The world’s food supply and fertilizer — is it time for new strategies?
Call it unorthodox, maybe even heretical. But, even for those of us who believe government (usually) has no business interfering in business, perhaps there’s a case for an exception. And that exception could be fertilizer. We are starting to see cases of how governments can work with companies to clear roadblocks to ensure sufficient future supplies of fertilizer can be made available.
For a world that has made so many astonishing technological advances, with talk of creating human tissue with 3D printing just being the latest, we’re still not too good at managing food supply. This is something to keep in mind for those moments you begin to despair of the fertilizer sector, and worry about the stock you own in potash and phosphate companies, sectors which are going through a sluggish price environment.
As droughts show — and the California drought is showing this right now — we still don’t have a handle on ensuring that the world has enough food. And it is also clear that governments have to step in and take a key role. Just this week we have seen Brazil’s government-backed Inova Agro financing program, which is charged with funding agriculture development, deciding to finance a potash mine to be developed by Verde Potash. As we have noted many times, Brazil still imports 90% of its potash requirements.
In Mali, as has also been reported here on Investor Intel, that government’s Institute for Rural Economic Development has been working with Great Quest Metals, the results of their work showing that the company’s direct application fertilizer is an effective replacement for much costlier imported chemical phosphate across the full range of crops and regions of the North African state.The trials using Mali’s phosphate resources provided results for all of Mali’s most important crops: cotton, maize (corn), rice (irrigated, upland and lowland varieties), millet, sorghum, cowpea (or black-eyed pea), and peanuts using GQ blends of enriched high grade (35% P2O5) and enriched medium grade (27% P2O5).
Mali actually had a phosphate mine that operated between the 1970s and into the early 1990s. Since then efforts to get new mines to exploit the substantial resources have founded due to either downturns in the global economy, falls in the phosphate price and — in the case of Mali — the invasion by Islamic insurgents, which was effectively stopped by French and other forces. But in 2009, for example, Mali could afford to import only 70,000 tonnes of fertilizer, but that was enough for just 10% of the 2.7 million hectares of arable land in the country. However, fingers crossed, Great Quest and the Mali government may show that such public-private co-operation can really work.
Northern Mali has a drought at the moment. So does Kenya; there President Uhuru Kenyatta has announced a reduction in prices of subsidized fertilizer to spur productivity and close the cycle of food shortages.
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Australia is suffering a severe drought covering large tracts of inland New South Wales and Queensland. There is talk of some towns being evacuated, and thousands of stock are being shot, there being no feed for them. Australia is drought prone and there have been some shockers since European settlement. (I know a little about this: I authored a book The Farming of Australia which deals with this whole subject — it’s available through Amazon.)
But Australia is a country that, until the mining boom came along, was built on the economic foundation of agriculture. But the country still doesn’t have a single potash mine (despite substantial deposits, especially in the brine lakes) and one major phosphate mine (despite having large by world standards deposits for which money cannot be raised).
Over the years, the government in Canberra has propped up all sorts of industries: the automobile manufacturers (until now — all three plants are going to close within a few years), and drought relief is given to farmers. But Canberra seems never to have given a moment’s thought to developing its potash and phosphate resources, even though there is talk of Australia being a “food bowl” for Asia.
Now the United States is being reminded of the fragility of its food supply. California produces a significant proportion of the nation’s fruit and vegetables, dairy products and wine. As one writer details, California supplies 99% of the artichokes grown in the U.S., 89% of the cauliflowers, 86% of its lemons, 90% of American avocadoes, 88% of its strawberries and 95% of celery consumed by Americans. Some scientists believe it’s California’s worst drought in 500 years.
There is a worldwide food crisis. Fertilizer, of course, cannot redress the problem of drought; but it can be a significant boost to world food supplies so that a drought in one area can be offset to some extent by high production from other parts of the country/globe.
China is showing us how it can be done. It is investing in farming around the world (large Australian properties have recently been purchased) and buying into potash and phosphate projects. We have seen Indian and Middle East interests pump money into African agribusiness projects.
Yet something is wrong with the world food system. It is the one vital area that we still cannot control. Meanwhile, millions more mouths arrive each year.
Fortunately, private enterprise does what it can, as we saw recently with the alliance formed by Allana Potash and ICL to produce potash in Ethiopia, supplying farmers in East Africa.
But more is needed. That’s why I suggest it may be time to think about how the system could be improved, and whether private finance is enough.
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