According to the International Fertilizer Industry Association, global fertilizer demand grew 5% in 2007, and is expected to expand an average 3.5% over the next two years as increased grain consumption in emerging-market countries such as India and China, growing demand for biofuels, and rising crop prices spur farmers to plant more.

This is no temporary trend. The world's population is expected to grow from roughly 6.7 billion currently to 9.2 billion in 2050, meaning more people will have to eat. Rising incomes in many emerging-market countries are rapidly changing dietary habits in favor of eating more chicken and beef, which increases demand for grain fodder. In fact, inventories are at their lowest in 17 years, and with roughly 90% of farmland already utilized, farmers turn to fertilizers to enhance the quantity of production possible per acre.

Additionally, potash supplies are particularly tight these days, naturally pushing prices up. Farmers are willing to pay premium prices for quality fertilizers since the additional crops they can yield provide lucrative returns. Consequently, contracts are resetting at much higher prices. This has already translated into improved margin expansion and boosted earnings growth for Potash Corp. and should further enhance financial performance if these trends persist.

Excerpts from: http://www.fool.com/investing/intern...