17 July 2017
We think demand for potash could double by the late 2040s, by which point it could be a US$50 billion market. That’s one of the reasons why we’re investing counter-cyclically to give ourselves the option to add it to our diversified portfolio of commodities through the construction of the Jansen project in Saskatchewan.
As an essential nutrient for plant growth, potash is a vital link in the global food supply chain. And the demands on that supply chain are intensifying; while cultivated land area will remain almost static, the global population will be close to 10 billion by 2050. Not only will there be more mouths to feed but also rising calorific intake comprised of more varied diets, both of which increase the strains on finite land supply. Between now and the middle of the century, food demand will grow by 50% and sustainable increases in crop yields will be crucial if we are to continue to feed the world. Advances in farming practices, farmer education and new seed varieties will all help to optimise yields in the future. But as the quantity of production grows, so too does the amount of potassium removed by harvesting – and the sustainable, targeted use of potash fertilisers will be critical in replenishing our soils.
Mineral fertilisers are used to provide plants with potassium (K)1, one of the three essential macronutrients they need to thrive, along with nitrogen and phosphorus. Potassium has no substitute in plant nutrition and deficiency reduces resistance to drought, pests and diseases. Potassium deficient crops have poorly developed root systems and weak stalks. Not only does potassium help to improve yield, it is also known as the ‘quality’ nutrient as it affects factors such as the size, shape, colour and vigour of the seed, grain or fruit.
Potassium nutrient can be supplied to crops through the application of mineral fertilisers, organic manures and crop residues, or from the native mineral content of the soil. Potassium chloride, which is the most common type of potassium fertiliser, is often referred to as potash (which is also a generic term for all potassium compounds and potassium-bearing materials).
More than 90% of the global demand for potash comes from agriculture and around 55Mt of potassium chloride is applied as fertiliser annually. That is equivalent to 6kg per tonne of crop production, 40kg per hectare of harvested land or 7kg for each person on the planet.
The basic rationale for rising potash consumption is quite simple. Not only is the total population continuing to grow, but at least three billion people are expected to join the global middle class by 2030. That has implications for people’s diets. Average calorie intake is increasing and so is the share of those calories coming from animal products2, sugar and vegetable oils – foodstuffs that have higher demands on crop production. As a result, food demand is rising faster than population, and crop production is rising faster than food demand. The finite supply of cultivated land area cannot keep up with that demand. In 2000, arable land per capita was 2,500 square metres – about half the size of a football field. Since then it has fallen to 2,100 square metres and is projected to shrink further to 1,900 square metres by 20303. As a result, the demands of food supply must be met through higher yields from existing arable land, putting more strain on our soils. All this points to steady long-term growth in global crop production and this growth will have to be achieved through the sustainable intensification of agriculture and the optimisation of crop yields.
Arable land per capita is likely to fall by almost one quarter between 2000 and 2030, while demand for food will increase by one half.
There are a number of complexities involved in translating the expected requirement for crop production into demand for potash. Greater application of nutrients in the form of mineral and chemical fertilisers, of which potassium chloride is one, will be a key means of achieving the necessary yields – but there are others, including the use of precision agriculture to minimise nutrient losses, efforts to improve the recycling of nutrients from animal manures and crop residues, and development of hardier seed varieties.
The amount of potash fertiliser required will also depend on which crops are grown and where – because potassium uptake varies between crops and different soils have different levels of native potassium. That native potassium is a crucial factor – unlike nitrogen and phosphate, potassium is not readily leached out of soils and farmers can reduce the amount of potash fertiliser they apply by “mining” the soil. That can happen in the short-term, if the economics of buying potash are unattractive, but sometimes over longer periods if the soil is naturally rich in nutrients.
But native potassium is not inexhaustible. Quantifying aggregate soil potassium availability across whole countries is extremely difficult, but it is believed that in many parts of the world potassium is being removed faster than it is being replenished. Higher yields and multiple-cropping practices risk further depletion of soil potassium. This provides considerable upside to future potassium demand if native potassium is pushed to critical levels, increasing the share of supply that must come from external sources, particularly potash fertiliser.
… in many parts of the world, potassium is being removed from the soil faster than it is being replenished.
Potash demand sits at the intersection of inexorable mega trends ranging across demographics, economics, diet and the environment. For the producer of any commodity, such an intersection is exactly where you want to be. But demand is only half the story. In the next episode, we will focus on the supply side of the potash market.
1. The element was first isolated in 1807 by Sir Humphrey Davy. The chemical symbol for the element, K, derives from ‘kalium’, the Latin version of the Arabic word for alkali.
2. Livestock is fed on a variety of materials, including cultivated crops and open grazing, with implications for land use and crop production.
3. Source: United Nations The 2012 Revision of World Agriculture Towards 2030/2050.