Fertilizer companies have a promising year amid prospects of firmer grain prices and healthy demand as American farmers prepare to plant a larger corn area. But there’s a producer standing out: Nutrien shares are outperforming peers even as its retail business still recovers from a $1 billion write off in Brazil, one of the world’s leading agricultural markets.
This year, Nutrien’s shares have risen 8.3% in New York, while Norwegian Yara has gained 3.9% on the Oslo Stock Exchange, and Mosaic has tumbled 6%. Nutrien has diverged from the others since early February due to more optimistic prospects for potash prices and increased competitiveness in nitrogen fertilizer production, where supply remains tight.
“The underlying fundamentals for Nutrien are just a little bit better than they are for Mosaic,” Benjamin Theurer, an analyst at Barclays, said in an interview with The AgriBiz.
While U.S. tariffs could impact prices and sales, Nutrien expects its potash sales to increase to as much as 14.4 million tons this year from 13.9 million in 2024 and firming prices. And the company is in a better position to capitalize on this scenario.
If Mosaic, another major potash producer, wants to increase its production, it must bring an inefficient mine into operation, according to Theurer. Mosaic operates two main potash mines: Esterhazy, a low-cost mine, and Colonsay, which has significantly higher costs and is usually idle. For Mosaic, the equation of higher prices against higher costs may not be worthwhile.
With six mines in Canada, Nutrien is the world’s largest potash producer, holding approximately 20% of market share. About one-third of the company’s EBITDA came from the potash business last year. Another third came from nitrogen operations, which also have a positive demand outlook.
“The U.S. nitrogen market is currently tight as net import volumes through the first half of the fertilizer year were down 60% compared to the 5-year average,” said Ken Seitz, Nutrien’s CEO, during the company’s earnings call last month. Meanwhile, demand is expected to be strong in the spring due to the higher projected corn acreage in the world’s largest exporter.
Global nitrogen markets have also been impacted by natural gas prices, which remain high in Europe, boosting the competitiveness of nitrogen production in North America.
“Nutrien has a very sizable nitrogen business, which contributes with almost $2 billion in EBITDA and benefits from a structural net gas price differential,” Theurer said. Having cheaper sources of natural gas than Europe results in higher profits for North American nitrogen operators. “That’s another factor in favor of Nutrien that Mosaic doesn’t have.”
The Canadian company has a more diversified portfolio compared to Mosaic, which is absent from the nitrogen fertilizer market. The US company is a major phosphate producer and the benefits from rising prices may have been already priced in.
After the fertilizer shares rally in January, Barclays downgraded Mosaic to underweight and Nutrien to equal weight from overweight. For Nutrien, phosphate accounts for less than 10% of the company’s EBITDA.
What about Brazil?
After writing down about $1 billion in Brazil over the past two years, Nutrien is expected to have a “more neutral year” on its retail operations in the country, Theurer said.
The Canadian company is downsizing its operations in South American nation to simplify and focus its portfolio, which includes a review of its assets. In 2024, the firm reduced headcount, idled five blenders (that are now expected to be sold), and shut down over 50 experience centers in the country. Meanwhile, it is doubling down on proprietary products, a growing business in Brazil that has helped improve margins.
“Our improvement plan in Brazil is beginning to show encouraging results, and we remain focused on initiatives that improve cash flow from the business,” Seitz said during the fourth-quarter earnings call. “It’s not necessarily true that the market is moving along the way that I think the industry is hoping—and high interest rates are still a source of challenge for the Brazilian agricultural complex. But we’re seeing green shots now.”
The CEO also highlighted that the company is starting 2025 in a better position regarding inventory management for crop protection, reducing operational risks. Nutrien’s inventories in Brazil are 46% lower compared with the same period a year ago, according to Jeff Tarsi, senior vice president for Nutrien’s retail unit.
While the atmosphere in Brazil remains tense when it comes to Nutrien, the company appears to have left the worst behind. The recent shares performance signal investors are not concerned, given the weight Brazilian operations has for consolidated earnings. Last year, the company’s revenue in Brazil totaled $855 million, corresponding to only 3% of the total $26 billion.
Nutrien’s retail Ebitda, which totaled $1.7 billion, would have been about $100 million higher if Brazil would not have been negative, according to the analyst from Barclays. “Brazil is about 5% or 6% of the retail Ebitda. So it matters within this segment, but within the grand scheme of things, it’s less than 2%,” he said.
Nutrien’s troubles in Brazil have been probably priced in, and “the downside is more limited now” after the re-sizing of the local operation, the analyst said. At the same time, maintaining a certain presence in the country is important given the huge Brazilian demand for crop inputs.
“Let’s be honest, Brazil is an agricultural powerhouse. You need Brazil, but it’s a difficult market to operate in. I think some companies thought: ‘Oh, we’re so good in Australia, Canada, and the U.S.… We can do this everywhere.’ Unfortunately, Brazil is a tricky place to operate. Once you’ve figured it out, it’s fine. The challenge is figuring it out.”
