The volatility attached to the cost of fertilizers has created a significant period of uncertainty.
According to experts, the first half of 2023 has been marked by the ongoing debilitating price averages for fertilizers of all types on a global scale.
Here the Investing News Network (INN) presents a recap for the first half of the year in the fertilizer space created with potash and phosphate.
Price compression affecting industry
One expert told INN the name of the game in the fertilizer space has been uncertainty, and discussed the price trajectory for the three major fertilizer types, referring to potash, phosphate and nitrogen fertilizers.
Josh Linville, director of fertilizer at StoneX, told INN “the three major fertilizer prices came off significantly” throughout 2023
This happened in part due to what he described as a self-fulfilling prophecy, as buyers saw prices declining and waited for them to fall further before making purchases.
“But we can’t wait too long, because eventually just-in-time demand meets supply, and that’s a big issue that we’ve had,” Linville said.
He added that prices have shifted quickly as the world has gone from the throes of the pandemic to a recovery period and now to a post-recovery time.
“A kind of a classroom theory that I always work with is that uncertainty generally pushes prices higher,” he said. “And that’s what we dealt with.”
Russia’s invasion of Ukraine leads to volatility
It’s clear the industry has been severely impacted by the conflict between Russia and Ukraine.
Linville discussed the impact of Russia’s invasion of Ukraine and the subsequent sanctions Russia faced from the west. “(The market) thought we were losing Russian exports in general,” he said. “They were really one of the biggest exporters of all three major fertilizers.”
But in reality, Russia’s role in the market has not been curbed.
“European production has come back online. Largely they’re still sort of offline, but most of it is back,” he explained to INN. “A lot of these fears that drove prices up were found to be unfounded, and now we’re starting to correct lower.”
As the conflict continues to evolve, Linville told INN market participants want to see an end to the conflict and have business go back to normal.
According to a market report, potash is expected to reach a global value of US$23.03 billion this year, representing a 4.5 percent compound annual growth rate (CAGR) compared to 2022.
When it comes to the phosphate sector, the industry is expected to reach a total valuation of US$16.8 billion in 2023 and grow at a CAGR of 2.4 percent over the next 10 years.
Price of fertilizer impact on investment landscape
It’s clear the recovery phase of the pandemic has exposed various industries that flourished during times of chaos and built their future plans based on pandemic numbers.
As the world continues to move away from the more intense crisis days, some industries like the fertilizer space are experiencing growing pains of shaking off the pandemic coating.
“A lot of these plans looked very, very good when these prices were at all-time highs (or) very close to it,” Linville said. “Now all of a sudden, some of these are half of what they were, some of these are a third or lower than what they were, and that return is just not there.”
Investor takeaway
Uncertainty has certainly dominated the landscape for the fertilizer space and the larger potash industry.
However, Linville told INN there is one key certainty in the space: demand will continue to grow. “Every single day, there are more mouths to feed around the world and we have to feed those mouths — we have to create food for everybody — and that means more fertilizer.”
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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