Agriculture Prices Look to Rise: Potash and Phosphate on the Verge of a Great Run

The intersection of agriculture and global economics is a complex interplay of supply and demand, influenced by geopolitics, climate, and market sentiment. At the heart of this equation are two indispensable fertilizers—potash and phosphate—key drivers of agricultural productivity. With rising global populations and increasing pressure for sustainable farming, these commodities are poised to play a pivotal role in feeding the world’s growing needs. Current developments signal an era of significant price movements, making it a timely moment to explore the fundamentals and investment opportunities tied to these agricultural assets.

Historical Price Patterns

To understand where we are heading, we must first examine how potash and phosphate have behaved during previous agricultural booms. Three critical price spikes provide valuable lessons:

• The Oil Crisis of the 1970s saw fertilizer costs surge as production—a highly energy-intensive process—became more expensive. The resulting price hikes in energy translated directly into higher agricultural costs.
• The 2008 Global Food Crisis witnessed unprecedented price movements due to soaring energy costs, rising demand for biofuel, and bottlenecks in supply. Fertilizers like potash and phosphate captured market attention as nations scrambled to ensure food security.
• The 2022 Supply Chain Disruptions, driven by COVID-19’s aftermath and the Russia-Ukraine conflict, once again thrust these commodities into the spotlight. Export limits from major suppliers like Russia and Belarus (potash producers) and China (phosphate leader) added pressure on already strained markets.

Each of these events had a common thread: supply shortages, demand spikes, and volatile energy prices. These themes resurface today, amplifying the potential for a bull market in fertilizers.

Current Market Dynamics

Agricultural commodity prices, including potash and phosphate, are being influenced by several intertwined factors:

• Supply Constraints: The ongoing conflict in Eastern Europe has disrupted exports from Russia and Belarus, responsible for over 40% of global potash supply. Similarly, China’s restrictions on phosphate exports are further limiting global availability.
• Rising Demand: Global food demand continues to grow as the population surges toward ~10 billion by 2050. Developing nations are driving agricultural intensification, relying heavily on fertilizers for higher yields.
• Energy Volatility: Geopolitical tensions have led to erratic energy markets, increasing production costs for fertilizers.
• Focus on Sustainability: With environmental pressures mounting, farmers are turning to fertilizers like potash and phosphate as essential tools to maximize land efficiency while being mindful of sustainability goals.

These forces create a conducive environment for price surges, prompted by tightening supplies and burgeoning demand.

Recent Developments

Several notable developments warrant closer attention:

• Potato Price Surge in Russia: Russian potato prices have soared over 330% versus the 2010–2020 period and are up over 120% versus last year’s average, driven by unfavorable weather conditions and supply chain disruptions. This underscores the vulnerability of agricultural markets to climate and logistics issues, creating ripple effects for fertilizer demand.
• Grain Price Risks from Russia and Ukraine: Combined, Russia and Ukraine account for 29% of global wheat exports. The conflict has impaired shipments, leading to higher grain prices. Fertilizer scarcity further complicates production, perpetuating a vicious cycle.
• China’s Economic Stimulus: China’s renewed focus on boosting its economy is driving up demand for meat and grains. The ensuing need for animal feed pushes grain prices higher, creating additional reliance on fertilizers like potash and phosphate.
• Rice Price Spikes: Rising rice prices, driven by weather disruptions and export bans in key producing nations, further demonstrate the global pressures on agricultural commodities. Across Asia, the wholesale price is up 70% versus the previous decade and 30% year over year, with some regions up significantly more.
• Tariffs and Trade: Pressure on other nations from the Trump administration to balance trade will likely lead to more aggressive purchases of agricultural commodities from the USA, resulting in priced cycling higher.

These developments reflect a confluence of factors that are stressing global food systems, amplifying the importance of fertilizers in mitigating risks.

Investment Opportunities in Potash and Phosphate

For those seeking to capitalize on market trends, the potash and phosphate sectors present a broad spectrum of investment opportunities:

Established Producers

• Nutrien (TSX:NTR, NYSE:NTR): A global leader in potash production with integrated phosphate assets.
• Mosaic (NYSE:MOS): An industry heavyweight with significant operations in both potash and phosphate.
• 2007–2008: Potash Corporation of Saskatchewan’s stock tripled, while Mosaic’s soared over 500%.
• 2022: Nutrien’s stock climbed more than 50% in months amid supply shocks.

Mid-Tier and Emerging Companies / Exploratory Firms

• Few in number and poor in liquidity
• Many in risky jurisdictions and with poor earnings visibility
• Interesting opportunities abound for the high-conviction investor

Plant capital in the low season, wait, then harvest

Investment strategies in this space often reward those who take a long-term view. Commodity bull markets historically deliver exceptional returns, and the potash-phosphate duo appears to be gearing up for sustained upward momentum. Warren Buffett said, “There’s no cure for low prices like low prices,” and this applies doubly so for the commodity sector and even more for the tiny agriculture investment space.

Potential Resurgence and Parallels

The price surges of 2008 and 2022 provide instructive parallels for today’s market. Supply constraints, rising production costs, and geopolitical tensions are once again disrupting equilibrium. Driven by food security concerns and growing demand, potash and phosphate are anticipated to re-enter the spotlight.

For investors seeking to align their portfolios with critical global needs, I believe now is the time to act. Potash and phosphate are not merely commodities; they are foundational pillars of modern agriculture, intertwined with the ongoing fight against food insecurity and climate change.

Checking Boxes from Macro to Micro for Outperformance

The agricultural sector faces mounting challenges in ensuring sustainable food production. Potash and phosphate play a pivotal role in addressing these issues, making them investment-worthy commodities as the world looks to balance population growth, land constraints, and sustainability.

With historical patterns suggesting potential price surges and recent market dynamics signaling bullish prospects, the future looks bright for these essential agricultural inputs. Whether you’re an investor or simply someone interested in global agriculture, now is the time to pay attention to the opportunities on the horizon. Start your exploration today—with my book The Energetic Investor as your guide. In the book, now available on Amazon, I tell my story of learning to hunt for value off the beaten path.