The world population is expected to reach 9.8 billion by 2050, and it will need at least 25% more food than we are producing today.
That requires getting more out of the agricultural land, which will require significant advances in crop sciences and water management.
But one key element that will remain the same is fertilizers. They are needed today and will be even more in demand in the future. Investing in one core ingredient of fertilizer via the best potash stocks in Canada might be an intelligent thing to do.
Canada’s Potash Industry
Canada’s vast landmass and rich mineral resources make it a powerhouse in the global potash industry. As the world’s largest producer, Canada contributes more than 31% of the global supply.
The majority of Canada’s potash reserves are located in the province of Saskatchewan, with the region hosting several large-scale mining projects and operations.
Being home to the world’s largest potash producer, Nutrien, the Canadian potash industry is well-established with mature supply chains and a strong presence in international markets.
The industry has long been recognized for its high-quality potash, advanced mining techniques, and strict environmental standards. Canada’s strategic geographic location provides it with access to major potash importers like the US, China, and India.
Another noteworthy factor is the government’s supportive stance towards the potash industry, recognizing its potential to contribute to Canada’s economic growth, create employment opportunities, and strengthen international trade relations.
Pros and Cons of Potash Stocks In Canada
- They are associated with the evergreen food industry.
- Canada is the largest potash producer in the world.
- Good long-term holdings as demand may grow with the world population.
- Limited competition from the US.
- No substitute exists (for fertilizers).
- Plentiful global supply of potash.
- Limited stocks.
Best Potash Stocks In Canada
Some of the best potash stocks in Canada, which can also be classified as the best agricultural stocks in Canada, are:
- Nutrien Stock (NTR.TO)
- Altius Minerals (ALS.TO)
- Verde Agritech Stock (NPK.TO)
- Gensource Potash Stock TSXV (GSP.V)
- Western Resources Stock (WRX.TO)
- Karnalyte Resources Stock (KRN.TO)
1. Nutrien Stock
- Ticker: NTR.TO
- Industry Niche: Potash and fertilizer production
- Forward Dividend Yield: 3.56%
- Dividend Payout Ratio: 27.98%
- Dividend Yield (12-Month Trailing): 3.08%
- Upcoming Dividend Date: Jan 12, 2024
- Market Cap: $32.75 Billion
- Forward P/E Ratio: 10.82
Even among the best potash stocks in Canada, Nutrien is in a class of its own. It’s the largest potash producer in the world, but that’s not the only agricultural crown it wears.
With a massive network of over 2,000 locations around the globe and around 2,000 proprietary products, including seeds and crop inputs, it’s one of the largest agricultural companies in the world.
Its supply chains are pretty mature, and it has entered numerous international markets with primary products like potash or finished products like crop protection. It can be considered one of the safest, most diversified potash stocks in Canada and the world.
Its network of six mines (all in Saskatchewan) has an annual capacity of about 21 million metric tons distributed to one of the 300 points under the Nutrien umbrella. It’s also the third largest nitrogen producer in the world, with nine facilities and 13 ammonia plants. It’s also a significant phosphate producer (the second largest in North America).
Nutrien stock is relatively new because the company was formed through a 2018 merger of two agricultural giants in Canada. The best of the stock’s performance was between Mar 2020 and Apr 2021, when this large-cap company grew by over 250%. It also pays dividends.
2. Altius Minerals
- Ticker: ALS.TO
- Industry Niche: Royalties (including potash mines)
- Forward Dividend Yield: 1.54%
- Dividend Payout Ratio: 60.38%
- Dividend Yield (12-Month Trailing): 1.91%
- Upcoming Dividend Date: Dec 15, 2023
- Market Cap: $768.36 Million
- Forward P/E Ratio: 49.45
Altius Minerals offer a different type of potash exposure to its investors. It’s a royalty company with interest in 12 assets/projects in the Americas. Half of these assets are potash mines, of which five are operated and controlled by Nutrien.
The US-based Mosaic company owns the other one. The potash-only assets make up a decent portion of the company’s annual revenue.
Still, the diversity of the portfolio and the variety of the assets under its name makes Altius Minerals different from most other stocks on this list. It has significant exposure to coal for electricity, iron ore, copper, and battery metals like zinc and cobalt. So its financial yield from the assets is tied to various markets.
It also means that it has a more comprehensive risk and opportunity profile.
The stock may rise (following a significant bump in financials) if the demand for battery metals or iron ore shoots up, even when potash and other potash stocks are going down.
Altius has offered decent long-term growth in the past, and an example would be the 130% stock price rise between Jan 2016 and Sept 2022. The company also pays dividends.
3. Verde Agritech Stock
- Ticker: NPK.TO
- Industry Niche: Potash mining and fertilizers
- Forward Dividend Yield: 1.12%
- Market Cap: $64.26 Million
- Forward P/E Ratio: -122
Verde Agritech is a UK-based company listed in Canada that owns and operates a potash mine in Brazil, the first in the country. The Brazilian operations have benefits, like more affordable labour than what Canadian companies have access to. The company also opened its plant in Brazil to produce potassium fertilizers.
So now it has taken control of a more significant portion of the supply chain, i.e., from production to processing and final product (fertilizer).
It has two major fertilizer brands two its name, one of which has the distinction of being the only fertilizer in Brazil that uses micronized sulphur. It’s a unique advantage/selling point in a massive market. It also has a silicon-based supplement brand to its name.
The Verde stock has seen tremendous ups and downs in the fifteen years between 2007 and 2022. And at its best, the stock rose by over 4,300% in just over two years (between Mar 2020 and Apr 2022). The company doesn’t pay dividends.
4. Gensource Potash Stock (TSXV)
- Ticker: GSP.V
- Industry Niche: Potash producer
- Forward Dividend Yield: 2.91%
- Market Cap: $33.73 Million
Gensource Potash is closer to home than Verde. It’s based in Saskatoon, and all three projects are in Saskatchewan.
Only one out of the three projects is anywhere close to development (in 2022), and the rest are just areas/lands owned by Gensource that it’s looking to develop. And the one project that’s expected to start producing potash soon has another owner with about a 33% stake in the project.
The company differentiates itself from other potash producers in Canada by its “mine-to-farm” approach. The idea is that once Gensource starts producing the potash, it will oversee everything, from fertilizer manufacturing to the delivery to end destinations (the farms).
This vertically integrated structure is supposed to give the company an edge over its competitors.
Gensource’s potential can be evaluated based on several factors, including the potential of the undeveloped land it owns (which can be mined for potash).
The stock has gone through two major growth spurts in the last ten years, and the most significant one occurred between Nov 2017 and Nov 2021, which saw the stock rise about 500%.
5. Western Resources Stock
- Ticker: WRX.TO
- Industry Niche: Potash producer
- Forward Dividend Yield: 12.12%
- Market Cap: $59.18 Million
Western Resources, through its wholly-owned subsidiary Western Potash, controls a project in Regina, Saskatchewan, named Milestone. The project, which is still in its first phase, is expected to produce about 146,000 tons of potash in a year.
The production is expected to reach new heights in the next stage, i.e., about 1.4 million tons of potash annually, though the timeline of that phase has not been specified yet.
Unlike the other potash companies on the list, Wester Resources has provided very little information about the project’s specifics, and this lack of information/transparency is a factor worth considering when evaluating this stock as a potential investment.
The stock has fallen hard from its glory days (2011-2012) and the best growth it could offer in the last five years was between May and July 2019, when the stock spiked over 220%.
6. Karnalyte Resources Stock
- Ticker: KRN.TO
- Industry Niche: Potash development
- Forward Dividend Yield: N/A
- Market Cap: $10.12 Million
The last stock on this list is Karnalyte, a potash development company working on the first phase of its Wynyard Potash Project. The company’s goal is to become a low-cost, low-impact, and high-quality potash producer, which may help it stand out against giants like Nutrien that have clear superiority in production yield.
But the project appears to be quite promising considering the company’s valuation, with a projected annual production of about 2.125 million tons of potash.
The project is in Saskatchewan, a province rich in this mineral. The company also aims to produce a decent amount of Magnesium alongside potash. One of the best growth phases of the stock was its 890% spike between Oct 2021 and Mar 2022.
Should You Invest in Potash Stocks?
Yes. The best potash stocks in Canada offer you unique exposure to the agricultural market, i.e., investing directly in one of the core ingredients. And Canadian investors have a default edge as Canada is the largest producer of potash globally, though the credit goes mainly to Nutrien.
But the fact remains that agricultural products are more likely to increase in demand, and minerals like potash may grow in value steadily in the next two or three decades, which may be reflected in the potash stocks.
Future of Potash Industry in Canada
Looking ahead, Canada’s potash industry is set to play an even more significant role in addressing the global food demand challenge. As the world population surges, the need for enhanced agricultural productivity becomes paramount, placing potash at the forefront of sustainable farming solutions.
Several factors are poised to drive the growth of the potash industry in Canada:
- Increased Global Demand: With the ever-growing global population and the need for higher food production, the demand for potash as a crucial fertilizer ingredient is expected to rise.
- Technological Advancements: Advancements in mining technology can lead to more efficient extraction and processing methods, reducing costs and increasing production capacities.
- Sustainable Farming: As the world shifts towards sustainable farming practices, potash’s role in improving soil health and crop yield becomes increasingly crucial.
- Investments & Expansion: Companies like Nutrien are continuously investing in expanding their operations, tapping into new markets, and increasing their production capabilities.
However, the industry is not without challenges. The abundant global supply of potash could lead to price fluctuations, impacting profitability. Moreover, environmental concerns and the necessity to adhere to strict regulations could impose additional operational costs.
FAQs
Q: What’s The Largest Potash Company In Canada?
A: Nutrien is the largest potash company in Canada. It’s also the largest potash company globally.
Q: What Are The Top Potash Stocks?
A: Nutrien and Verde can be counted among the top potash stocks in Canada.
Q: Are Potash Stocks Safe?
A: Yes. Potash stocks are a vital part of the evergreen agricultural industry and are relatively safe, but stocks should be evaluated individually.
Conclusion
The best potash stocks in Canada can prove to be suitable investments, especially in the long term.
The only significant potential risk these stocks may possess is a revolution in the agricultural industry that renders potash-based fertilizers useless or subpar in the future. But it’s a long shot, and as of now, the risks are relatively minimal.
An excellent pairing to the potash stocks would be the best water stocks in Canada.
