In addition to oil and gas prices, the Russian invasion of Ukraine has sent fertilizer prices soaring. Russia is one of the world's largest fertilizer exporters, and Bank of America analyst Steve Byrne said Wednesday that there is still more upside than downside for fertilizer prices and fertilizer stocks.
Byrne said global fertilizer supply was already tight even before Russia invaded Ukraine due to sanctions against Belarus, high gas prices in Europe and a ban on Chinese exports.
Prices Soaring: More than 20% of the world's supply of ammonia is sourced from Russia and exported out of Ukraine, Byrne said. Tampa ammonia prices recently jumped from $1,135 per ton to $1,625/t. Russia and Belarus each supply about 20% of global potash, which has created an unprecedented global supply shortage, Byrne said.
Potash prices in Vancouver averaged $279/t in 2021, but Byrne is projecting average 2022 prices of $566/t. Phosphate prices have also jumped from less than $900/t to above $1,200/t since the invasion.
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How To Play It: While parabolic gains in fertilizer prices are bad news for farmers, surging prices are a major tailwind for fertilizer producers. Bank of America has raised its price targets for the following three Buy-rated fertilizer stocks.
- CF Industries Holdings, Inc. (NYSE:CF) target raised from $109 to $122.
- Mosaic Co (NYSE:MOS) target raised from $75 to $86.
- Nutrien Ltd (NYSE:NTR) target raised from $117 to $130.
All three stocks are up more than 88% in the past year, but Byrne said their downside may be limited even if a resolution is reached in Ukraine.
"If things were to magically go back to the pre-war status quo, we’d still expect high fertilizer prices," he said.
Benzinga's Take: Fertilizer prices and fertilizer stocks appear to be reacting to supply shortages exactly as expected. The world can't go without food or fertilizer, so farmers and producers have no choice but to pay up for the limited supply.
