The fertilizer industry and related agribusiness exchange traded funds are showing improved fundamentals, with Potash Corp. of Saskatchewan (POT) raising its outlook for industry-wide shipments while supplies remain tight.
Potash raised its projection for industry potash exports to 58 million metric tons, up from 57 million previously, as Latin American demand is expected to hit a record high this year and China’s usage exceeds 12 million metric tons, reports Christopher Donville for Bloomberg.
“Emerging markets in Asia and Latin America account for almost two-thirds (2/3) of global consumption to support food production for their large and growing populations,” according to Global X.
ETF investors can gain exposure to the fertilizer industry through a targeted ETF, like the Global X Fertilizers/Potash ETF (SOIL) , which is up 2.5% year-to-date. Additionally, broad agribusiness ETFs such as the Market Vectors Agribusiness (MOO) include fertilizer producers, along with other companies involved with chemicals, equipment, agricultural products and live stock, among others. MOO is down 0.7% year-to-date. SOIL includes a 4.7% allocation toward POT and MOO has a 6.6% weight in POT.
Potash, a type of potassium that strengthens plant roots and bolsters drought resistance, has experienced increased demand after prices fell last year, after Russia’s OAO Uralkali, the largest producer, abandoned a sales pact and increased sales. [Agribusiness ETFs Try to Firm]
Consequently, Potash Corp. has diminished production, and North American inventories ended the first half at their lowest since 2011 and could remain tight due to scheduled maintenance that would limit output.
Additionally, Uralkali has also cut its full-year output target by 8% to bolster prices.
“Prices are still down year-on-year but are inching higher,” Mark Gulley, an analyst at BGC Partners LP, said in the article. “Pricing stability is drawing buyers back to the potash market.”
Global X Fertilizers/Potash ETF
For more information on the agriculture industry, visit our agribusiness category.