THERE is a grim outlook for future world food shortages.
BHP Billiton's hostile takeover bid for major fertiliser producers, Canada-based Potash Corporation, shows the extent to which food security is having an impact on strategies in the corporate world.
The BHP bid has been followed by the news of a potential merger of Russian potash rivals, Silvinit and Uralkali, which would result in tightening of the ownership of the producers of a key crop nutrient.
Chinese chemical groups fear the BHP move would lead to too much concentration in the fertiliser market and put at risk the future supply of product at reasonable prices to its food producers.
The Chinese reckon BHP and one or two others will lock up the market and milk the fruits of a capacity shortage.
They are concerned about being able to feed their burgeoning population with affordable food as pressures on dwindling land and water resources.
Potash production is currently running at about 90 per cent of capacity, but Potash Corp has the bulk of new global capacity coming on stream in the next three years, which makes it a compelling play for BHP to establish a major new line of business.
China buys about a third of Russian potash output, and is staring into the future of needing more of the product from the Canadians.
Demand for potash imports into China is growing at 5 to 8 per cent annually.
The target in this contest isn't a dominant player across the fertiliser spectrum of "N, P and K", as it is ranked third but well behind others in the production of nitrogen and phosphates.
The long-term challenge is to feed the world with less water and minimal increases in arable land.
BHP's pitch to its investors recognises the need for the world to lift crop yields by using more "balanced" fertilisers.
This investment is positioning the group to benefit from that necessary trend.
BHP isn't yet a potash producer, but it is sitting on future reserves, and has eyes on a long-term prize.
The barriers to BHP's move to become a major force in the sector are tricky with a play like this across the globe, and they aren't limited to the target's ability to find a rival white-knight bidder.
There isn't a global equivalent of the Australian Competition and Consumer Commission, but that doesn't mean this will be a quickly played-out deal.
BHP has to get competition policy clearance in several countries - the US, Brazil and Canada - before it gets across the line.
US anti-trust commissioners don't exactly move at the speed of a herd of startled gazelles, and it could be anywhere between three and seven months for a verdict to come out.
The Chinese Government has also been looking into the ways it can block the deal but it isn't clear how this can be done.
Meanwhile, the prospects of rival bidders emerging to thwart BHP's $40 billion bid are weak.
Potash hasn't come up with a Plan B, despite rising potash prices making the target look more valuable, and the strong Chinese interest in finding other investors to stump up the money.
