Ways to Invest in Potash
Interested in potash investing, but not sure where to start? Here’s what you need to know about potash, from supply and demand to stocks.
The world’s population is increasing rapidly, and is expected to reach over 9.7 billion by 2050.
A larger population will have many consequences, one of which is that much higher amounts of food will be needed. But with more people will come further urbanization and less farmland to work with, which means farmers will have to increase crop yields.
That’s where fertilizers like potash come in. Potash fertilizer not only provides essential nutrients to food, but also improves water retention in plants and strengthens their roots and stems. Put simply, potash fertilizer allows for higher crop yields and increased food production.
Phosphate and potash are increasingly important to enhancing crop production and will also have a large role to play in the cultivation of the burgeoning cannabis industry.
Unsurprisingly, many investors are wondering what potash is, and how they can gain exposure to the potash market. Read on to find out more about this commodity.
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Potash investing: What is potash?
First, it’s important to understand what potash is: an alkaline potassium compound that is most commonly used in fertilizers. All in all, 95 percent of the world’s potash supply is used to grow food.
The term “potash” refers to potassium compounds and potassium-bearing materials. It includes potassium chloride, which is a salt-like mineral that is naturally white or colorless, but sometimes takes on a pink or red color due to impurities such as clay.
Most potash comes from salt left over from ancient evaporated seas, which lie underground. There are two different types of potash: sulfate of potash (SOP) and muriate of potash (MOP).
SOP is used on high-value crops, such as fruits, vegetables, nuts, tea, coffee and tobacco, and is considered premium quality. MOP is more common, and is typically used on vegetables such as sugar beets, celery and Swiss chard.
Potash investing: Supply and demand
According to the US Geological Survey‘s latest data on potash, global output came in at 41 million MT in 2019. Consumption for 2018, the most recent year for which information is available, was 43 million MT.
Last year, the top potash-producing country was Canada, whose output came in at 13.3 million MT. Saskatchewan potash production accounts for 90 percent of that amount, and makes up about 50 percent of global potash production.
Belarus was the second largest producer in 2019 with potash output of 7 million MT. Russia came in third, with potash production totaling 6.8 million MT.
The potash sector has suffered from oversupply in recent years, and that has created lower prices and put pressure on potash producers. That said, the potash outlook is fairly promising, and, as noted, population growth is expected to spur even more demand for potash in the long term.
Potash investing: Companies to watch
Given the solid outlook for the potash industry, many investors are interested in entering the space. One popular way to do so is by investing in potash stocks.
There are a huge number of companies to consider, so it’s important to do your research. Our lists of potash companies on the ASX as well as on the TSX and TSXV are good places to start.
This is an updated version of an article first published by the Investing News Network in 2016.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.