Russia Surrenders Global Fertilizer Domination
Russia Surrenders Global Fertilizer Domination
The oil crisis is what’s getting all the headlines, but Russia exports more than crude. According to the most recent sales numbers, Putin’s teetering economy is losing billions of dollars (trillions in rubles) on sanctions in a market they have dominated for decades. We’re talking about fertilizer. Russia is the largest global exporter of urea, UAN, phosphate, and potash.
China won’t help them on this one. A state planner for the National Development and Reform Commission (NDRC) stated this week that China is “seeking new sources to actively import potash fertilizer.” The rest of the world is scrambling to do the same. It’s spring. Crops need to be planted. They won’t grow without fertilizer, which is now in short supply.
Compounding the problem, the labor strike at Canadian Pacific Railway (CP) is reducing Canada’s capacity to produce and export goods. They are the third largest exporter of fertilizer in the world behind Russia and China, outpacing the fourth place United States by nearly $2 billion a year. Like today’s NFL power rankings, expect that order to shift by harvest time.
Rising Fertilizer Prices Create Investor Opportunities
This may sound like a familiar rant by now, and it should. When demand is high and supply is limited, the price of goods and services go up. Have you been to the gas pump recently? Those increases are reflected in share prices. Last week, I wrote about investing in oil companies to offset rising fuel bills. Let’s talk about fertilizer this week.
The cost of fertilizer affects the cost of food. Add that to increased transportation costs and we’re looking at weekly grocery bills that could be double what we paid last year by the time harvest season gets here in fall. It’s already happening. Urea, anhydrous, UAN28, and UAN32 hit all-time price highs two months ago. They’re not going down anytime soon.
Who benefits? Nutrien (NTR), a Canadian company that is the largest exporter of potash in the world, is up 38.60% YTD. They started the year at $76.12 and opened this morning at $105.50. The rail strike might cause a slight dip. Buy it when that happens. In the meantime, load up on Mosaic (MOS), their US competitor. They’re up 68.57% this year and still climbing.
Another US company in this space to keep an eye on is CF Industries (CF). Based in Deerfield, Illinois, the company is fifty-six years old and experiencing the greatest two-year run in its history. After bottoming out in March 2020 at $25 a share, they’ve climbed all the way to $101.74 at the opening bell this morning. Since January 1st, they’re up 44.91%.
What else does Russia export?
The war continues to wage on, and western nations are imposing sanctions that are crushing the Russian economy. In addition to crude oil and fertilizer, Russia also exports iron, steel, wood, cereals, aluminum, and computer equipment. United States Steel Corporation (X) has risen 54% since the end of February. Alcoa (AA) is up 25.20% over that same period.
Don’t get me wrong. I’d much rather see peace in Ukraine, but the investment opportunities this war is presenting cannot be ignored. If the conflict were to end tomorrow, the sanctions won’t simply go away. The void created by Russia’s inability to do business with western nations needs to get filled. I’m investing in the companies that are filling it.
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