The grain commodity situation and fertilizer problems

  

Global grain prices are moving higher which is an inflation problem, but it may be solved through having farmers in non-sanctioned countries increase production. These farmers should make a windfall. 

Unfortunately, the production that will not be available for international trade cannot be easily replaced even if farmers have yet to plant. Fields have to be prepared, and seeds bought and the there is another problem - fertilizer. Guess who is a large provider of vital crop nutrients? Russia. The top fertilizer importer is Brazil, a large soybean and corn producer, and Russia is their key provider. Fertilizer also affects commodities beyond corn, wheat, and soybeans. Commodity and energy prices are higher and that includes all fertilizers.

The Green Markets Weekly North America Fertilizer Price Index is constructed using the fertilizer benchmark prices of US Gulf Coast Urea, US Cornbelt Potash, and NOLA Barge DAP. The index is value weighted based on the annual global demand of each nutrient. The index is at its highest level since inception. 

The three largest US fertilizer companies, CF Industries, Mosaic, Nutrien have all shown significant gains of at least 70 percent in the last year.  

The high fertilizer prices squeeze margins for farmers and make it more difficult to switch planting plans. The commodity shock is multi-faceted and is unlikely to go away soon. Is there money to be made with these companies? Volatility is high and the chance of a reversal is high, but production cannot be adjusted if there is a long-term disruption.