We believe potash demand will be driven by the need to improve agricultural yields, particularly in emerging markets where output per hectare lags well behind the level achieved in Europe, North America and Northeast Asia. On the one hand, the world's population is set to grow at an average annual rate of 0.9% in the period to 2030 according to United Nations forecasts; this is equivalent to 71 million new mouths to feed each year. In addition to population growth, the average daily food intake per capita has increased from 2,189kcal in 1961 to 2,831kcal in 2009, equivalent to an average growth rate of 0.5% per year. On the other hand, arable land is a finite resource, so the agricultural sector must meet growing demand for food mainly by increasing the average yield per hectare. Rising food consumption is therefore a longterm trend that will outlast the demand for early cycle commodities such as steel that are driven by industrialization and urbanization. In the case of the US, primary steel production per capita rose during the first half of the 20th century before declining afterwards; current production levels are barely 30% of their level 50 years ago. Food consumption on the other hand has been increasing, and current intake per capita is approximately 30% above the level in 1962 (Exhibit 1). We view the US experience as a leading indicator for emerging markets such as China and India.

Eoin Treacy's view Disposable income is a term most often associated with the middle classes and goes hand in hand with increased calorie consumption. As the ranks of those with more money left over at the end of the week swell, demand for food is likely to continue to increase. However, as has been the case in other countries, the primary beneficiaries from an investment perspective are likely to be the purveyors of value added products such as super markets and processed foods companies.

Unilever, Mondalez International, Nestle, Danone, Kerry Group, Aryzta, Lindt & Spruengli, Glanbia, Tate & Lyle, Lancaster Colony, Kellogg, General Mills, Conagra Foods, McCormick, Campbell Soup and Grupo Bimbo all share similar patterns of mean reversion. They will need to continue to hold above, or in the region of, their respective 200-day MAs if their medium-term uptrends are to remain consistent.