Market Overview

04

To support global population and economic growth, the key challenge for modern agriculture is to increase agricultural productivity, thereby producing more food on the limited amounts of land available. Mineral fertilisers are essential to enable increases in yield. The main nutrients required by plants are nitrogen (N), phosphate (P₂O₅) and potash (K₂O), with phosphate accounting for about 24% of total global mineral consumption.

IMF forecasts put population growth in 2011 and 2012 at 1.2% per year. Simultaneously, significant numbers of people in some emerging market countries are becoming richer and consuming more meat and dairy products. Meat production requires up to seven times the amount of cereal (and hence fertiliser) compared to the requirements of a grain-based diet. According to projections, global annual meat production will need to rise 75% to 470 million tonnes by 2050.

The tight balance between supply and demand for crops keeps the market strong. In 2011, the world’s farmers produced more grain than ever before — a total of 2,295 million tonnes, according to the US Department of Agriculture. Nevertheless, demand has exceeded production in seven of the past twelve years, and grain stocks remain low.

Population growth and decrease of arable land per capita

Crop market prices in 2011 were broadly strong, and at the highest levels since 2008. In broad terms therefore, farmers wanted to optimise crop yields, which boosted fertiliser demand in market-oriented economies.

However the general economic uncertainty and the worsening Eurozone crisis at the end of the year led to weaker demand. The FAO Food Price Indexpeaked in February 2011, remained firm in the third quarter but declined as year-end approached. International currencies were also affected, and the purchasing power of major fertiliser users in markets like such as India and Latin America and Southern Asia was reduced.

Animal feed a key driver for grain consumption
kg of grain to produce 1 kg meat

Meat consumption by region
kg meat/capita/year

Global GrainWheat and coarse grains (corn, barley, sorghum, oats, rye, millet and mixed grains) Consumption Outpaces Production

Source: USDA

FAO Food Indices

Source: Bloomberg

Crop Prices, US$

Source: USDA, FAO