Fertilizer Stocks Fall After Pandemic Pop

Pandemic Era Gains

Over the past two years, shares of fertilizer makers steadily climbed higher thanks to multiple factors. The first bump came when economies reopened in 2020. Fertilizer prices and their stocks got another lift thanks to bad growing weather which limited grain inventories around the world. Then, when Russia invaded Ukraine in February of this year, fertilizer prices rose again due to fears that grain output would be slowed.

Companies in the space including Mosaic Co. (MOS) and CF Industries Holdings Inc. (CF) benefited from these macroeconomic developments. Now, however, their stocks have been dragged down in recent weeks. Investors are trying to figure out whether fertilizer shares are being dragged lower as part of the broad market downturn, or if they have further to fall because their valuations ran up too much.

Pull Back

Flashing back to April, Mosaic and CF were up 99% and 55% for 2022, respectively. These year-to-date returns have come back down to earth recently with Mosaic up 13% and CF up 18%. Other competitors in the sector including Nutrien Ltd. (NTR), Corteva Inc. (CTVA), and CVR Partners LP (UAN) ran up and then slowed down in a similar fashion.

For what it’s worth, although Mosaic and CF’s returns have come back down to earth, the S&P 500 has plunged 19% in 2022. Nevertheless, investors are trying to figure out where fertilizer stocks go from here.

What’s Next?

Some investors continue to see upside in fertilizer stocks, pointing to the ongoing war in Europe. Output will be uncertain in the region until there is some sort of resolution. With that said, natural gas prices are still historically high in Europe. This can make manufacturing fertilizer more expensive. While that might be good for the companies, some experts note that as fertilizer becomes too expensive for farmers around the world, it decreases demand.

Zooming out, fertilizer stocks are a fascinating barometer of global interconnectedness in an era defined by a pandemic and a war. With inflation still running at record highs, partly because of increased food prices, it’s important to pay attention to inputs that can keep staples elevated.

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