Han Shujun’s dusty desk in a giant farm-supplies warehouse in China’s grain-growing belt seems a world away from the corridors of financial power in Canada and the intrigue swirling around Potash Corp. of Saskatchewan.
But with nervous interest and a hint of patriotic pride, Ms. Han has been following as Potash Corp.’s board of directors rebuffed a hostile takeover bid from Australian rival BHP Billiton, and rumours swirl that a Chinese partner might intervene to help keep Potash Corp. out of BHP’s hands.
The reason for Ms. Han’s interest is simple. Compound fertilizers – of which potash is a key component – are the only thing on sale at the Gold, Honesty and Trust Agricultural Corporation where she works as a manager. She’s also a grain farmer, and relies upon such fertilizers herself to improve crop yields.
The obscure mineral is as important to Ms. Han and her company as it is to China as a whole. The country is now the world’s biggest user of potash as it struggles to produce enough food to feed the itself amid a population growing in numbers and appetite, and farm land diminishing in size and efficiency.
Ms. Han shares the government’s worries a BHP takeover will lead to higher fertilizer prices worldwide, something few in this poor farming city can absorb. “The farmers can’t afford it if the price goes any higher,” the blunt-talking 40-year-old says. “They won’t pay for it, they’ll just stop using fertilizer.”
Bags of fertilizer at a fertilizer and pesticide warehouse in Ningjin, Hebei Province, on September 13, 2010.— Sheila Zhao for The Globe and Mail
Her favoured ending to the battle for Potash Corp. is an unlikely one: for the Chinese government to buy the Canadian company and its potash deposits outright.
“If China just buys the company, then China can decide what the potash price is.”
Ms. Han’s passion for the humble, potassium-containing crystal goes a long way to explaining why rumours persist that one of China’s state-owned conglomerates might step in with a “white knight” intervention to help Potash fend off BHP. Simply put, potash matters here. Not just in Ningjin – a city of 700,000 people surrounded by a vast ocean of nearly harvest-ready corn – but all across the world’s most populous country of 1.3 billion, which has dragged itself out of crushing poverty only to be faced with a fresh set of questions brought on by its success.
Chief among those is how China – a country with 22 per cent of the world’s population but just 9 per cent of its arable land – will feed itself, particularly as tens of millions of its newly affluent citizens adopt a diet heavy in meat, eggs and dairy, all of which were luxury items less than a generation ago. (As tens of millions of Chinese joined the middle class, meat consumption per capita more than doubled from 1995 to 2008, from 25 kilograms per person, per year to 53.) The new demand for chickens, cows and pigs has spurred rapid growth in the consumption of animal feed – primarily corn. The shift is such that China, once the world’s second-largest corn exporter after the United States, is on pace to be a net importer of corn in 2010 for the first time in at least eight years. Eighty per cent of all corn supplies are used for animal feed.
The math is daunting and the stakes are high. China’s new middle class isn’t so affluent as to be willing or able to pay a higher price for imported meats. The ruling Communist Party, which sees its right to rule as closely linked with its ability to deliver continued economic progress, knows that the availability of affordable meat is a key marker of how well it’s governing the country – and maintaining social stability.
As a result, crop yields and corn supplies – as well as efforts to ensure reliable access to potash and other fertilizers – are treated almost as state secrets here, as important to the country’s future as oil and gas reserves.
