, 2009
Potash One: Return of the Potash Bull By James West
Potash One's announcement last week of its intention to absorb Potash North into its corporate structure is evidence of company president Paul Matysek's confidence in the future of potash markets. While most other minerals are adversely affected by the drop in demand engendered by the economic slowdown, potash itself is still in short supply relative to growing global demand.
For potash, the future is much brighter than it currently seems. For one thing, just because the global economy is going into a contraction doesn't mean that farmers are going to stop fertilizing. Quite the contrary.
As GDP lowers across the global spectrum, pressure will intensify for enhanced yields from crops as a growing number of poor rely on simple diet options comprised of grains. While protein diets exert more pressure on grain supplies, the inability of a growing proportion of the world's poor to incorporate meat into their diets means the slack from reduced meat demand will largely be offset by increased demand for grain in human diets.
The population does not stop growing either in times of recession, so the fundamental driving force for demand of potash remains intact, though development of new deposits has slowed considerably in the current financial environment.
"Good deposits are rare and only 12 countries produce potash," highlighted PotashCorp President and CEO Bill Doyle in a presentation last month.
The top producing country is Canada, followed by Russia, Belarus, Germany, and the US, while other important potash producers are Israel, Jordan, Brazil, and China. (The Canadian province of Saskatchewan holds more than 50% of the world's potash reserves - enough to meet global demand for several hundred years - and has 37% of current global production capacity.) Lesser producers include Chile, Spain and the UK.
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