On the supply side of the ledger, we assume that global MOP operational capacity will increase from 63 million tonnes in 2010 to 86 million tonners in 2020. Brownfield expansions are expected to account for almost three-fourths or 17 millions tonnes of projected increase this decade. Only two greenfield projects are included in our analysis - Vale's Potassio Rio Colorado project in Argentina and Eurchem's Volgograd project in Russia.

Current producers are plowing profits into large mine expansions and improvements. That is especially the case in Canada where expansions by the three producers are expected to account for almost 75% of the new brownfield capacity this decade. Expansions by producers in the former Soviet Union account for another 20%.

Only two greenfield projects are included for one reason - our analysis indicates these projects do not generate returns on invested capital that meet even modest thresholds based on reasonable price and capital cost assumptions. The table shows internal rates of return for a generic greenfield project in Saskatchewan for different combinations of capital costs and fob mine prices. This calculation assumes a 4.0 million tonne mine, six years construction and three years to reach full capacity. Based on realistic capital costs our take away is that a price of about $600 per tonne at the mine is required in perpetuity to achieve even a modest threshold return on invested capital.

The chart shows price assumptions used in pre-feasibility and feasibility studies for a proposed Greenfield project in Saskatchewan. In addition to these lofty prices, the estimated capital costs used in the studies looked low to us.

Again, assuming all of these supply and demand assumptions are on target, the global MOP operating rate is projected to range from 80% to 85% of capacity throughout the decade. These projected rates assume that global MOP shipments will climb to almost 73 million tones by 2020 or the high end of the forecast range.

Eoin Treacy's view Decyfer MOP Fertilizer prices hit a peak of $575 in 2009 and currently trade below $400. Mosaic's estimation of $600 as the price required for a profitable greenfield mine emphasises the high barrier to entry in the potash sector. The long-term outlook for the comparatively small number of fertiliser shares remains bullish subject to the occasional volatility that comes with exposure to agriculture prices.

Almost all the shares in the sector recently found support in the region of their respective 200-day MAs and would need to sustain moves below them to question medium-term uptrend consistency. This Performance Filter of related shares may be of interest.

Seed and chemical manufacturers are currently offering more leverage to firm grain and bean prices. Viterra which provides a number of services to farmers including seeds and fertilisers has been ranging below $12 since late January and has at least partially unwound its overbought condition relative to the 200-day MA. A sustained move below $10.50 would be required to check potential for a successful upward break.

DuPont de Nemours remains the sector leader and continues to post a rivetingly consistent progression of higher reaction lows. A sustained move below $50 would be required to begin to question medium-term upside potential.

Both Israel Chemicals and Syngenta share a similar pattern with the fertiliser companies above. KWS Saat hit a new recovery high this week.

Monsanto remains a laggard. It has been ranging below $80 for the last few months and will need to hold above its 200-day MA if the medium-term upside is to continue to be given the benefit of the doubt.