Fertilizer: We Expect Near-Term Prices Will Remain Above Pre-Conflict Levels Despite Ceasefire Deal

The United States and Iran agreed to a two-week ceasefire as part of broader negotiations to end the military conflict, with Iran reopening the Strait of Hormuz to shipping traffic. North American fertilizer stocks CF Industries, Mosaic, and Nutrien were down 5%-11% at the time of writing.

Why it matters: Nitrogen and phosphate fertilizer spot prices remain up roughly 40% and 10%, respectively, since the conflict began. The Middle East accounts for 40% of global nitrogen exports and 20% of global phosphate exports.

• The reopening of the Strait should partially alleviate the supply shock, as port inventories in the Persian Gulf should be able to leave, getting fertilizer to its destinations in time for the spring planting season.
• However, we still think a lot of fertilizer production capacity in the Middle East will remain offline over the near term as production of liquid natural gas (the feedstock for nitrogen) remains down. This should leave the global market undersupplied and near-term prices higher.

The bottom line: We continue to forecast higher 2026 nitrogen and phosphate fertilizer prices. We maintain our $135 fair value estimate for narrow-moat CF Industries, our $40 fair value estimate for no-moat Mosaic, and our $80/CAD 109 fair value estimates for narrow-moat Nutrien.

• We view CF and Nutrien as fairly valued, with both stocks trading in 3-star territory. We view Mosaic as undervalued, trading in 4-star territory.
• For Mosaic, we point to rising phosphate prices over the next few months, reflecting a delayed effect of the supply shock. A shortage of sulfur, a key input in phosphate fertilizer, will raise input costs and likely reduce production, supporting higher prices.