Emerging Markets Planting the Seeds for Fertilizer Growth
As caloric needs increase around the world, potash companies are a good way to play the trend.
Growth prospects for emerging-market diets remain robust. We expect no slowdown in absolute caloric intake in the next decade compared with the prior decade. Poorer places such as India and sub-Saharan Africa drive much of the growth. Relatively richer emerging countries such as China will shift what they eat, which can have just as meaningful implications for agriculture input producers as how much a country eats. This growth story underpins an attractive demand outlook for fertilizer, particularly potash. India and sub-Saharan Africa will drive much of the food consumption growth in emerging markets. We expect that sub-Saharan Africa's caloric demand growth will be equivalent to the calories consumed by Germany, France, the United Kingdom, and Italy combined. India's growth will match the total caloric intake of two Japans. Each would exceed China's caloric gain of the past decade.
Wide-moat Potash Corp (POT) remains our favorite way to play this trend. Not only does the company hold an advantageous position on the global cost curve, but PotashCorp has spare capacity that should be filled by growing demand from emerging markets.
Jeffrey Stafford does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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