Fertilizer stocks are rising today as global authorities sound the alarm over rising fertilizer prices and the challenges they pose for major crops.
Since Russia first invaded Ukraine a month ago, many investors have focused on the country’s oil and gas exports. Energy commodities aren’t the only ones rising, however, a fact that investors increasingly seem to realize.
Russia has been the world’s largest fertilizer producer for years. For countries dependent on its exports, soaring fertilizer prices mean an uncertain – and potentially unstable – future.
For companies producing fertilizers, the scarcity has led to soaring prices and, consequently, soaring stock prices. Archer-Daniels-Midland (NYSE:ADM), Nutrien (NYSE:RNT), Mosaic (NYSE:MOS) and CF Industries (NYSE:heart rate) have all been developed accordingly.
What’s going on with fertilizer stocks
For many farmers, soaring fertilizer prices are terrible. This month, fertilizer prices hit record highs as the costs of raw materials that growers depend on jumped.
At first glance, it might seem that farmers should be celebrating rising food prices. However, many have realized that the cost of materials is rising even faster. An American farmer said CNBC that “the cost of inputs is rising even more than the price of wheat”. This industrial landscape has left farmers on the fence when it comes to planting crops.
What does this reality mean for fertilizer producers? Well, with supply constraints due to Russia’s invasion of Ukraine, continued demand is driving prices up. Small farmers will feel the effects more, but large agricultural enterprises should be able to survive despite rising costs. For fertilizer stocks, this should translate into continued gains. As a result, InvestorPlace Contributor Muslim Farooque recommended NTR and CF stocks as buys last week.
What happens after
With continued uncertainty about the significance of the sanctions imposed on Russia, the fertilizer shortage looks set to persist. This means a prosperous future for fertilizer stocks, at least in the short term.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines