BHP Billiton's Bid For Potash Pulls Focus To Fertilizer, Food, Farming
18 August 2010 - 7:44AM
Dow Jones News
BHP Billiton Ltd.'s (BHP) US$38.6 billion bid for Canada's
Potash Corp. of Saskatchewan (POT) underscores increasing corporate
interest in farming, food and fertilizer, the executive manager of
the Fertilizer Industry Federation of Australia, Nick Drew, said
Wednesday.
There is a global trend of increasing population and increasing
wealth in heavily populated countries like India and China and that
means demand for farm products is going to rise, at the same time
as the availability of arable land is being squeezed from
urbanization and environmental degradation, he said.
"There's going to be quite a crunch coming and agriculture is
probably going to become a much more interesting space in the next
few years," Drew told Dow Jones Newswires.
The board of Potash isn't opposed to a sale but has rejected
BHP's bid as "grossly inadequate," which suggests the sector will
remain in focus until the issue is resolved.
News of the takeover comes after Canada's second-largest
fertilizer producer Agrium Inc. (AGU) Monday announced a
conditional A$1.24 billion cash takeover offer for Australian
agribusiness AWB Ltd. (AWB.AU). AWB was already considering a
share-based nil-premium merger proposal by Australia's GrainCorp
Ltd. (GNC.AU), which if it proceeds would have created Australia's
biggest grain company and its biggest agribusiness with a market
capitalization of almost A$2 billion and annual sales in excess of
A$7 billion.
Drew said BHP may well be just seeing potash as just another
mined commodity and would be deciding on the value of any takeover
on that basis.
"But I suspect the fact that they're interested gives you a clue
as to which way they think the market is going for fertilizers,
which is just a reflection of the market for food," he said.
Signs of a sharp increase in food demand from rising population
was seen in the 2008 spike for fertilizer prices and in the spike
in wheat prices since early June due to the Russian drought, he
said.
Both these spikes are symptoms that suggest the future of
agriculture is both more volatile and brighter, he said.
"We're starting to see productivity bump against demand," Drew
said.
The U.N. Food & Agriculture Organization said last year it
expects the world's human population to rise to 9.1 billion in 2050
from 6.7 billion now, which - given increasing income growth and
urbanization - would require a 70% increase in global farm
production.
Australia is a major global supplier of traded grains, meats,
dairy products, and fibers, such as wool and cotton.
Potash, along with nitrogen and phosphate, are key crop
nutrients that replenish soil and increase the amount of crops
produced on farmland. Potash Corp., based in the prairies of
central Canada, controls 20% of the globe's potash supply.
-By Ray Brindal, Dow Jones Newswires; 612 62080902;
ray.brindal@dowjones.com
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