Illustration by Elias Stein
Since Russia invaded Ukraine, shares of Saskatoon, Canada’s
the Western Hemisphere’s top fertilizer maker, have climbed 37%. The
Energy Select Sector SPDR
exchange-traded fund, a proxy for Big Oil, is up only 13%.
Fertilizer is derived from potash, phosphate, and natural gas. Russia and Belarus produce more than a third of global potash, and dominate in natural gas. Belarus’ potash exports were strangled by prewar Western sanctions; Russia cut its own off on March 4. Potash fertilizer prices have soared by three-quarters in 2022. Prices of urea, one of two main nitrogen fertilizers distilled from gas, have risen 60% in a month.
The market is dynamic. Nutrien has enough spare potash capacity to substitute more than a third of what’s offline in Russia and Belarus, says Brian Madden, CIO at First Avenue Investment Counsel. Saudi Arabia and its Gulf neighbors are growing nitrogen fertilizer output by 7% to 9% a year. And hard-hit farmers, who lay down nitrogen every season, can skip a year or two with potash or phosphate by “mining the soil” for leftovers. Crop shifts can drive this process: Corn needs nitrogen, while wheat and soybeans need phosphate and potash.
North American producers have an edge on European rivals, because they have access to cheap gas. Diversified Nutrien has two major competitors on the continent: