Fertilizer and Oil Prices have been roughly correlated, Potash Corp appears poised for a breakout.
Modern agriculture is inextricably tied to the use of oil. The USDA has a nice report showing the massive transformation of the agricultue in the US over the 20′th century. The number of people employed in agriculture has dropped from over 40% of the population in 1900 to less than 2% of the population in 2000, while US agricultural exports are roughly 80 times higher over the same period. The industrialization of farming has led to massive increases in agricultural productivity. The limits to this dynamic will have a lot to do with oil supply.
The above chart shows how the value of fertilizer has been correlated with the value of oil over the last decade. The latest impetus in the agricultural story has been the growing middle classes in the emerging BRIC nations, and their growing thirst for oil and higher protein food. While the recent recession has caused some massive fluctuations, it is obvious that he overall trend is still in tact.
In the developed world we used our wealth to speculatively build real estate we didn’t need, while the middle classes of the BRIC nations used theirs to purchase better quality food, shelter, and mobility. Material improvements in quality of life. I wonder what we can expect more of in the future?
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