One of the safest investments over the previous two years is in danger as crop prices fall.
Falling prices for maize, wheat, and other commodities have weighed on the stock prices of fertilizer producers, including Mosaic Co. and CF Industries Holdings Inc. Stocks of fertilizers are still higher than they were before the outbreak, but they have lost most of their 2022 gains since the spring.
Fertilizer stocks have been dragged down with the rest of the market, and investors and experts are attempting to figure out whether they can turn around or if they were pushed up too high in the panic when Russia invaded Ukraine and still have further to go.
Matthew Tuttle, CEO of Tuttle Capital Management, recently said, “I’d be very wary with the fertilizer stocks right now.” He claims to have made money trading intraday fluctuations of Mosaic shares lately. Still, He is now avoiding them and the stocks of the Tampa, Florida company’s competitors because they are in “no man’s land.”
Midway through April, Mosaic and CF had respective year-to-date growth rates of 99 percent and 55 percent. Despite their subsequent drop, they continue to rank among the S&P 500’s best performers thus far in 2014. Compared to the general stock market’s 18% drop in 2022, Mosaic’s 15% growth and CF’s 20% growth stand out as particularly impressive.
CVR Partners LP, Nutrien Ltd., and Corteva Inc. are all competitors that have followed similar price patterns. Futures for wheat, soybeans, and maize rose by at least 2 percent on Thursday, boosting fertilizer stocks.
After the 2020 economic recovery, the price of fertilizer and producer stocks’ value skyrocketed. However, high natural-gas costs and shortages of other chemicals required in fertilizer manufacture harmed productivity, while bad growing weather depleted grain supplies throughout the globe, driving up prices of mainstays like maize and wheat.
By invading Ukraine in late February, Russia sent shockwaves through the global crop and fertilizer markets by jeopardizing many of the world’s grain exports and fertilizer production.
In spite of the increase in crop prices, many farmers were unable to afford the amount of fertilizer they desired, according to Guillaume Daguerre, director of natural resources and commodities at Fitch Ratings.
Farmers’ incomes are reduced, and food prices, which have risen dramatically, rise even more, as fertilizer costs go up.
Now that growing conditions in North America, Europe, and Asia have improved, farmers are more optimistic that bumper harvests will replace the staples that have been left behind in Ukraine, the price of crops has fallen. Futures prices for corn, wheat, and soybeans are all lower now than before Russia’s invasion. When the Federal Reserve started raising interest rates to curb inflation, stock market investors began selling off even their winning positions.
According to certain experts and investors, there are still reasons to be positive on fertilizer stocks. First, the outcome of the war in Europe is still unclear. Second, the continued high cost of natural gas in Europe is having a negative impact on the production of fertilizer while providing a boon to the least-affected businesses. Third, an increasing amount of land is being devoted to cash crops, which may be a response to farmers’ desires to maximize yields while benefiting from current market conditions that see commodity prices at multi-year lows.
According to JPMorgan Chase & Co. commodities analyst Tracey Allen, low global grain and fertilizer supplies and high energy costs are expected to keep food and fertilizer prices high until 2023; according to JPMorgan Chase & Co. commodities analyst Tracey Allen.
Future crop prices would be “heavily influenced by fertilizer prices,” she said.
