As markets recover from the continuing Ukraine-Russia conflict, investors may choose to examine fertilizer stocks. This stock market segment is primarily gaining attention now due to global supply problems. In addition to oil, fertilizer is a critical resource under global supply chain difficulties. It is a well-known fact that agriculture is essential to providing food for the world's population. As Russia is among the world's leading manufacturers of fertilizers, it is evident that worry is warranted. In summary, given the possible impact of global sanctions on Russia's exports despite all of this, fertilizer inventories may be worthy of note.
An Overview of the Fertilizer Industry
The agricultural fertilizer and food crises are being brought clearer as sanctions on Russia and Belarus continue to be implemented. Europe sees the most significant impact while potash and nitrogen-producing industries, such as our stock recommendations, prepare for increases. Commodities continue to be in high demand since they are in limited supply worldwide, and firms that produce and handle them are in high demand and a fantastic inflation hedge. Considering this, the market has sunk nearly all ships this week. Now that potash shipments from Russia and Belarus are banned, U.S. companies are considering debottlenecking strategies to increase crop fertilizer supply by enhancing efficiency and operations.
As sanctions in Europe have the potential to alter business patterns, clients are searching for suppliers with a more excellent track record of dependability. Among other commodities, agricultural product shortages constitute a significant factor in the rise in commodity prices. Natural gas is an essential raw ingredient and primary fuel source for the manufacture of ammonia from nitrogen. There is still plenty of time to capitalize on the price action concerning fertilizers and agricultural chemicals such as nitrogen and potash due to Europe's escalating natural gas prices. According to a graphic from the National Agricultural Statistics Service, agricultural pesticides and fertilizers outperform fuels so long as demand exceeds supply.
Why Should You Take Into Account Fertilizer Stocks?
Demand for main fertilizers such as potash, phosphate, and nitrogen is boosted by rising crop commodity prices and robust farmer economics. Corn and soybean prices are at record highs, and strong global demand and limited supply have pushed up agricultural commodity prices. Higher freight, electricity, and labor expenses, as well as shortages of primary materials, have contributed to the increase. In 2022, higher commodity prices will likely be buoyed crop fertilizer demand.
In addition to a probable increase in fertilizer demand this year, robust farmer profit margins resulting from a rise in agricultural commodity prices are likely to increase demand this year. Because of robust crop demand, grower economics remain favorable in most worldwide growing areas. In the United States, the demand for fertilizers is anticipated to be driven by healthy farm profits and high planted acreage levels. It is anticipated that robust farmer economics will help sustain demand in big countries like Brazil and India.
This year's agricultural revenue in the United States will likely be bolstered by a rise in grain and oilseed prices owing to supply chain delays caused by Russia's invasion of Ukraine. A robust farm income bolstered by a rise in agricultural commodity prices would most likely motivate farmers to invest in crop fertilizers.
In 2022, the global demand for potash is anticipated to be driven by robust farmer economics, rising crop commodity prices, and constrained supply availability. Additionally, demand for nitrogen fertilizer remains robust, and the increased economic activity contributes to a rise in industrial nitrogen product usage. Demand in North America, India, and Brazil is anticipated to raise global nitrogen consumption.
Likewise, fertilizer prices are soaring due to war-related supply issues. Russia is a leading exporter and manufacturer of fertilizers. The Russian government's decision to ban fertilizer exports has challenged global supply, driving up fertilizer prices. The introduction of sanctions has also affected Russian exports.
Potash prices have increased due to increasing worldwide demand and a limited supply. In addition to limited supply and robust demand, worldwide phosphate prices are being pushed upwards by a lack of available products. Nitrogen prices have risen due to lower operating rates in Europe and Asia because of higher energy prices and an increase in demand. A surge in natural gas prices in Europe has led to a drop in nitrogen fertilizer output, thereby driving up international nitrogen prices. On the strength of crop markets and global supply restrictions, aggravated by the Russia-Ukraine war, the pricing impetus is anticipated to persist.
1. Intrepid Potash
In the beginning, we will examine Intrepid Potash or IPI for short. IPI is an industry leader in the worldwide fertilizer manufacturing business. Potassium chloride is made here in the United States in the highest quantities. Similar chemicals act as a vital nutrient for agricultural growth and as a component in animal feed. IPI also mines potassium, magnesium, sulfur, and water-based commodities. These qualities enable it to service the oil and gas sector in addition to regular agricultural businesses.
Demand for IPI's goods is predicted to climb as global potash inventories fall. Given the magnitude of IPI's activities, IPI stock might be an excellent choice for investors eager to get on the fertilizer stock bandwagon. Consequently, it is logical that some are evaluating IPI before its fourth-quarter financial results are released next week. We can study the company's preceding fiscal quarterly profit for comparison reasons.
IPI exhibited substantial achievements across the board in this report. The year-over-year growth in sales for the company's first three quarters was well over seventy-five percent. Profits per share and net income rose by more than 138% for the firm. CEO Bob Jornadvaz shares insight into the company's present success. He underlines the contributions of increasing fertilizer prices, rising oilfield sales, and significant cash flow creation. In addition, Jornayvaz indicates that IPI anticipates results from enhanced price levels during the current quarter. Given the preceding, do you think IPI stock is a leading competitor among fertilizer stocks today?
2. Nutrien
Nutrien, established in Canada, is profiting from the robust demand and rising prices for crop nutrients in the global agriculture markets. NTR also benefits from acquisitions, cost efficiency, and a rise in digital platform use. Additionally, the corporation continues to grow its presence in Brazil through acquisitions, such as Tec Agro. These reasons have led to an over 82% increase in its share price over the past year.
Nutrien, which carries a #1 Zacks Rank, has a projected earnings growth rate of 106.4% for the current year. In the past 60 days, the Zacks Consensus Estimate for NTR's earnings for the current year has increased by 37.8 percent.
3. Sociedad Química (SQM)
As one of the world's foremost lithium producers and a Chilean supplier of iodine, this company is profiting from the lithium battery-based electric vehicle (EV) boom. However, SQM also produces crop inputs, mostly potash and potassium nitrate, and the company's fertilizer division accounts for 33 percent of overall gross revenues. Diversified SQM is better positioned than most pure-play fertilizer firms. Even if fertilizer costs are surging (potash prices alone have increased by more than 100% in the last year! ), agricultural nutrients are predicted to become more scarce in the coming months (partly due to sanctions against top producers Russia and Belarus), SQM stands to benefit from both trends and could fill the void left by Russia's potash exports, with management predicting a 10 percent increase in potash sales volumes for 2022. The company's revenue increased by 58 percent in 2021 compared to the previous year due to increased lithium demand and higher potassium prices. Wall Street anticipates revenue and profits gains of 80 percent and 180 percent, respectively, for 2022, while management anticipates more excellent results due to the sustained strength of the fertilizer and lithium sectors.
4. Origin Agritech Limited (NASDAQ: SEED)
Origin Agritech Limited (NASDAQ: SEED), an agricultural biotechnology firm headquartered in Beijing, China, engages in breeding seeds and genetic enhancement operations. Additionally, the corporation sells agricultural supplies such as fertilizers and agricultural chemicals.
The stock rose 13.3 percent in premarket trading on February 7 after the business revealed a promising outlook for 2022 and expected sales growth of 300 percent to RMB 150 million in the fiscal year 2022. Existing hybrid seed enterprises and a fresh push to sell GMO and CRISPR-enhanced crops to feedstock firms will contribute to the anticipated expansion.
Marshall Wace LLP, owned by Paul Marshall and Ian Wace, acquired 6,890 shares of Origin Agritech Limited (NASDAQ: SEED) during the fourth quarter of 2021 for $49,000, becoming the only SEED stakeholder in our database.
5. The Mosaic Company
The Mosaic Company is another well-known fertilizer manufacturer, and it is the largest integrated producer of concentrated phosphate and potash. Mosaic employs about 13,000 employees in six countries and serves consumers in around 40 countries to provide a feeling of scale. MOS stock has increased by more than 65 percent in the past six months. The corporation released its fourth-quarter and full-year earnings last week.
Full-year revenues were $12.4 billion, a 42 percent increase from the previous year. This income rise resulted from improved pricing, which compensated for a decline in volume. Mosaic recorded a net income of $1.63 billion, a significant increase over 2020's net income of $666 million. Therefore, earnings per share increased to $4.27 from $1.75 a year before. In addition, the company anticipates completing the faster ramp-up of its new K3 potash mine by the end of this quarter.
The business anticipates that the mine will produce 5 million tons this year. In addition, the Phosphate division earned $1.2 billion in 2021. Consequently, its MicroEssentials fertilizer sales, which set a new sales record of 3,3 million tons, propelled the company's profits. Finally, Mosaic Fertilizers' sector profits increased by 115% to $745 million. This division surpassed its 2023 EBITDA contribution objective two years early, which is remarkable.
6. CF Industries
Hydrogen and nitrogen compounds for industrial use are the primary focus of this business, and notable examples are commodities for renewable energy, pollution control, and fertilizers. The company's primary activity is the sale of ammonia, the largest ammonia generator in the United States. In addition, the corporation plans to boost its ability to manufacture green and blue ammonia, which are more ecologically beneficial.
Last month, the company released its annual and fourth-quarter financial reports. CF made $6.54 billion in sales last year, a massive increase from $4.12 billion the year before. This represents an increase in income of 37%. Sales rose across the board, primarily due to rising global demand and tightening supply. In addition, diluted earnings per share were $4.24, or $917 million annually. These numbers are significantly higher than last year's $317 million and $1.47 billion.
Additionally, CF is heading toward its long-term objectives of promoting a global hydrogen and alternative fuels economy. It achieves this, among other things, by producing blue and green ammonia. One of them is the creation of the first commercial-scale green anaerobic fermentation in North America. The project is projected to be finished in 2023 at the industry's Donaldsonville Complex, where it has already begun. Given these developments, will CF stock make your list of the best fertilizer stocks to purchase?
7. Bioceres Crop Solutions Corp. (NASDAQ: BIOX)
Founded in 2001 and headquartered in Rosario, Argentina, Bioceres Crop Solutions Corp. (NASDAQ: BIOX) is a publicly-traded company on the NASDAQ. The firm provides agricultural productivity solutions, including seed technology, genetic material, and seed treatments. Bioceres Crop Solutions Corp.'s (NASDAQ: BIOX) Crop Protection business develops herbicides, insecticides, fungicides, and micro-granular fertilizers.
Bioceres Crop Solutions Corporation (NASDAQ: BIOX) announced on March 16 its intention to combine with Marrone Bio Innovations Corporation (NASDAQ: MBII) in an all-stock transaction. The deal is priced at around $236 million and is anticipated to finalize in the third quarter of 2022. Upon the transaction's completion, Marrone Bio Innovations, Inc. (NASDAQ: MBII) shareholders will own approximately 16 million shares of Bioceres Crop Solutions Corp. (NASDAQ: BIOX). At least two directors will be appointed to the board of directors of Bioceres Crop Solutions Corp. (NASDAQ: BIOX) by shareholders of Marrone Bio Innovations, Inc. (NASDAQ: MBII).
On March 18, Ben Klieve from Lake Street maintained his 'Buy' rating and $25 price target on Bioceres Crop Solutions Corp. (NASDAQ: BIOX) shares. He referred to the company's purchase of Marrone Bio Innovations, Inc. (NASDAQ: MBII) as a "visionary transaction accomplished at a wonderful price."
8. Compass Minerals International, Inc. (NYSE: CMP)
Compass Minerals International, Inc. Compass Minerals International, Inc. (NYSE: CMP) is one of the leading Western Hemisphere providers of sulfate of potash specialty fertilizer. Compass Minerals International, Inc. (NYSE: CMP) shares increased by 11% during the past month despite a macroeconomic environment marked by worldwide food shortages.
On February 24, Compass Minerals International, Inc. (NYSE: CMP) declared a quarterly dividend of $0.15 per share, payable on March 21 to shareholders of record as of March 10.
On March 3, CL King analyst David Silver boosted his price objective on Compass Minerals International, Inc. (NYSE: CMP) from $65 to $67 and accorded the stock a 'Buy' rating. According to the analyst, the company's value is becoming increasingly sensitive to the long-term potential of its discovered lithium deposit and its more modest growth objectives. Silver informed investors in a research note that Compass Minerals International, Inc. (NYSE: CMP) is implementing efficiency improvements at its Goderich salt mine.
Twelve hedge funds owned long holdings in Compass Minerals International, Inc. (NYSE: CMP) during the fourth quarter of 2021, compared to 14 funds in the previous period. Jeffrey Bronchick's Cove Street Capital is the company's largest stakeholder, with 587,618 shares worth $30 million.
9. Company Scotts Miracle-Gro (SMG)
The Scotts Miracle-Gro Company manufactures, markets, and sells lawn and garden care products and indoor and hydroponic gardening products in the United States and overseas. The business is divided into three segments: U.S. Consumer, Hawthorne, and Other.
The opening price of Scotts Miracle-Gro Company shares was $79.04, up from the previous day's closing of $79. The most recent cost was $76.40 (25-minute delay). Scotts Miracle-Gro Company is an NYSE-listed company with around USD4.6 billion trailing 12-month revenue and 7,300 employees.
10. Bunge (BG)
Bunge Limited is a global agricultural and food corporation. It works in four divisions: Agribusiness, Refined, Specialty Oils, Milling, and Sugar and Bioenergy. The Agribusiness section acquires, stores, transports, processes, and sells agricultural commodities and commodity goods, such as oilseeds, primarily soybeans, rapeseed, canola, sunflower seeds, and grains primarily wheat and corn; and processes oilseeds into vegetable oils and protein meals.
The opening price of Bunge shares was $98.77, up from the previous close of $97.60. The most recent cost was $98.71 (25-minute delay). Bunge is an NYSE-listed company with a trailing 12-month sales of about $62.1 billion and 22,000 employees.
Final Thoughts
Inflation, conflict, and agricultural market developments drive up demand and fertilizer and crop prices. In the first 12 months after the start of a rate-hiking cycle, commodities have traditionally outperformed the S&P 500.
Amid heightened geopolitical instability and structural supply shortfalls, commodity indices have risen. Historically, commodities have demonstrated resilience in rising rate conditions and can assist investors in hedging against inflation and diversifying their portfolios.
Based on our quantitative assessments, IPI, MOS, and CF are Strong Buys due to their outstanding growth, profitability, and momentum scores. They have projected revenue growth rates of 24.75 percent, 24.60 percent, and 26.77 percent, respectively. Fertilizers and agricultural chemicals are defensive in the present inflationary climate characterized by strong demand for food, particularly in light of global food shortages. Considering the expenses passed on to customers, the bullish trend for these commodities is anticipated to continue for the foreseeable future.
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