4 Commodities Ready To Shock Investors – #3: A War In Africa May Cause Phosphate Price Shock
Posted: July 23, 2008
As if the oil price shock that has thrown the world into turmoil isn’t bad enough, there’s reason to believe at least four more commodity price shocks may be headed straight for investors’ portfolios.
Next up: phosphate, a critical component in fertilizer, which based on an analysis that appeared last week on the web site The Oil Drum, could be in for a price explosion.
As explained in The Oil Drum article, written by Jeff Vail, Morocco has about two thirds of the world’s rock phosphate reserves. The price of phosphate, which has already risen some 300% in the past year alone, could go a lot higher if Morocco’s long-simmering feud with Algeria over the disputed territory of Western Sahara, which is phosphate-rich, explodes, which it could at any time. Indeed, the analysis notes that tensions between the two countries are rising, in part because the U.S. and Russia are provoking animosities “with massive opposing arms deals and bi-lateral trade agreements.”
As The Oil Drum analysis noted, the U.S. Geological Service says there are no substitutes for rock phosphate in agriculture. Rock phosphate “is arguably as important to the world situation as oil supply,” according to the analysis.
The takeaway here for investors is that, while phosphate prices have leaped in recent months, an even bigger spike could occur at any moment. If it does, the price of food may rise significantly above its already high levels, even as more farmers are forced to contemplate going out of business.
At the same time, presumably companies such as Canada’s Mosaic Co. could prosper. Mosaic describes itself as one of the world’s leading producers and marketers of concentrated phosphate and potash crop nutrients. Among other logical possible winners: Agrium Inc., another Canadian firm that produces and markets phosphate, potash and nitrogen.
Tomorrow, July 24, Commodity Shock #4 – Cobalt
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