snippets of fertilizerworks article

General info on fertilizer including phosphate and potash.


"That a fertilizer producer based in out-of-the-way Saskatoon should overtake Canada's largest chartered banks, tech powerhouses and oil companies - Royal Bank, Research In Motion and EnCana have all led the TSX in market cap in the last couple of years - struck many as bizarre. It shouldn't have, though. Potash is the primary source of potassium, which along with nitrogen and phosphate, is one of three nutrients absolutely essential for plant growth. And while humankind has gotten by in the past without oil, credit and smart phones, it has never done without food.

Part of the global potash industry's remarkable run-up in 2008 was a reflection of this simple fact. Indeed, 2008 saw the convergence of a number of factors that conspired to increase the value of the entire agri-industry: the record 6.7 billion mouths and stomachs that required feeding (growing to an estimated 10 billion by 2050); the fact that the world's most populous countries, China and India, were switching from efficient (albeit occasionally bland) rice and grain-based diets to feed-intensive animal-protein diets; and the general decline in arable land as farms and cropland were paved over to make way for industry. In essence, this meant that the world needed to produce more food from less land. And that, in turn, meant an increased demand for nitrogen, phosphorus and potassium - the core components of industrial fertilizers, which can dramatically increase harvests of everything from wheat to soybean.

Thus, producers of all three fertilizer components could be expected to benefit from increased global demand. If that were the whole story, though, it still wouldn't account for the stellar earnings of companies like Potash Corp., whose profit more than tripled to $3.5 billion in 2008, up from $1.1 billion the year before, or the company's even more remarkable gross margin of almost $5 billion, up from less than $2 billion in 2007.

Nor would it account for the fact that while the price of crops plummeted worldwide in 2009 as the economic recession took hold and intensified, potash producers expect to maintain or even grow their margins this year. Underlying this optimism is the belief that, while the price of nitrogen and phosphate may - and in fact did - plummet as demand dries up, potash prices and margins can be maintained by matching output to demand.

Indeed, earlier this year Potash Corp. chief executive Bill Doyle bitterly lamented the fact that nitrogen and phosphate producers "screwed up their businesses" by slashing prices to spur sales in the face of slumping demand. Margins evaporated practically overnight. He's vowed that won't happen with potash, and thanks to the tightly controlled market and unique dynamics of the global potash industry, he might be right."