The Potash Corp. Lesson: Fertilizing China’s Economy

B.C. commodity suppliers need to heed the call of China’s growing economy.

There’s a straightforward lesson for B.C. commodity suppliers in the story of Potash Corp.

Let’s talk about fertilizer!

Okay, you have to admit you don’t hear that too often in business. Presuming we mean real, factory-made fertilizer, and not the …umm… organic kind that many of us reference constantly, usually beginning with the word “bull.” 

Specifically, I think we should talk about potash, the building block of fertilizer, and of which Canada is the world’s leading producer.

I’m mentioning potash because Potash Corp. of Saskatchewan Inc. is about to be taken over by foreigners. It’s fighting, but resistance is futile, because there is no one in Canada big enough to do it instead.

And Potash Corp.’s story is likely to be repeated in B.C. among other commodity suppliers like those who mine gold, copper, and other metals.

You see, like many other commodity suppliers today, Potash Corp. is a victim of its own success. As potash prices rise (much like other commodities right now,) the sharks have started to move in. For example, BHP Billiton has launched a US$39 billion hostile takeover bid for Potash Corp.  

But if you dig a little deeper, you’ll see that behind this takeover attempt is the Chinese situation. China needs fertilizer to revitalize its farming industry, to boost its crop production in order to feed its enormous population, and of course to provide jobs for the many millions of people who still haven’t fled the farms for jobs in cities. Billiton would like to lock up that market and is willing to pay billions to do so.

However, it now seems that China, which is so flush with money it’s almost obscene, may also make a higher bid through one of its state chemical companies. China would like the potash, of course, but it also needs something more – a consistent supply of commodities to keep growing its economy, which must add millions of jobs yearly to soothe its restive population.

What’s your China strategy?

And therein lies the lesson for every commodity supplier in B.C. China is on the hunt for any company that can provide either the materials for factories that can create those jobs, or transfer those jobs directly to China.

So, if you’re a commodity supplier, what’s your China strategy?

Are you looking at them as a market? Are you looking to sell out to the Chinese and ensure their supply? Are you looking at joint venturing in China, providing expertise so the Chinese can start building their own internal commodity supply?

Whatever it may be, you’d better get one. They’re not going away.

And that, by the way, is not fertilizer of the organic kind.