On July 31, 1790, President George Washington signed the first patent ever issued in the United States. It was granted to Samuel Hopkins for a new process and apparatus for making potash, America's first industrial chemical. While the patent expired fourteen years later, today potash remains an important product around the world. (Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth. Read Patents Are Assets, So Learn How To Value Them.)

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If you've never heard of potash, you're not the only one. Here are some facts that may help in understanding the growing importance of this unique product.

  1. It's Made of Potassium
    The element potassium is a member of the alkali metal group and is abundant in nature. It's always found in combined forms with other minerals in the earth's crust, particularly where there are large deposits of clay minerals and heavy soils.
    Potash is an impure combination of potassium carbonate and potassium salt. Rock deposits bearing potash resulted when ancient inland seas evaporated millions of years ago. The term potash has been commonly used to describe the fertilizer forms of potassium derived from these rocks by separating the salt and other minerals.

  2. It's Part of History
    In the early days, the primary source of potash was the ash from native hardwood trees. The basic chemical compound potassium carbonate was extracted by leaching the ashes in big iron pots to dissolve out the soluble components. Evaporation of the solution through percolation resulted in the production of potash. Potash was used in making fertilizer, glass, soap, gunpowder and dyeing fabrics.
    Up until the 1860s, the only sources were hardwood trees and a few other plants. The U.S. dominance in potash production began to decline when natural deposits of the chemical were discovered in dry lake alkali beds in Germany. The outbreak of World War I forced other countries such as Russia and France to develop their own natural sources. Additional sources were discovered in California, Utah and New Mexico.

  3. It's in Your Food
    Ninety-five percent of the world's potash is used on farms to fertilize the food supply. It's a critical ingredient that helps to improve crop yields, increase resistance to plant diseases and heighten water retention. It also has a positive effect on food color, taste and texture.
    Potash is a component of feed supplements used to grow livestock and enhance milk production. It still has several industrial applications that trace their roots back to the colonial days, including glass, soap and ceramic production.

  4. You Need it in Your Diet
    Potassium is an important element of the human diet as it's involved in both cellular metabolism and body functions. It's essential for growth and maintenance of tissues, muscles and organs, as well as the electrical activity of the heart.
    The average recommended intake for an adult is 4.7 grams per day but the intake level can change depending on your specific medical condition. Good sources of potassium include citrus fruits and juices, milk, chicken, red meat, fish, soy products, root vegetables, bananas, nuts and yogurt. (You may have heard of this method of evaluating currencies, but make sure you know the whole story. Check out The Big Mac Index: Food For Thought.)

    Farm soil contains more potassium than nitrogen and phosphorous, and these three nutrients are all critical to thriving plant growth. Potassium absorption is enabled by the use of soil enriched with potash-based fertilizers.

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  1. It's Been All Over the News
    Potash made the news recently when BHP Billiton Limited (NYSE:BHP) withdrew its hostile takeover bid for the Potash Corporation of Saskatchewan (NYSE:POT). The giant mining company was staking its $39 billion bet on the projected long-term need for increasing the world's food supply.
    PotashCorp is the largest fertilizer company in the world, engaged in the production of potash, phosphate, and nitrogen. With a presence in seven countries, it accounts for 20% of global production. In 2009, potash accounted for one-third of the company's revenues, totaling $1.2B in net sales. More impressive was that the gross margin from potash sales was 71% of the total, ample evidence of the profitability of this business segment.

    BHP had its eye on the huge potash deposits in Saskatchewan, and PotashCorp has existing operations with extensive reserves in very stable environments. In addition, the barriers to entry in this business are substantial, requiring significant capital investment and long lead times.

The Bottom Line
With the world's population projected to grow by 75 million in the next year, the demand for potash is expected to grow along with it. The sources for potash are finite and they are concentrated in Canada, Russia and Belarus. Two years ago, speculators drove the price from $200 to $900 per metric ton. The bubble subsequently burst and medium-term prices are expected to be in the $400 to $500 range.

It's no surprise that PotashCorp was an attractive target to BHP. Life can't survive without food and water, and potash is a vital part of the formula for expanding the efficient expansion of the world's food supply. There are no known substitutes for potash, and the acquisition of PotashCorp would have quickly established BHP as a world player in this growing market. How this battle will play out remains to be seen. (These deals can make or break investors' returns. Find out how to tell the difference. Check out Analyzing An Acquisition Announcement.)

Find out what happened in financial news this week. Read Water Cooler Finance: GM's Dramatic Return.

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