Fertilizer stocks are rising today as global officials sound alarms over rising fertilizer prices and the challenges they pose for key crops.
Since Russia first invaded Ukraine one month ago, many investors have focused on the countries’ oil and gas exports. Energy commodities aren’t the only ones rising, though, a fact investors seem to be increasingly realizing.
Russia has been the world’s largest producer of fertilizer for years. For countries dependent on its exports, the surging price of fertilizer means an uncertain — and potentially unstable — future.
For companies producing fertilizer, the scarcity has meant a surge in prices and in turn, a surge in share prices. Archer-Daniels-Midland (NYSE:ADM), Nutrien (NYSE:NTR), Mosaic (NYSE:MOS) and CF Industries (NYSE:CF) have all been in focus as a result.
What’s Happening With Fertilizer Stocks
For many farmers, the surging fertilizer prices are something of a horror story. This month has seen fertilizer prices reach record highs as costs surged for the raw materials upon which producers depend.
At first glance, it might seem as though farmers should be celebrating rising food prices. However, many have realized that the cost of materials is rising even faster. One U.S. farmer told CNBC that “input costs are going up even more than the price of wheat.” This industry 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, persistent demand is driving prices up. Smaller farmers will feel the impacts of this more, but large agriculture businesses should be able to sustain despite rising costs. For fertilizer stocks, this should result in continued gains. As a result, InvestorPlace contributor Muslim Farooque recommended NTR and CF stock as buys last week.
What Comes Next
With uncertainty lingering in what sanctions levied against Russia will mean, the fertilizer shortage appears likely to persist. This means a prosperous future for fertilizer stocks, at least in the short term.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines