BHP Billiton’s (BHP) bid to take over Canadian fertilizer producer Potash Corporation of Saskatchewan (POT) has officially been rejected as being too low. But the buzz created by the takeover attempt isn’t dying. First, there was speculation that one of the Chinese state-owned enterprises would step in and shell out the cash for Potash—if anyone has ample cash for the acquisition, the Chinese do. Today, there’s new speculation that BHP’s Australian rival, Rio Tinto (RTP), may partner with a Chinese company and submit its own bid for Potash. Rumors are also circulating that fellow fertilizer producer Mosaic (MOS) may partner with other agricultural companies to acquire Potash.

 

The high level of interest in Potash highlights the bullish case for fertilizers, essential for growing crops. In the long run, population growth and improving standards of living in developing countries should lead to continual demand for fertilizer to increase food supply. In the nearer term, the rally of crop prices due to adverse weather conditions (for example, Russia’s drought and wild fires) reducing supply should lead to an extra demand jolt for fertilizers as farmers scramble to take advantage of more favorable pricing.