①The Middle East conflict has caused a surge in fertilizer prices, impacting U.S. agriculture and driving up the stock prices of fertilizer producers; ②U.S.-based fertilizer manufacturers and other industries heavily reliant on natural gas (including steel, plastics, etc.) have gained a cost advantage.
Cailian Press reported on March 13 (edited by Niu Zhanlin) that the spike in fertilizer prices triggered by the Middle East conflict is spreading from Wall Street to the heartland of the United States, pushing up the stock prices of fertilizer producers while forcing farmers to make difficult decisions as the spring planting season approaches.
A recent report by the United Nations Conference on Trade and Development pointed out that shipping costs, including freight, marine fuel, and insurance fees, are also rising, leading to increased transportation costs across the entire fertilizer supply chain.
Investors are betting that U.S. fertilizer producers will capture more market share amid the inability of Middle Eastern producers to export products from the Persian Gulf. Additionally, with relatively lower natural gas prices in the U.S. compared to overseas competitors, these companies are expected to see expanding profit margins.
The conflict in the Middle East has disrupted the global supply of significant amounts of ammonia, urea, sulfur, and phosphate. Furthermore, approximately 20% of the global liquefied natural gas (LNG) supply has been affected, which European and other regional fertilizer producers heavily rely on.
Since the U.S. and Israel began bombing Iran, European benchmark natural gas prices have surged by about 60%. In contrast, U.S. natural gas futures have risen by only around 14%, giving U.S.-based fertilizer producers and other industries reliant on natural gas (including steel, plastics, etc.) a cost advantage.
Against the backdrop of an overall sluggish market, investors are searching among listed companies for potential beneficiaries.
Many investors have focused their attention on $CF Industries Holdings (CF.US)$ the industrial sector, a company that consumes a large amount of natural gas to produce nitrogen fertilizers. During Thursday’s trading session, its stock price surged by more than 12%, hitting a record high. Since the beginning of this year, the company’s stock price has risen over 75%, making it one of the hottest stocks of the year.
Edlain Rodriguez, an analyst at Mizuho Securities, stated that investors expect CF Industries to raise fertilizer prices to align with global competitors, who need higher prices to offset rising natural gas costs, while CF Industries’ raw material costs will remain relatively stable.
He added, “Their advantage stems from the gap between U.S. natural gas prices and European natural gas prices. The wider this gap, the more advantageous their position becomes.”
The share prices of Mosaic and Nutrien, two other major fertilizer suppliers in North America, have also risen by more than 30% so far this year.
For American farmers already facing cost pressures, the situation in the Middle East has driven up prices for certain fertilizers by about 30%. This impact comes at a critical time when farmers are planning for spring planting.
Typically, farmers purchase most of their agricultural inputs in the fall. However, in recent years, consecutive bumper harvests have led to a decline in agricultural product prices, while tariff policies implemented by the Trump administration have weakened export markets and driven up costs, leaving many American farmers in a tight financial situation.
More farmers than usual have chosen to delay purchases until spring, as they anticipate receiving subsidy checks from the Trump administration’s $12 billion agricultural aid program.
At the end of last year, due to cash shortages, American farmers reduced their fertilizer purchases. Mosaic, which mines potash in western Canada and phosphate in central Florida, noted that this decision to delay purchases now appears to be quite costly.
Seed and pesticide seller Bayer expects that farmers will reduce corn acreage this year in favor of increasing soybean planting. However, company executives indicated that this shift will weigh on performance since the corn business is typically more profitable.
Rodrigo Santos, head of Bayer’s agricultural business, stated during last week’s investor conference call: ‘The scale of the shift from corn to soybeans remains uncertain, but it is clear that soybean acreage will increase.’
Some farmers may opt to reduce fertilizer application rates and hope for favorable weather conditions to compensate for nutrient deficiencies.
Editor/Stephen
