How to Invest in the Fertilizer Industry

Agriculture is profitable even without participating in farming or other agricultural value-chain activities; everyone needs to eat. There are wide ranges of investment options that can be harnessed by investors and the current 2022 global fertilizer shortage confirms this is the right time to invest in agriculture. Looking for some alternative investing options, or some diversity in a recession proof industry? Read on to explore some of agriculture investment options available.

In the previous post Investment Opportunity in the Fertilizer Industry an overview of the fertilizer industry was presented, alongside an assessment of the impact of the ongoing shortage and the business opportunities it provides for potential investors.

Investment Opportunities in the Fertilizer Industry

Besides the direct involvement of investors in the production of organic and/or balanced fertilizer blends as shared in the previous article, there are quite a number of other investment options that can earn investors profit. I haven’t looked into any of these companies, I’m not giving stock tips, or suggesting you buy any of them. Do your own research and use the following mentioned companies as a guide to find the right investments for yourself.

Stocks: investing in companies who produce fertilizer is a great way to make returns from the ongoing shortage-induced hike in the price of chemical fertilizers. As it stands, demand for the product is higher than its supply, leading to an increase in fertilizer prices. The demand is expected to increase the stock value of companies involved in fertilizer production and distribution considering that fertilizer is an essential commodity required for food production.

Examples of some publicly traded fertilizer companies:

CVR Partners LP: Founded in 2007, CVR Partners LP is a subsidiary of CVR Energy Inc. based in Texas, United States. The company is into manufacturing of Nitrogen fertilizer and is listed on the New York Stock Exchange (NYSE) as UAN. In 2012¹, the company was listed as a Fortune 500 company. In December 2021, it made a revenue of over USD180M, a 109% year-on-year increase. UAN is a dividend paying stock with a current market capitalization of over USD1.1B². Furthermore, as of the time of this report, the stock was trading at about USD107 per share.

CF Industries Holdings: a manufacturer and distributor of fertilizers founded in 1946, CF is a publicly traded company listed on the NYSE. The stock has a current market capitalization of nearly USD17B³ and sells for about USD79 per share. As of December 2021, the company realized a revenue of over USD2.5B, a 130% year-on-year increase. Similar to UAN, CF is also a dividend paying stock.

Nutrien Limited: founded in 2018, Nutrien Limited is a Canadian based fertilizer company which currently ranks as the world’s largest producer of potash and third-largest producer of Nitrogen fertilizer. It is listed as NTR on both NYSE and Toronto Stock Exchange (TSE) and trades for about USD85 and CAD109 per share respectively. NTR has a current market capitalization of over CAD60B.

Other publicly traded fertilizer companies listed on the NYSE include Mosaic Company trading at USD52 per share, and Compass Minerals International Inc., trading at USD58 per share among others.

Commodities: investing in essential commodities with high fertilizer requirements or indirectly linked with the fertilizer is another option. For example, corn is one of the most important, and most traded agricultural commodities globally. Also, it is a cereal that requires a lot of application of Nitrogen and Phosphorus fertilizers to perform optimally. This implies that the current fertilizer shortage is expected to affect its production and price. If more farmers decide to focus production on other cereals like wheat, it means the demand for the reduced quantity of corn will be higher than its supply, leading to a hike in its price. From a different angle, if farmers pay the high price of obtaining fertilizer amidst the shortage, to increase their profit margin therefore, they will be forced to increase the price of corn in response to high cost of input. Either ways, the importance of corn makes it another investment option.

Exchange-traded Funds (ETFs): ETFs provide a great option for diversifying your investment portfolio by investing in a basket of different companies. Diversification functions as a hedge against risks and uncertainties associated with the stock market. This is because individual stocks in a single ETF are influenced by different economic, government and market factors. The following are examples of fertilizer related ETFs:

VanEck Agribusiness ETF trades as MOO on the NYSEArca. It is an agribusiness fund with a total listing of 55 agribusiness companies/holdings from different parts of the world. These companies cut across subsectors such as agrochemicals, including fertilizers, agro-inputs such as seeds, aquaculture, livestock and crop production. A few holdings under this ETF include Nutrien Limited, Golden Agri-Resources Limited, Iveco Group, CF Industries Holdings Inc., Deere & Co, Bayer Ag., Corteva Inc. etcetera. The entire fund currently has a weighted average market capitalization of USD38.2B and trades for about USD95.

Teucrium Corn Fund traded as CORN on the NYSE and NYSEArca. As earlier stated, investing in an essential commodity like corn also provides an opportunity to profit from the ongoing fertilizer shortage. Investment in corn can be done through direct trading or through ETFs. CORN has a listing of about 20 companies/holdings; some of which include AT&T Inc., ITT Inc., Humana Inc., WGL Holdings Inc. and Corn Future. The ETF currently trades at USD25 per share and has a total net asset worth over USD165M.

Mutual funds: mutual funds function similarly to ETFs. However with the later, funds are pulled from different investors by a Fund Manager (usually another company) and used to purchase a range of securities including stocks and bonds. In comparison with individual stocks, mutual funds just like ETF’s have lower costs and avail an investor the opportunity to diversify their portfolio. In addition, they are quite convenient, and another investment option in the fertilizer industry. Examples of mutual funds that trade in fertilizer companies include:

Fidelity Select Chemicals Portfolio: trades on NASDAQ as FSCHX and has a Net Asset Value of over USD850M. Amongst its top 10 holdings is the Mosaic Company, the largest producers of potash and phosphate fertilizers in the United States. Mosaic is also listed on other mutual funds like Bridgeway Aggressive Investors 1 (BRAGGX) which trades on NASDAQ and NYSE as well.

All of these options are a clear indication that no matter the size of your investment, anyone can be an investor in the fertilizer industry, enabling interested investors to avoid the hassles of agricultural production to benefit from convenient options. What are you waiting for? Let’s get started on investing already. This post was written with Fiverr by Estherogbole. I hire Fiverr writers to write on topics they are proficient in, this allows us to all learn more about how to better invest, build businesses and work online.

I’m not a financial advisor, any of the companies mentioned in this post are examples of investment options. Do your own research before you buy any investment. Subscribe for more business, sales and investing posts. Have a lovely day.

References