On first thought the answer would likely be yield or economics. Upon deeper contemplation the answer might be growing populations. However one of the other drivers for the use of fertilizer is changing diets. As standards of living increase, one of the changes that people make are improvements to their diet. For example the daily caloric intake in China has gone up by 50 percent since 1978. Within this increase is a near doubling of protein consumption, of which the majority of this is due to eating more meat. This is partially why for example Australian beef exports saw strong increases last year in beef exports.
What does this increase in meat consumption have to do with fertilizer? This increase in consumption ultimately increases the consumption of grains. Depending upon the protein type, more grain must be utilized to produce more meat. For example, for every pound of chicken, two pounds of grain are used to grow this protein. For cattle it is eight times, pork is almost four to one. Certainly this is dependent upon what the animal is fed but it takes more grain to produce more protein. This along with growing populations is why China has gone from being an exporter of corn, to an importer.
How does one increase the production of grains? Certainly one of the ways this is achieved is through the proper use of fertilization.
If you would like to discuss a fertilizer or other mining project, please contact Schlumpberger Inc.
Recently Schlumpberger Inc had the opportunity to discuss a project with a management team. This project was a greenfield project that was looking to develop not only a new mine, but also an undeveloped deposit. Further research into the project showed that roughly half of the sales from the project was to go into an area that historically had poor agricultural yields, and would essentially be a new market for this project. The “yield gap” between the existing agricultural production and what was attainable for this area of sales was approximately 80 percent. In other words, the yield of corn in this area was one fifth of what could be attained with proper agricultural knowledge and access to agricultural inputs.
This “organic” growth is exciting for a project, it represents an untapped market that has the potential to sustain sales for this operation, as well as improving yields, and possibly reducing hunger in an area.
If you would like to discuss the potash markets, please contact Schlumpberger Inc.
On 15 April Mosaic announced that they were buying Archer Daniels Midland Company’s fertilizer distribution business in Brazil and Paraguay for $350MM. While not yet finalized, this deal would provide blending and warehousing in these countries as well as logistics services.
This seemingly represents a sound strategy in that it expands market access for Mosaic particularly in Brazil. With 2014 GDP growth expected to increase by over three percent, Brazil represents 80 percent of the Latin American potash market, has nutrient deficient soils, and is a large producer of corn, sugar cane and soy beans. This important market grew 4.6 percent in fertilizer use in 2013 alone. This region is further characterized by difficulties in transporting not only the crop nutrients, but also the finished agricultural products. Improved logistics would certainly aid these issues likely improving sales.
Obviously sales of phosphates in this area will be straight forward. However how will sales of potash be affected with this strategy? Campotex seemingly adds an additional wrinkle to this deal. Will the potash tonnes be sold outside of Campotex, or will this just improve movement of Mosaic’s allocation within this region? This certainly has the potential to upset the potash balance, at least in Brazil.