Why Fertilizer Companies Soared on Thursday

Fertilizer companies Nutrien (TSX:NTR)(NYSE:NTR) and NPK (TSX:NPK) both soared from news that Russia could see fertilizer production stopped.

| More on:

Fertilizer companies such as Nutrien (TSX:NTR)(NYSE:NTR) and Verde Agritech Plc (TSX:NPK) soared on Friday due to the ongoing Russia and Ukraine conflict. Nutrien reached another all-time high, while NPK stock climbed 17%, also hitting all-time highs.

What happened?

Nutrien stock and NPK stock beat previous all-time highs, climbing on Thursday from news both will expand potash production. NPK in particular saw immense growth of 17% as of writing, announcing it would expand production in Brazil to meet global fertilizer supply chain woes.

Nutrien stock also announced recently it would expand its production to meet demand. This comes after the Russia-Ukraine conflict and sanctions would affect the low-cost supply of Russian potash. Inventory has suddenly dropped to the lowest ever seen, just as it’s needed more than ever, creating a huge demand.

So what?

Nutrien stock and NPK stock were quick to respond. NPK announced it would double capacity, reaching three million tonnes in 2022. Brazil, where the company produces potash, imports about 85% of fertilizer consumption. While the country has stocks to last until October, it plans on expanding to meet demand and avoid a food shortage.

While Russia is a low-cost, high-volume producer, it still remains the world’s second-largest major fertilizer producer. Canada is the largest producer of potash in the world, where Nutrien stock is based. While sanctions haven’t hit fertilizer companies yet, many believe it’s only a matter of time.

That’s why Nutrien stock also announced an increase in supply. Interim Chief Executive Officer Ken Seitz stated he worries farmers could start using less fertilizer if prices rise. The world’s largest crop nutrient company stated this could create a volatile market if there aren’t producers willing to pick up the slack.

Now what?

One major problem stands in the way of Nutrien stock in particular from moving forward: a strike. Not with the company, but with Canadian Pacific Railway. Workers announced a strike could start on Mar. 16, and Nutrien wants the government to halt it.

Such a stoppage could be a huge problem for the company to ship out production of fertilizer in time for spring planting. This could create a massive foot shortage should Russian fertilizer be made unavailable, which is likely — all at a time when food prices have been inflated on a massive scale.

For now, it looks like NPK stock and Nutrien stock will continue to be in demand. Shares of NPK are up 17% as of writing and 634% in the last year. Nutrien stock is up 4% as of writing and 66% in the last year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien Ltd.

More on Investing

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »