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
AWB Ltd (ASX:AWB)
Historical Stock Chart
From May 2024 to May 2024 Click Here for more AWB Ltd Charts.
AWB Ltd (ASX:AWB)
Historical Stock Chart
From May 2023 to May 2024 Click Here for more AWB Ltd Charts.