Friday, March 09, 2012

How to Profit from the World's Most Indispensable Commodity

How to Profit from the World's Most Indispensable Commodity
By Dr. Alex Cowie, Editor, Diggers & Drillers 

There are some commodities so rare, so valuable, and so indispensable that their mere existence in large quantities makes them a source for the wealth of a whole nation. These commodities create huge surplus profits for a country. 

Oil is the best example.

For instance, Norway, Abu Dhabi and Saudi Arabia have built up more than a combined $1.63 trillion in assets thanks to their oil sales. Simply by recognising and investing in a commodity the world can't do without.

What if you applied that logic to your own investing strategy? 

What if you could find a little discussed - but indispensible - commodity to add to your investment portfolio? Perhaps something that not many people are talking about yet, but will take off - just like oil did - when the masses realise how valuable it is... What do you think that could do to your overall profit and loss statement?

Well, there is at least one commodity out there that seems like it could fit the bill. Which I'd like to tell you about today...



Why You Want to Add Potash to Your Portfolio

Potash is potassium-rich rock. Plants need potassium to grow, but heavily farmed soil can be very low in potassium. Farmers apply potash to the land as a fertiliser to nourish crops and get more produce from each hectare. Without fertilisers like potash to boost potassium levels in the soil, there wouldn't be enough food to go around. 

Why?

Two reasons. Supply and demand.

The global population increasing steadily (at a rate of about 11 million hungry mouths a month), meaning the demand for food is growing. 

However, the amount of viable farmland keeps shrinking (each year some is lost to urban development - and still more becomes desert). This puts a great deal of pressure on the farming sector to increase production. They do this by using fertilisers such as potash. 



Potash Prices are Climbing

Potash prices are now rising fast. Since the start of last year they've increased over 30% to reach $476.30 per tonne last month. Yet, they are still a long way from their peak, which also makes me confident the price won't collapse any time soon. 


Potash Price

Potash is in demand wherever farmers are growing crops. The world's biggest potash consumers are therefore China, Brazil, India and the United States. 

The US is a big consumer. But, surprisingly, it imports 91% of the potash it uses. 

Most US potash imports come from Canada. The US is keen to be more independent of its reliance on Canada.

One of the most important points to remember is that potash is less volatile than many other commodities. It moves mostly in line with good old-fashioned supply and demand. There are no futures markets, ETFs or hedge funds playing around with the price.

Because of this, potash stocks are a bit less unpredictable. 

And, even in a recession, there are almost seven billion people who need to eat. 

That's why potash is what I'd call a recession-proof commodity. An indispensable commodity. And one well worth thinking about adding to your portfolio.

Alex Cowie
Editor, Diggers & Drillers

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