Dive Brief:
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Major fertilizer companies are grappling with weaker prices as growers delay purchases to better manage costs.
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Nutrien, CF Industries and Mosaic saw earnings declines as they navigated volatile input prices and an economic downturn mired with interest rate hikes. According to second quarter reports, profits were slashed in half compared to last year for the three companies, despite higher sales volumes.
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Signs of growing demand and market stabilization are fueling optimism for the back half of the year, executives said in their earnings calls, as geopolitical tensions and extreme weather concerns continue to affect crop supplies.
Dive Insight:
Fertilizer prices, while still relatively high, have fallen since peaking in the second quarter of last year, when manufacturers saw record-high earnings results.
Average prices for products with anhydrous ammonia and urea fell nearly 50% over the past year, according to a University of Illinois report. Meanwhile, prices for potash products declined more than 35%, as urea and liquid nitrogen fell about 20%.
Several factors are behind the collapse in pricing, including demand destruction from high prices, investments in expanding global capacity and market adjustments to the Ukraine-Russia conflict, economists said in the report.
As retailers work through their inventories ahead of an expected strong fall application season, demand is forecasted to rebound for all fertilizer products in the third quarter, Ken Seitz, president and chief executive officer at Nutrien, said on an earnings call Thursday.
“Looking ahead, we believe structural market shifts are supportive of higher average fertilizer benchmark prices through the next cycle,” Seitz said. “This view is driven by the expectation for continued tightness in global crop markets, higher energy prices and other inflationary impacts on the global cost curve.”
Economists also are expecting higher prices as geopolitical tensions continue to affect global grain markets and supplies. In 2022, export sanctions and restrictions enacted in response to the Ukraine-Russia conflict sent fertilizer prices skyrocketing. With no grain corridor deal resolution in sight, markets could rally again.
“The ongoing risk of conflict escalation or other geopolitical developments which lead to global trade flow disruptions remain,” experts said in the report.
