Potash mine. Photo credit: Flickr user Bruce Guenter

It took millenia for the global population to finally top the billion mark. However, in the two centuries since it hit that mark the population has exploded -- in 2011 it topped seven billion. More growth is on the way, with the population expected to top nine billion by 2050. That means farmers need to figure out a way to feed two billion more people at a time when arable land is shrinking. It's a daunting challenge, and one that will require many solutions, including increased usage of fertilizers like potash.

The best stock for this trend is Potash Corp. of Saskatchewan (NYSE:POT), which is the clear leader in potash production.

Why potash?
Potash is a key fertilizer for farmers as it improves root strength and disease resistance, assists in water retention, and enhances taste, color, and texture of food. Because of these benefits, demand for this important crop nutrient is expected to grow by about 2.5%-3.5% per year.

However, potash isn't easily accessible. It was originally formed as ancient seas evaporated and left behind deposits. Over time, these deposits were buried and now must be mined underground. These deposits are costly to develop, with multi-billion dollar development costs and lead times taking seven years. Those costs are a huge barrier to entry, which is why there are only a handful of key potash producers around the globe.

Why PotashCorp?
While there are a number of potash producers, PotashCorp is the world's leading potash producer by capacity, as its Canadian operations represent nearly 20% of global capacity. The company also has equity investments in four other potash-related businesses around the world. In addition to its leadership in potash, the company also produces the two other major crop nutrients -- nitrogen and phosphate -- which provides investors with a bit more diversification and additional options for growth.

The key, however, is potash, and not only does PotashCorp lead the world in potash production capacity, it is also one of the industry's low cost leaders. The company has spent the last several years investing to grow the capacity at its lowest cost mines, which is pushing its cash costs down. By 2016 the company expects its cash cost to drop from just under $140 per tonne to well under $120 per tonne. That low-cost growth will improve the company's margins as well as its cash flow. With those expansion projects nearing completion, the company's capital spending is starting to wind down. This is expected to drive a big improvement in its free cash flow, as the company's overall capex spending has dropped from its peak of over $2 billion in 2012 and is on pace to be as low as half a billion dollars by 2018.

For investors, this increased free cash flow has resulted in very robust dividend growth over the past few years. In fact, that payout has grown from just a penny per share to $0.38 per share over the past decade. More dividend growth is likely in the years ahead given declining cash costs and capex, along with the fact that production is heading higher.

Investor takeaway
Potash is a very important crop nutrient, especially in a world that needs to boost its food production in order to feed a growing population. The best way to invest in its production is to stick with the global leader, which is PotashCorp. Not only does the company control 20% of global capacity, but it is a low-cost leader. That focus on costs will generate a lot of cash flow, which PotashCorp is sending back to investors via an ever growing dividend, making it the best stock to invest in potash.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.