Currently, there are around seven billion people inhabiting our planet, but that number is forecasted to rise to nine billion by 2040. With populations rising in both developed and emerging markets, producing enough food to feed the world's citizens is becoming a paramount issue. To feed our expanding world, food output will have to increase by roughly 70% over the next four decades just to keep up with demand. While all the links along the agricultural food chain will see robust long-term gains, a value opportunity could be had on the critical first step of that chain. For investors, there's big money in dirt.

Value at the Bottom
While most investors tend to focus on the sexier agricultural plays in GMO seeds, high tech irrigation equipment and pesticides, the boring trio of phosphate, nitrogen and potash could be the better long-term play. Various constraints including the lack of available arable land, water resources and infrastructure place serious pressures on the world's ability to increase food production. While the various high tech seeds and equipment will help push back the tide, the fertilizer sector is poised to do most of the heavy lifting.

Currently, the four staple crops of corn, wheat, soybeans and rice, account for half of total fertilizer consumption and make up around 60% of total global crop area. At the same time, demand for these main crops has risen sharply over the past 30 years. With the global population still rising and the fact that most of the productive arable land is now in use, future crop expansion will need to happen in regions with poorer soils. To that end, trade group the International Fertilizer Industry Association (IFA) predicts that fertilizer consumption will rise by 11% by 2016. Likewise, researcher Freedonia predicts similar findings. The group predicts that global demand for fertilizers will increase by 3.8% per year through 2014, with the Asia/Pacific region leading that demand.

SEE: 5 Grocery Staples That Are Going up in Price.

The Big Buy in Dirt
Given the long-term picture, now could be a great time for investors to strike in the sector. The problems facing the Eurozone, along with falling food prices has depressed demand from farmers in the second half of 2011. That caused fertilizer prices and shares to plummet. However, things may have turned a corner. Demand from key markets is finally beginning to pick-up, especially for Potash Corp (NYSE:POT), Mosaic (NYSE:MOS) and Agrium (NYSE:AGU), through their jointly owned potash cartel.

Canpotex recently signed a deal to export fertilizer to China. This is after several months of low to zero purchases from the Asian Dragon. At the same time, corn plantings in the U.S. have surged on the back of warm weather. Yet, stocks within the fertilizer sector still remain depressed.

The Global X Fertilizers/Potash ETF (ARCA:SOIL) can be used as a broad play for sector. The ETF tracks 29 different fertilizer focused firms, including the Canpotex trio as well as global players such as Norway's Yara (OTCBB:YARIY.PK). Overall, the fund charges 0.69% in expenses and is down roughly 8% since its inception a year ago.

With corn plantings skyrocketing, investors may want to focus on the producers of nitrogen. As the largest North American producer of corn-critical nutrient, CF Industries (NYSE:CF) is primed for outperformance. Already, shares of the firm have made new highs, but Goldman Sachs says the company could experience more upside based on "exceptional nitrogen pricing trends, potentially good news on buybacks and an attractive valuation." Also riding high in the nitrogen sector is CF's subsidiary Terra Nitrogen (NYSE:TNH) as well as recent spin-off Rentech Nitrogen Partners (NYSE:RNF). Rentech just recently declared its first dividend, while Terra yields a juicy 6.8%.

SEE: Investing Seasonally in the Corn Market.

The Bottom Line
As world populations continue to grow, feeding the people is becoming a big issue. For investors, adding the backbone of the agriculture sector to a portfolio could be a prudent move and now could be the best time to do it. The fertilizer sector will continue to see great gains as the world requires greater crop yields from less arable land. The previous picks, along with Chemical & Mining Co. of Chile (NYSE:SQM) make ideal selections to play the industry.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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