Because food prices are increasing due to supply chain disruptions and low agricultural output, the fertilizer industry should benefit. Thus, we think Nutrien (NYSE:NTR) and Yara International (OTC:YARIY) are well-positioned to capitalize on the industry tailwinds. But given the challenges the industry faces, we think fundamentally weak fertilizer stocks Sociedad Química (SQM) and Scotts Miracle-Gro (SMG) could suffer a downtrend in the near term. Let’s discuss.Increasing food prices due to supply chain constraints and the impact of climate change on agricultural output should benefit the fertilizers industry significantly. Nevertheless, rising energy prices in Europe and China, plant shutdowns, and extreme weather conditions have hit the fertilizer market hard.
The global fertilizer market is expected to grow at 5% CAGR to $323.38 billion by 2028. And because rising food prices should drive the demand for fertilizers, well-established stocks Nutrien Ltd. (NTR) and Yara International ASA (YARIY) should benefit.
However, given the current challenges facing the industry, we think fundamentally weak stocks in this space—Sociedad Química y Minera de Chile S.A. (SQM) and The Scotts Miracle-Gro Company (NYSE:SMG)—could suffer a decline in the near term.