Investors who have put their faith in commodities over the past two years have been sorely disappointed. Everything from oil to precious metals, potash, and other commodities necessary for economic growth and expansion have seen declines largely on reduced expectations for global growth as well as increased supply in many commodity sectors.
While I do believe that a medium- to long-term rebound in commodities is likely, given current global growth trajectory estimates as well as trends supporting additional consolidation in many key commodity sectors, exactly when such a rebound will take place is largely unknown.
When such a rebound does take place, I also expect some commodity sectors to perform better than others, and as such, I will be focusing my attention on one commodity sector in particular which I believe will outperform other commodity sectors and the broader market in general over the next commodity-driven cycle: potash.
Potash is a staple commodity for food production, and has a very high correlation to growth trends in food consumption globally, particularly meat consumption. With developing economies supporting food consumption growth trends which generally outpace growth in other commodities (the need for food is likely to outpace the need for gold or oil, given current trends toward renewable energy), companies like Potash Corporation of Saskatchewan Inc. (TSX:POT)(NYSE:POT) are companies I am looking at now as defensive plays in a bull market which is approximately 10 years old.
Commodities are defensive by nature, and given the nature of potash as a commodity which is expected to grow in importance over the medium to long-term, I would suggest investors take a deeper look into the industry given the current depressed nature of the potash business.
Invest wisely, my friends.