Fertilizer stocks and agribusiness-related exchange traded funds have made a steep retreat from their mid-April highs as falling crop prices weigh on the sector.
Year-to-date, the iShares MSCI Global Agriculture Producers ETF (VEGI) declined 11.9%, VanEck Vectors Agribusiness ETF (MOO) fell 12.6%, and the First Trust Indxx Global Agriculture ETF (FTAG) decreased 7.0%.
Shares of fertilizer makers, such as Mosaic Co. and CF Industries Holdings Inc., have plunged in recent weeks, following the pullback in prices for soft commodities like corn, wheat, and other crops, the Wall Street Journal reported.
Market observers are now mulling over whether or not fertilizer stocks can rebound after the broad market selling, or if this market segment was just caught up in the hype after Russia invaded Ukraine and disrupted global fertilizer exports.
“I’d be real careful with the fertilizer stocks right now,” Matthew Tuttle, chief executive of Tuttle Capital Management, told the WSJ.
Fertilizer prices and producer stocks rallied after global economies reopened in 2020. Meanwhile, bad weather conditions cut grain inventories around the world, fueling the rally in staples like corn and wheat. Additionally, high natural-gas prices and shortages of other chemicals used in fertilizer production further weighed on output.
Fertilizer prices also surged in late February when Russia invaded Ukraine, which disrupted a major hub for grains and fertilizer exports.
Looking ahead, Tracey Allen, commodity strategist at JPMorgan Chase & Co., argued that supplies of grains and fertilizer are depressed around the world and energy prices are elevated, which could support food and fertilizer prices through 2023. “Fertilizer prices are going to be a very important driver of agricultural prices going forward,” Allen told the WSJ.
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