Potash economics

In 2018 there were 14 potash producing countries, including smaller production volumes from the Ukraine, the UK and Chile. In 2013 Russian production exceeded that of Canada, a response to overproduction, but today Canada is still retains its status as the world's dominant potash producer.

Other countries in the top ten producers are; Belarus, China, Germany, Israel, Jordan, Chile, USA and the UK (A). The volume of produced potash has been steadily increasing since records are first available in 1919 (B).

At the beginning of 2008, potash prices started a meteoric climb from less than US$200 a tonne to a high of US$875 in February 2009. These subsequently dropped dramatically to an April 2010 low of US$310 level, before recovering in 2011–12, and relapsing again in 2013. Prices in November 2011 were about US$470 per tonne, but by May 2013 were stable at US$393.After the surprise breakup of one of the world's largest potash cartel at the end of July 2013, potash prices drop another 20 percent. At the end of Dec 2015, potash traded for US$295 a tonne. In April 2016 its price was US$269. In May 2017, prices had stabilised at around US$216 a tonne down 18% from the previous year. By January 2018, prices recovered to around US$225 a tonne and today (late 2020) the spot price is around US$ 205 a tonne.


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Potash warehousing

Over the longer term, there were significant drops in world price in the late 1980s and in 2009, related to world financial crises (B). The price of potash in the period 1900 to 2017 shows a serrated rise since the 1950s, directly tied to the agricultural green revolution and increasing population pressure on the world’s arable land (C, D). This is combined with rising middle class numbers in the developing world, along with increasing consumption of animal protein (D). However the world potash market is currently oversupplied, putting downward pressure on the price of potash.In the last few years the world potash demand tends to be price inelastic in the short-run and even in the long run due to overcapacity across the world.

The sharp price spike during World War 1 (1914-1918) relates to the use of Chilean salt petre (potassium nitrate and sodium nitrate) in the manufacture of gunpowder (mixture of sulphur, charcoal and potassium nitrate) and to the fact that at that time the Germans exerted control of the world’s potash production, which was focused in the Zechstein and Alsace basins (C). At that time extractable deposits in the caliche soils of the Atacama Desert were known as “white gold.”

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World Statistics. A) Major potash producers for 1998-2018, the legend and chart match in their vertical order (compiled from USGS on-line data tables downloaded from http://minerals.usgs.gov/minerals/pubs/commodity/potash/ last accessed 1 September, 2019) Inset shows 2013 production for top ten. B) World potash production 1919-2010. C) Price (annual average) of potash in US$ per metric ton. All potash production in thousand metric tons of K2O equivalent showing dip in the market in 2009 due to the global financial crisis. (Potash data for Band C were replotted using downloaded data from <http://minerals.usgs.gov>). D) Trends since 1960 of world population (gold line), arable land per capita (green diamonds) and per capita food production (blue line), indexed to 100 and based on period 2004-2006 (from FAO database < http://faostat3.fao.org>l).

The main use of potash is as a source of soluble potassium, which is one of the three primary plant nutrients; the other fertilisers are fixed and soluble phosphorus and nitrogen. Mankind’s use of these three nutrients, in commercial forms, started the “Green Revolution” in agriculture in the 1950s. More than 95% of the world’s potash fertiliser is today produced as muriate of potash (MOP-potassium chloride) and sylvite is the preferred ore mineral in most mines, due to relatively low processing costs. MOP fertilizer has a minimum requirement of 60% K2O content. Sulphate of Potash (SOP-Potassium sulphate) and Sulphate of Potash-Magnesia (SOPM-potassium magnesium sulphate), together make up around another 5% of current fertiliser usage, and are required by some more sensitive crops where elevated chloride levels could be a problem (E). SOP has a minimum requirement of 50% K2O, while SOPM has a minimum requirement of 19% K2O content. Retailers sell potash, or potash blended with other fertilizers, in dry or liquid form.

Since 1960, the number of people on the planet has more than doubled, while the amount of arable land per hectare has halved (D). Yet the total crop or food production per capita has managed to exceed the growth in world population. Each year, potash fertiliser is used in the production of fruit and vegetables (17%), maize (15%), wheat (15%), rice (14%), sugar (4%), cotton (4%), soybeans (4%) and palm oil (2%). Our ability to continue to produce more food per capita is largely the result of the increasing use of potassium and other fertilisers and encapsulates the “Green Revolution”.

Even so, the world’s ever-expanding population means soil degradation now affects more than 15% of the Earth’s land area, resulting in 30% of the world’s cropland becoming increasingly unproductive. This is especially true in the semi-arid (sub-tropical) climate belts of the Developing World, where many subsistence farmers cannot afford to buy fertiliser to boost yields. In addition, salt marshes of the temperate zones, heavily irrigated lands, and wetland rice soils are also increasingly saline, with elevated levels of sodium and chloride in the waters. Worldwide, soil degradation affects more than 15% of the Earth’s land area, resulting in 30% of the world’s current cropland currently becoming increasingly unproductive. This is mostly due to increasing soil salinity, especially in the world’s semi-arid climate belts where water access is limited and irrigation, coupled with application of fertiliser, drives a combination of salinisation and groundwater depletion. Salinity induced symptoms in a crop include reduced root growth, decreased flowering, and smaller leaf size. When applied to the soil, SOP has a lower salinity effect on soil quality compared to MOP (potash is carried to the soil and the plant roots as a soluble sulphate versus chloride salt), and therefore is the preferred fertilizer for many saline soils around the world. For this reason there is a 40%-60% price premium for SOP over MOP (F). 

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E) Crop responses to to elevated chloride levels, showing detrimental effects of MOP application, and the utilkity of SOP. F) price differentials between MOP and SOP.

Through the increasing use of potash and other fertilisers, we are currently winning the battle to supply enough food to support the world’s growing population, even as the quality of some soil is subject to increasing salinisation. The major cause of famine today is not lack of food in the world, rather, regional famine is often due to a combination of war, ethnic and religious conflicts. The result is lack of required infrastructure and funding at the state and regional level needed to move large volumes of food into regions that require it.

Over the longer term, ongoing unfettered population growth is driving what will likely be a catastrophic collapse in the world’s food supply. This is true whether or not one subscribes to claims of anthropogenically-induced climate change and the possible additional stresses this will add to an already depressing picture of the future health of the world’s agriculture. Population growth is a problem that is much harder for the world’s political class to address by giving speeches and putting in place a few legislative measures to reduce anthropogenic CO2. It requires governments to address head-on the larger and more fundamental problem of too many mouths to feed. This is a situation created by a combination of human need and superstition, a lack of social systems to support the old, and by dogma inherent in the majority of the world’s religions in their support of notions of large families, their opposition to contraception, education of women, and antithetic attitudes to homosexuality. 

Berries

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