"Jacob Bout
Good morning. Can you comment on your confidence level of your 2020 global potash demand forecast of 67 million tons to 69 million tons? And maybe what are your thoughts, what are the assumptions in China and Brazil in 2020?
Charles Magro
Sure. Good morning, Jacob. So look, the way we're looking at the potash business, if you step back and you look at the long-term history. But the potash market has been growing pretty consistently at 2.5% to 3% per year, but over that period of time, we have seen pullbacks in demand over the years and really that's because of inventory getting build up in the system, which in the potash world we really can't see with great clarity. But the last five years, if you just look at the last five years of the potash market, it's grown at closer to 4% per year. So was this pull back really expected, not really, but I don't think we can even say it was a surprise. So when you look at 2019, there were two really key drivers that pulled back the expected demand now, One is North American weather, which we've talked a lot about and the second was palm oil pricing being so low in Southeast Asia.
So when we look forward to 2020, we expect both of those to correct themselves. We're going to assume normal weather in North America, and when we look at our, as you recall, we bought a company called Waypoint last year, which is the largest soil sampling business in the United States, and the data that we're getting from that is really quite fascinating and what it is showing us is that there are some areas that are quite potash deficient in North America which shouldn't be a surprise considering the weather we had in the spring and even in the last fall. So we do think the underlying demand in North America is going to rebound next year.
When it comes to palm oil, we are seeing prices that are up. There is an increase in demand for biofuels in Asia, and so all of that bodes well for a rebound next year in Southeast Asia. The other markets that we're expecting to grow next year, of course, Brazil, just more acres being put in the production, and then of course, India, which I mentioned, had good rains this year. China, our assumption would be more flat this year, but if you look at the aggregate of all of what I've just described, it is our call today that we would be at the 67 million tons to 69 million tons for 2020, up from the 64 million tons to 65 million tons, and if you just take that number and you go back five years that would put us back on trend point of about a 2.5% annual growth rate. So we are pretty confident with the 67 million tons to 69 million tons today."
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