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Overview of PotashCorp and Its Industry Fertilizer 101 1 of 15 To better understand our company — and our opportunity — we believe it is important to begin with the basic drivers of fertilizer demand. Our story is one of global development: millions of people with rising incomes want to feed their families better diets with high-quality fruits and vegetables and protein from meat. With pressure on global crop supplies mounting, the need to sustainably increase production is clear. We believe that fertilizer will play a key role in achieving this, and that the agronomic and economic opportunities which exist today — and are expected in the years ahead — will encourage farmers to apply more fertilizer, especially potash. Fertilizer 101 Overview of PotashCorp and Its Industry Global Development Story World Population Shift to Urban Areas in Developing Countries The global population is rising by almost 80 million people every year. This growth is occurring simultaneously with the changing composition of the world population as it is taking place in developing countries in Africa and Asia, particularly in urban areas. Today, one out of every two people lives in a metropolitan area; by 2050, that figure is expected to rise to more than two-thirds of the global population. This is an important shift since urban consumers tend to eat more and better balanced diets. For example, urban dwellers in China consume nearly 75 percent more meat and almost 25 percent more fruits and vegetables than their rural counterparts. Source: United Nations Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story World Population Overview of PotashCorp and Its Industry Global Development Story World GDP and Caloric Intake per Capita Economic Growth Driving Increased Food Consumption Many countries with rapidly rising populations are also global leaders in economic growth. Although short-term fluctuations occur, the economies of China, India and other developing countries are expected to continue to expand and enhance global economic growth for decades to come. As economies grow and individual incomes rise, history tells us that people in emerging nations typically seek to improve their diets. People in Brazil, China and Indonesia have experienced significant increases in their daily intake of fruits, vegetables and protein from meat, eggs and fish. The shift to a better diet is just beginning in other parts of the developing world such as India and Africa. In the decades to come, dietary changes in these markets coupled with population growth are expected to be a key driver of global food demand. *Bubble size reflects the relative size of country population. Source: United Nations, FAO, IMF Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story World GDP and Caloric Intake per Capita Overview of PotashCorp and Its Industry Global Development Story World Grain and Oilseed Production Rising Production in All Major Crop Growing Regions With the drivers of population and income growth in developing countries solidly in place, demand for grain and oilseeds has been increasing for many years. Oilseed demand has more than doubled and grain demand is up nearly 40 percent over the past two decades. In turn, this demand has put stress on grain supplies, raising prices for crop commodities above historical levels and motivating growers to boost their production levels. The five markets of China, India, Other Asia, Latin America and North America produce over 70 percent of the world’s grain and oilseeds. North America is a major producer and exporter of grains and oilseeds, while Latin America has emerged as a leading exporter of oilseeds to markets such as China. Source: USDA Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story World Grain and Oilseed Production Overview of PotashCorp and Its Industry Global Development Story World Meat, Fruit and Vegetable Production Changing Diets Support Growth in Higher Value Agriculture Products The desire to improve diets in the developing world not only increased demand for grains, it has had a profound impact on global production of high-value agriculture products such as meat, fruits and vegetables. China has significantly increased its production capacity for these products to keep pace with growing domestic consumption and also to capitalize on export opportunities for higher value crops. Meat, fruits and vegetables are important products for the fertilizer business. Meat production requires more grain to be allocated to feeding livestock and fruits and vegetables are large consumers of all nutrients, especially potash which aids in the maturing process and helps enhance color, taste and texture. Source: FAO Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story World Meat, Fruit and Vegetable Production Overview of PotashCorp and Its Industry Global Development Story Global Population and Arable Land Per Capita Pressure to Increase Productivity on Existing Land As populations rise and urban areas expand, there is less arable land per person available for agriculture. With a finite land base and an expanding global population, this historical trend is expected to continue. The strain on arable land is most pronounced in developing countries, where less than 0.2 hectares per person is available for crop and animal production. These countries have the most urgent need to improve their food production, highlighting the importance of increasing long-term crop productivity. Source: FAO, United Nations, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story Global Population and Arable Land Per Capita Overview of PotashCorp and Its Industry Global Development Story World Renewable Water Profile Water Availability an Increasing Concern Not only is land constrained, water availability is becoming an increasingly important issue in many countries. Over the past four decades, renewable water resources per capita have declined by nearly 50 percent in the developing world. This strains water supplies even as demand for agriculture and industrial purposes rises. The competition for water in developing countries is unlikely to slow as populations continue to increase and economies grow. Consequently, we believe agriculture will have to use water more efficiently. Fertilizer, especially potash, helps plants retain water and is expected to play an important role in enabling efficient water use in the future. Source: FAO AquaStat, United Nations, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story World Renewable Water Profile Overview of PotashCorp and Its Industry Global Development Story Global Trends Population Change Primary Driver of Anticipated Growth in Food Demand Importantly, we believe that the global development story is not just one about history, but also about the future needs of our growing world. Using estimated population growth and dietary changes shifts, by 2050 you can see that the developing markets will be a major driver of future food (and fertilizer needs). In fact, more than 70 percent of future food demand growth is directly attributed to population change with the other 30 percent expected to be driven by diet. Source: FAO Last updated: Aug 31, 2014 Fertilizer 101 Global Development Story Global Trends Overview of PotashCorp and Its Industry Agriculture World Grain and Oilseed Supply/Demand Stocks Are Relatively Tight Despite Record Production Crop production has struggled to keep pace with rising grain consumption for the last few decades. Following the major supply shortfall in 2012, favorable weather and increased planted area led to record crop production in 2013. This supported a partial recovery in global ending stocks from the historically low levels recorded the previous year. Global consumption and trade rose significantly as a result of increased supply and lower crop prices. While weather will continue to play a significant role in determining the yield potential of each year's crop, the current strain on global grain supply highlights the importance of proper soil fertility for improving yields, especially under difficult growing conditions. 2014F refers to the 2014/15 crop year Source: USDA Last updated: Aug 7, 2014 Fertilizer 101 Agriculture World Grain and Oilseed Supply/Demand Overview of PotashCorp and Its Industry Agriculture Selected Crop Commodity Prices Broad Strength in Global Crop Prices With supply tight for many agricultural commodities, prices remain well above historical levels. Although prices have been volatile in recent years, we believe they are strong economic signals to farmers around the world to focus on improving production. Since production increases must be sustained to remedy low grain inventories, elevated crop commodity prices are expected to remain for the coming years. Higher food costs generally encourage countries seeking self-sufficiency in agricultural production to adopt improved farming practices. Given our expectation of supportive crop prices remaining intact for the coming years, we anticipate positive farm level sentiment and a push to address soil fertility needs. See current crop commodity prices Source: World Bank, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Agriculture Selected Crop Commodity Prices Overview of PotashCorp and Its Industry Agriculture Impact of Fertilizer on Crop Production Fertilizer is Essential to Current and Future Crop Production Given that limited new arable land is available for crop production, the Food and Agriculture Organization of the United Nations projects that approximately 80 percent of future growth in crop production will come from yield advancements. Consequently, fertilizer will play a critical role in meeting this challenge. In fact, research indicates that fertilizer is responsible for approximately half of all crop production on a global basis. To enhance yields, fertilizer use needs to both increase and be properly balanced to sufficiently replenish the vital nutrients that crops consume every year. Source: IPNI, Agronomy Journal, FAO Last updated: Aug 31, 2014 Fertilizer 101 Agriculture Impact of Fertilizer on Crop Production Overview of PotashCorp and Its Industry Agriculture Corn Fertilization Rates and Yield Opportunity to Improve Yields Through Balanced Fertility The disparity between crop yields in developed nations and those in developing nations highlights the importance of agronomic best practices. In most developed countries, balanced fertilizer application and other best practices have contributed to significant yield growth. Since all three nutrients provide unique benefits to plants and work in synergy with each other, no nutrient can replace another. Obtaining proper balance among potash, nitrogen and phosphate is key to ensuring that a plant achieves its full potential. The developing countries that currently under-apply potash could experience significant yield improvements for many of their crops by correcting this imbalance. Source: IFA, USDA, FAO, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Agriculture Corn Fertilization Rates and Yield Overview of PotashCorp and Its Industry Agriculture Fertilizer Impact on Crop Yield and Return Balanced Fertilization Can Provide a Significant Economic Return As farmers seek to improve yields, fertilizer is poised to play a significant role. Based on long-term yield trials, farmers across all areas of the globe can improve yields through proper fertilizer use. The current economic incentive for utilizing proper fertility is significant for most crops and most growing regions in the world. The situation in India is more complex as changes in government subsidy levels has resulted in lower returns for its growers compared to historical levels. *Based on long-term yield trials Source: IPNI, Bloomberg, Industry Publications, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Agriculture Fertilizer Impact on Crop Yield and Return Overview of PotashCorp and Its Industry Global Fertilizer Trends World Fertilizer Consumption by Region and Crop Potash Has Most Diversity Amongst Regions and Crops Fertilizer is needed everywhere that crops are grown. Developing countries in Asia and Latin America account for almost two-thirds of global consumption. Potash consumption is distributed amongst a number of major regions while nitrogen and phosphate use is more heavily concentrated in China and India. Grains and oilseeds account for nearly two-thirds of global nitrogen and phosphate consumption. Potash consumption has the most diversity in the global usage by crop. Oilseeds, fruits and vegetables account for almost 40 percent of potash use, similar to the amount used by grains. Source: Fertecon, IFA, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends World Fertilizer Consumption by Region and Crop Overview of PotashCorp and Its Industry Global Fertilizer Trends Global Fertilizer Consumption Increasing Crop Production Will Rely Heavily on Fertilizer Application To meet growing demand for crops, more fertilizer will be required and in an improved nutrient balance. We believe over the next decade, fertilizer use will increase by almost 2 percent annually, which is consistent with overall crop production growth trends. Potash is projected to have the highest growth rate (approximately 3 percent annual growth), in part to address the under application of this nutrient in recent years. Phosphate consumption is expected to grow by 2.0-2.5 percent annually while nitrogen consumption is expected to grow at less than 2.0 percent per year. Source: Fertecon, CRU, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends Global Fertilizer Consumption Overview of PotashCorp and Its Industry Global Fertilizer Trends China's Fertilizer Use Fruits and Vegetables Are the Largest Consumers of Fertilizers in China Approximately one third of fertilizer used in China is consumed by fruits and vegetables, which require more nutrients per acre than most other crops. Cereals (rice, wheat and corn) consume another 43 percent. Production of fruits and vegetables is rising significantly in China, growing at an annual rate of nearly 5 percent since 2000. As China’s population expands and diets keep improving, we expect pressure to increase yields will continue to mount. Based on field research data, crop yields in China are most responsive to increased application rates for potash. Nitrogen and phosphate application rates are already above world average levels and are not expected to rise significantly from current levels. Source: IFA, Fertecon, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends China's Fertilizer Use Overview of PotashCorp and Its Industry Global Fertilizer Trends India's Fertilizer Use Government Policy Has Distorted Indian Fertilizer Consumption Wheat and rice remain the primary food grains in India and are interchangeable in the average diet. Together, these crops account for approximately half of the country’s fertilizer consumption as production is growing at a compound annual growth rate of 5 percent. Over the last 20 years, fruit and vegetable production has doubled and now accounts for 7 percent of fertilizer use and more than 15 percent of potash use. After a period of very robust growth, phosphate and potash consumption has been hindered by government subsidy changes over the past two years. While there does not appear to be a quick fix to this situation, we believe population growth and economic realities will ultimately drive the need for increased crop production and a more balanced fertilizer application ratio. Source: IFA, Fertecon, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends India's Fertilizer Use Overview of PotashCorp and Its Industry Global Fertilizer Trends Other Asia's Fertilizer Use Rice and Oil Palm Are the Major Drivers of Fertilizer Demand Strong domestic demand and increasing export opportunities have contributed to rapid crop production growth in Other Asia (which excludes China and India). Rice production in this region uses the most fertilizer, accounting for 35 percent of total consumption. Oil palm, the second largest consumer of fertilizer accounts for 17 percent of consumption and 50 percent of potash consumption in this region. Rice and oil palm production growth is expected to remain robust, driven by population and economic growth in the region. Given the potash intensive nature of many crops grown in Other Asia, the region’s potash use has increased at a relatively steady pace over the past decade. Source: IFA, Fertecon, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends Other Asia's Fertilizer Use Overview of PotashCorp and Its Industry Global Fertilizer Trends Latin America's Fertilizer Use Corn, Soybeans and Sugar Account for Majority of Fertilizer Use Crop production in Latin America has risen dramatically in recent decades. As world demand for grains and oilseeds increased, the region brought new land into production and became a major agricultural exporter. The top three crops grown in Latin America are soybeans, corn and sugarcane which have increased over 300 percent, 100 percent, and 100 percent respectively over the past 20 years. Production is expected to continue to rise as growers in countries such as Brazil continue to expand planted area and push for higher yields. This, in turn, will support increased fertilizer consumption. Given the significant potassium requirements of major Latin American crops, potash is used in a relatively high ratio compared to the other primary nutrients. Source: IFA, Fertecon, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends Latin America's Fertilizer Use Overview of PotashCorp and Its Industry Global Fertilizer Trends North America's Fertilizer Use Corn, Wheat and Soybeans Account for Majority of Fertilizer Use Corn is the dominant user of fertilizer in North America followed by wheat and soybeans. Crop yields have risen significantly over the past several decades and in recent years additional acres have been planted to nutrient-intensive crops such as corn. The increase in planted acres has contributed to nitrogen consumption growth but has not translated into additional usage of potash and phosphate. Recent soil test studies show that North American application rates for potash and phosphate have not kept up with higher removal rates, causing a decline in soil fertility. We believe this trend is not sustainable and expect a renewed commitment to proper soil fertility in North America in order to support long-term yield improvements. Source: IFA, Fertecon, PotashCorp Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends North America's Fertilizer Use Overview of PotashCorp and Its Industry Global Fertilizer Trends Fertilizer Use in Other Markets Long-term Potential in Africa, Eastern Europe and FSU Europe is the largest fertilizer market outside of Asia, North America and Latin America. In Western European countries, numerous crop production support policies have been removed or modified which has modestly decreased fertilizer consumption. In Eastern European and former Soviet Union countries, there is opportunity for increased usage as application rates remain below optimal levels following a sharp decline in the early 1990s (when agriculture production transitioned away from the state-operated model). Improving agricultural productivity in Africa is essential for tackling the continent’s food insecurity. There is tremendous opportunity to close the yield gap and improvements in fertilization practices can play a major role. Africa currently accounts for less than 3 percent of global fertilizer consumption despite having 15 percent of the population. This region has not only low consumption levels but *Excludes Asia, North America and Latin America unbalanced use of N:P:K also hinders crop yield potential. Africa’s N:K ratio is nearly 7:1 compared to the world average of less than 4:1 and the US average of less than Source: IFA, Fertecon, PotashCorp 3:1. Last updated: Aug 31, 2014 Fertilizer 101 Global Fertilizer Trends Fertilizer Use in Other Markets