Playing The Fertilizer Squeeze: The 3 Best Fertilizer Stocks to Buy

Fertilizers are becoming increasingly important in order to feed a growing population. Fertilizers improve the farming process by making it more efficient and increasing production output. In 2020, the fertilizer market was worth about $83.5 billion. But, by 2027, experts expect it to reach $93.9 billion. On top of that, two other factors are squeezing the price of fertilizer upward. While this isn’t ideal for consumers, it could mean outsized gains for the best fertilizer stocks.

What’s Causing the Fertilizer Squeeze?

Over the past two years, the COVID-19 pandemic has damaged and halted supply chains around the world. Quarantine lockdowns have it more difficult to produce everything from iPhones to Ford F-150s. This also includes industrial products, such as fertilizers.

Global fertilizer supply chains are critical for helping producers get food products to end consumers. When different countries were forced to quarantine due to COVID-19, supply chains around the globe were disrupted. For example, China is one of the biggest exporters of fertilizers to the United States. China has also instituted some of the strictest quarantines during the pandemic. In many cases, these quarantines lasted for months. These shutdowns in China have restricted the flow of fertilizer into the U.S.

On top of that, the Russia/Ukraine conflict is also contributing to higher fertilizer prices. First, the war is pushing up the price of natural gas. Natural gas is one of the main ingredients in most fertilizers. This price increase for gas makes it more expensive to produce fertilizer. On top of that, many countries have instituted sanctions against Russia, one of the biggest fertilizer producers in the world. This means that one of the world’s biggest supplies of fertilizer is being cut off.

This perfect storm of events is helping to squeeze the price of fertilizer. With this in mind, there’s a chance that fertilizer producers could experience record profits in the months ahead. Now, let’s take a look at the three best fertilizer stocks to buy.

List of The Best Fertilizer Stocks for 2022

No. 3 Nutrien (NYSE: NTR)

Canada-based Nutrien is the largest producer of potash in the world. It’s also the third-largest producer of nitrogen fertilizer in the world. The biggest reason that Nutrien is one of the best fertilizer stocks is that the management is incredibly forward-thinking.

Nutrien’s management believes that the industry struggles will persist well past 2022. For this reason, it is making strategic moves to continue providing value to shareholders. In 2021, Nutrien reduced the debt on its balance sheet by $2.1 billion. It also plans to repurchase $4 billion worth of shares during the year. On top of all that, Nutrien expects to pay another $1 billion to investors via dividends.

Essentially, Nutrien knows that the road ahead will be tough. It could take another year or longer for the global market to return to normal. To compensate, Nutrien is battening down the hatches. It is strategically allocating its capital (AKA reducing debt) and ensuring that shareholders will continue to receive value via dividends and stock buybacks.

These moves could help Nutrien be one of the best fertilizer stocks to own in 2022. It’s already off to a good start as its stock is up almost 30% so far this year. This is while the broader market is down nearly 14%.

Nutrien also recently posted a record year in 2021. It reported annual revenue of $26.86 billion, which was up 34% year over year. It also reported a net income of $3.15 billion, which was up 586% year over year.