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Strong Demand and Prices Bring Boom Time for Fertilizers: 4 Picks
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The fertilizer industry is on a solid footing buoyed by strong global demand and prices for crop nutrients. Strong agricultural market trends, a rally in crop commodity prices and attractive farm economics are spurring demand for fertilizers globally. Demand for fertilizers is also backed by the need to grow the production of grains to address rising consumption. A tight global supply-demand balance is also driving fertilizer prices.
Strong global demand coupled with supply constraints have provided a boost to crop commodity prices. Prices of corn and soybean have rallied to multi-year highs. Higher agricultural commodity prices augur well for crop nutrient demand. Expectations of higher planted corn and soybean acres globally this year on the back of higher crop prices also suggest an uptick in fertilizer demand. The U.S. Department of Agriculture estimates 92.7 million acres of corn planted in the United States for 2021, up 2% from last year. Soybean area planted is projected at 87.6 million acres, up 5% from 2020.
In the United States, healthy farm profits and higher planted acreage are expected to drive demand for fertilizers this year. Farm economics have strengthened in the United States on the back of a spike in crop commodity prices and government support. Solid farm income is likely to incentivize farmers to spend on crop nutrients. Robust grower economics back by strong crop demand are also expected to support demand in other major markets such as Brazil and India.
Meanwhile, phosphate markets are likely to remain robust in the near term on solid demand and pricing dynamics. Tight availability along with firm demand is driving up phosphate prices globally. Potash prices have also strengthened on the back of robust global demand, aided by strong grower economics, higher crop prices and low global inventory levels.
Demand for nitrogen fertilizer also remains healthy in major markets. Higher economic activities have contributed to increased industrial consumption of nitrogen products. Global nitrogen requirement is being driven by demand in North America, India and Brazil. Higher corn acres in the United States are expected to spur nitrogen demand in North America this year. Moreover, demand for urea imports into Brazil and India remains favorable. A tight nitrogen supply and demand balance and a spike in energy prices across Europe and Asia are also likely to support nitrogen prices through the balance of 2021.
Solid Zacks Industry Rank
The Zacks Fertilizers industry currently carries a Zacks Industry Rank #9, which places it in the top 4% of more than 250 Zacks industries. The favorable rank reflects the industry’s strength. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Price Performance
The Zacks Fertilizers industry has outperformed the broader market in a year’s time. While the industry has rallied 50.3%, the S&P 500 has returned 32.5%.
Image Source: Zacks Investment Research
4 Stocks Worth a Wager
The fertilizer industry is riding on the strength in the global agriculture markets. Factors like solid farm income and expectations of increased planted acres are expected to drive demand for fertilizers globally. As such, the time is ripe for the investors to add some fertilizer stocks that offer compelling growth prospects.
The Mosaic Company (MOS - Free Report) : The Florida-based company is well positioned to leverage increasing global demand for fertilizers and higher realized prices in its businesses. Strong prices for phosphate and potash should drive its results this year. Actions to improve its operating cost structure through transformation plans are also expected to boost profitability.
The company has expected earnings growth of 450.6% for the current year. The Zacks Consensus Estimate for current-year earnings for the company has moved up 45.3% in the past 60 days. It beat the Zacks Consensus Estimate in each of the trailing four quarters at an average of roughly 43%.
Nutrien Ltd. (NTR - Free Report) : This Canada-based company is well placed to benefit from solid demand and higher prices for fertilizers, especially potash. It is expected to gain from strong potash sales volumes this year on the back of solid domestic and overseas demand. Nutrien is also poised to gain from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to expand its footprint in Brazil through acquisitions, including Tec Agro.
Nutrien has expected earnings growth of 156.1% for the current year. The consensus estimate for earnings for the current year has also been revised 24.6% upward over the last 60 days. The company has a trailing four-quarter earnings surprise of 127.6%, on average.
Intrepid Potash, Inc. (IPI - Free Report) : The Colorado-based company is gaining from strong commodity prices and rising potash demand and pricing, which is supporting its margins. A recovery in economic activities and the strength in commodity prices are driving demand for its specialty fertilizer, Trio. Higher prices for potash and Trio are expected to drive its bottom line.
The company has expected earnings growth of 251.3% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 147.3% upward over the last 60 days. The company has a trailing four-quarter earnings surprise of 90.5%, on average.
Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) : The Chile-based company should benefit from being the low-cost producer of potassium chloride, potassium sulfate and potassium nitrate. Moreover, higher demand is expected to boost sales volumes in its specialty plant nutrition business this year. Rising demand is also expected to drive prices of potassium chloride.
The company has expected earnings growth of 46.7% for the current year. The consensus estimate for the current year has been revised 8.3% upward over the last 60 days. The company also has an expected long-term earnings per share growth rate of 32.5%.
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Strong Demand and Prices Bring Boom Time for Fertilizers: 4 Picks
The fertilizer industry is on a solid footing buoyed by strong global demand and prices for crop nutrients. Strong agricultural market trends, a rally in crop commodity prices and attractive farm economics are spurring demand for fertilizers globally. Demand for fertilizers is also backed by the need to grow the production of grains to address rising consumption. A tight global supply-demand balance is also driving fertilizer prices.
Strong global demand coupled with supply constraints have provided a boost to crop commodity prices. Prices of corn and soybean have rallied to multi-year highs. Higher agricultural commodity prices augur well for crop nutrient demand. Expectations of higher planted corn and soybean acres globally this year on the back of higher crop prices also suggest an uptick in fertilizer demand. The U.S. Department of Agriculture estimates 92.7 million acres of corn planted in the United States for 2021, up 2% from last year. Soybean area planted is projected at 87.6 million acres, up 5% from 2020.
In the United States, healthy farm profits and higher planted acreage are expected to drive demand for fertilizers this year. Farm economics have strengthened in the United States on the back of a spike in crop commodity prices and government support. Solid farm income is likely to incentivize farmers to spend on crop nutrients. Robust grower economics back by strong crop demand are also expected to support demand in other major markets such as Brazil and India.
Meanwhile, phosphate markets are likely to remain robust in the near term on solid demand and pricing dynamics. Tight availability along with firm demand is driving up phosphate prices globally. Potash prices have also strengthened on the back of robust global demand, aided by strong grower economics, higher crop prices and low global inventory levels.
Demand for nitrogen fertilizer also remains healthy in major markets. Higher economic activities have contributed to increased industrial consumption of nitrogen products. Global nitrogen requirement is being driven by demand in North America, India and Brazil. Higher corn acres in the United States are expected to spur nitrogen demand in North America this year. Moreover, demand for urea imports into Brazil and India remains favorable. A tight nitrogen supply and demand balance and a spike in energy prices across Europe and Asia are also likely to support nitrogen prices through the balance of 2021.
Solid Zacks Industry Rank
The Zacks Fertilizers industry currently carries a Zacks Industry Rank #9, which places it in the top 4% of more than 250 Zacks industries. The favorable rank reflects the industry’s strength. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Price Performance
The Zacks Fertilizers industry has outperformed the broader market in a year’s time. While the industry has rallied 50.3%, the S&P 500 has returned 32.5%.
Image Source: Zacks Investment Research
4 Stocks Worth a Wager
The fertilizer industry is riding on the strength in the global agriculture markets. Factors like solid farm income and expectations of increased planted acres are expected to drive demand for fertilizers globally. As such, the time is ripe for the investors to add some fertilizer stocks that offer compelling growth prospects.
Below we highlight four stocks, with a Zacks Rank #1 (Strong Buy), that are good options for investment right now. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Mosaic Company (MOS - Free Report) : The Florida-based company is well positioned to leverage increasing global demand for fertilizers and higher realized prices in its businesses. Strong prices for phosphate and potash should drive its results this year. Actions to improve its operating cost structure through transformation plans are also expected to boost profitability.
The company has expected earnings growth of 450.6% for the current year. The Zacks Consensus Estimate for current-year earnings for the company has moved up 45.3% in the past 60 days. It beat the Zacks Consensus Estimate in each of the trailing four quarters at an average of roughly 43%.
Nutrien Ltd. (NTR - Free Report) : This Canada-based company is well placed to benefit from solid demand and higher prices for fertilizers, especially potash. It is expected to gain from strong potash sales volumes this year on the back of solid domestic and overseas demand. Nutrien is also poised to gain from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to expand its footprint in Brazil through acquisitions, including Tec Agro.
Nutrien has expected earnings growth of 156.1% for the current year. The consensus estimate for earnings for the current year has also been revised 24.6% upward over the last 60 days. The company has a trailing four-quarter earnings surprise of 127.6%, on average.
Intrepid Potash, Inc. (IPI - Free Report) : The Colorado-based company is gaining from strong commodity prices and rising potash demand and pricing, which is supporting its margins. A recovery in economic activities and the strength in commodity prices are driving demand for its specialty fertilizer, Trio. Higher prices for potash and Trio are expected to drive its bottom line.
The company has expected earnings growth of 251.3% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 147.3% upward over the last 60 days. The company has a trailing four-quarter earnings surprise of 90.5%, on average.
Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) : The Chile-based company should benefit from being the low-cost producer of potassium chloride, potassium sulfate and potassium nitrate. Moreover, higher demand is expected to boost sales volumes in its specialty plant nutrition business this year. Rising demand is also expected to drive prices of potassium chloride.
The company has expected earnings growth of 46.7% for the current year. The consensus estimate for the current year has been revised 8.3% upward over the last 60 days. The company also has an expected long-term earnings per share growth rate of 32.5%.