In a presentation at the Bank of America/Merrill Lynch Global Industries conference on December 15, Potash of Saskatchewan (POT) offered a modestly optimistic view on potash fertilizer demand for 2011—and a very bullish view for global agriculture.

Potash first.

The company affirmed its guidance for 2011 of sales of 9.3 million metric tons. That’s roughly at the low end of Merrill’s projected global demand of 55 to 60 million metric tons in 2011.

The company said that it had seen a strong fall season in North America and believed that most of the fertilizer it sold went directly onto fields rather than into inventories. That should produce strong sales in the spring application season in 2011.

In China inventory draw down has been completed and the company expects consumption in 2011 to return to the 11 million metric ton level that the industry saw before the global economic crisis.

Nothing has convinced the company that it needs to invest in a new Greenfield potash mine. With current capacity, Potash can produce 12 million metric tons and expansions of existing capacity would take that up to 17.1 million tons by 2015. To justify a Greenfield project, Potash said it would need to see roughly a doubling of prices from the third quarter levels.

That should be reassuring to competitors who are building Greenfield mines or expanding existing sites.

Potash was actually much more bullish on global agriculture in general than it was on its own markets. Early in 2010, the company told the conference, projections showed that 2010 crops would be sufficient to meet demand. By the middle of the year it had become apparent, though, that for the eighth time in the last 12 years production would fall short of consumption and the world would have to draw down its stockpiles of food.

In 2011, Potash estimates, it will take a 5% increase in grain production to keep pace with consumption. That will be a tough if not impossible task since grain production has grown by only an average of 2% a year in the last few decades. Without a record increase in production, global grain stocks would fall to the historical lows of 206 and 2007.

That’s certain to produce higher grain and food prices—good for farmers and the companies that sell stuff to them, but bad for consumers, especially poor consumers. According to the Food and Agricultural Organization of the United Nations, by November 2010 the year-to-year increase in the global food price index was 22%.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Potash of Saskatchewan as of the end of November. For a full list of the stocks in the fund as of the end of November see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/