As part of an agreement between the United States and Russia to exclude the Black Sea from the Russia-Ukraine conflict, Russia would effectively be allowed to export fertilizer using EU ships if the deal is approved by the European Union.
Why it matters: Russia is one of the largest fertilizer exporters, so its diminished ability to export can reduce global fertilizer supply. Fertilizer prices hit all-time highs in mid-2022, when the conflict began. As Russian supply shifted to new markets, prices moderated.
Allowing exports to fully resume could add extra supply that could weigh on fertilizer prices and producer profits.
The bottom line: We maintain our fair value estimates for Nutrien NTR ($70 per share), Mosaic MOS ($35), and CF Industries CF ($85).
We do not expect fertilizer prices will decline in response to the news. We think the majority of Russian exports already found a market in more countries outside Europe and the US, such as China and India.
We view shares of Nutrien and Mosaic as currently undervalued, with both trading in 4-star territory. We view CF shares as slightly undervalued, trading more than 10% below our fair value estimate but still in 3-star territory.
Coming up: We expect potash prices will rise in 2025 as demand grows and production cuts from major producers in Belarus and Russia take hold. We view the cuts as a move to support prices, not in response to trade disruptions.
Of the three major fertilizers, phosphate could be the most affected, as prices remain above what we view as the long-term marginal cost of production. While we think Russia likely shifted its phosphate exports as well, we see the potential for supply expansion in response to higher prices.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
