Agricultural Chemical Application

Applying agricultural chemicals. Photo credit: USDA via commons.wikimedia.org.

Humans can go without a lot of the staples and goods we have become accustomed to: smartphones, cars, air conditioners, etc. Heck, we could even survive without electricity if we needed to. One thing none of us can go without, though, is food. To meet the world's growing population and our growing appetites, we need to grow more food. As we run out of arable land, we must increase the yield on that land. And to do that we rely on agricultural chemicals.

The term agricultural chemicals certainly doesn't sound pretty -- after all, we're talking about the stuff we ingest every day -- but these materials are a huge business that is essential to keeping the world's food supply growing. Let's look at the agricultural chemical business, why it's important, and what you need to know about investing in this space. 

What are agricultural chemicals?

An agricultural chemical is any chemical or supplement that is applied to agricultural land to enhance crop yields. This can range from something as simple as composed manure or fertilizer to more complex materials such as pesticides, hormones, and other growth agents. 

Farmers can maximize their product output by enhancing soil with fertilizers or preventing disease using fungicides. Some companies have taken this process so far as to genetically modify seeds to prevent disease and resist insects, but that is a whole other can of worms. Here are some of the most common types of agricultural chemicals:

  • Nitrogenous fertilizers
  • Phosphatic fertilizers
  • Potassium fertilizers
  • Herbicides
  • Insecticides

Why do we use them? In the case of fertilizers, plants need 18 elements to grow. They can get three of them from the air and water: hydrogen, oxygen, and carbon. The next three in terms of importance -- nitrogen, phosphorus, and potassium -- come from the soil and contribute directly to a plant's growth rate. To enhance plant growth or to replenish the soil after a farming season, farmers use fertilizers with high concentrations of nitrogen, phosphorus, and potassium. 

Farmers can also increase crop yields by using pesticides to ensure that crops don't get diseases, insect infestations, or overtaken by weeds. 

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Spreading the most basic agricultural chemical: manure. Photo credit: Chatellier via commons.wikimedia.org.

What is the history of agricultural chemicals?

Farmers have been attempting to enhance crop yields through agricultural chemicals almost since humans shifted away from being hunter-gatherers to farmers. According to Science Magazine, the very first known use of fertilizers took place over 8,000 years ago via application of manure on fields. The first known use of pesticides dates as far back as 2500 B.C., when farmers would spread elemental sulfur around crops. 

Today's agricultural chemicals are a little more advanced. The types of chemicals listed above are all designed for a very specific purpose, such as replenishing one particular nutrient in the soil or preventing the spread of a particular pest. This process has been challenging over the years due to the delicate balancing act between eliminating pests, maintaining certain levels of food safety, and not disrupting the broader ecosystem. Many advancements in this regard are being made in the development of genetically modified foods. 

How many ways can I invest in agricultural chemicals?

The majority of agricultural chemical manufacturing is done by a handful of massive companies both in the United States and globally. Investing exclusively in agricultural chemicals is a little more challenging, because most of these manufacturers either have a wide range of other offerings in the chemical manufacturing sector or have operations within other parts of the agriculture business. That said, a few select companies deal exclusively with agricultural chemicals  and investors who do some digging can unearth these agricultural chemical specialists. 

Why invest in agricultural chemicals?

Because you and everyone else in the world must eat. 

This investment strategy does seem a bit silly in its simplicity, but sometimes that simplicity is what makes it so effective. No matter how advanced we become at producing better crops, their growth is still dependent upon the availability of certain essential elements. As human populations grow both here and around the world, we are going to need arable land to support even greater yields. To meet those goals, we will need agricultural chemicals to give Mother Nature that additional boost. 

You can follow Tyler Crowe at Fool.com under the handle TMFDirtyBird, on Google+, or on Twitter @TylerCroweFool.

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