As the conflict in Ukraine continues, the price of fertilizers remains high. Sanctions cutting off Russia’s vast supply of fertilizer have crippled supply chains. Rising input costs and increasing export restrictions out of China have only made things worse. The United States is a large importer of fertilizers. Since the start of the war between Ukraine and Russia, prices have continued to rise. This has benefited companies that manufacture and market fertilizers. Investors are also looking to get in on the action, looking for fertilizer stocks to buy.
How does Russia control the production of fertilizers?
The production of nitrogenous fertilizers requires ammonia, which is produced through a highly energy-intensive process called Haber-Bosch and fueled by natural gas. Russia is a major supplier of the gas used in the production of nitrogenous fertilizers and also produces about 21 percent of the world’s potash. Combined, Russia and its ally Belarus control more than a third of the world’s potash exports. Russia is also involved in the export of other essential fertilizer products such as ammonia (22 percent), urea (14 percent) and monoammonium phosphate (14 percent). Currently, a combination of war-related sanctions and Russian domestic policies have limited Russia’s fertilizer exports, causing shortages along the fertilizer supply chain and bringing the world to the brink of another crisis. Source: https://blog.ucsusa.org
Two fertilizer stocks to buy
CF Industries Holdings, Inc. (NYSE: CF)
CF Industries Holdings shares are up more than 75% YTD, making them a tempting fertilizer stock to buy. The company recently announced that it has reached an agreement with exxonmobil (NYSE: XOM) to produce blue ammonia, which is expected to help decarbonize hard-to-reduce industrial facilities.
The company plans to invest $200 million in a carbon dioxide compression and dehydration unit. The unit is located at the company’s Louisiana complex and will process ammonia emissions.
Exxon Mobil has also signed an agreement with EnLink Midstream, which will facilitate the delivery of the CO2. The total emissions captured are estimated at 2 million per year. That’s the equivalent of replacing roughly 700,000 gasoline-powered cars with electric vehicles, according to the companies.
CVR LP Partners (New York Stock Exchange: UAN)
CVR Partners is another stock that has reaped the benefits of rising fertilizer prices. The stock is up 51% YTD and has been on a hot streak since early July. CVR is one of the leading producers and sellers of nitrogenous fertilizer products in the United States. The company offers ammonia products for agricultural and industrial customers; and urea and ammonium nitrate products to agricultural customers, as well as retailers and distributors.
Supply chain shortages and declining crop yields have led to increased hunger nationally and internationally. The longer the European energy crisis drags on, the more investors will look to buy fertilizer stocks.
CVR Partners generated revenue of $244 million in the most recent quarter. With nitrogen prices expected to rise as much as 30% before the end of the year, things could bode well for UAN shares.
The future of fertilizer stocks
Environmental enthusiasts are excited about the technological development that is taking place in the fertilizer industry. There is an increasing demand for slow and controlled release fertilizers. These improvements will help combat some of the negative effects that conventional fertilizers have on the environment.
For now, fertilizer companies continue to raise prices to keep profits high while competing with inflation. In addition, the world’s governments continue to invest in the fertilizer industry to improve crop yields and food supplies around the world.
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