Major fertilizer companies are banking on a demand recovery in 2024 as they look to overcome another quarter of declining profits.
CF Industries, Mosaic and Nutrien all saw third quarter revenue decline more than 30% despite increased sales volumes, falling short of Wall Street expectations. They also reported lower earnings as prices for active ingredients — such as ammonia, nitrogen, phosphate and potash — return to normalized levels after reaching record highs last year.
Looking ahead, executives are optimistic about 2024. A combination of increased demand and market stability suggest margin-rich opportunities for the foreseeable future, Ken Seitz, Nutrien’s president and CEO, said in an earnings call.
Growers had either delayed fertilizer purchases or bought less product after prices hurtled to record highs following a combination of events, including the COVID-19 pandemic and Russia's invasion of Ukraine. However, as prices come back down and planting season is on the horizon, manufacturers say that farmers can't hold out forever.
“Around the world, growers are incentivized to maximize yields through appropriate levels of fertilizer application,” Mosaic CEO Joc O’Rourke, said in a statement. “As a result, demand for our products has rebounded this year, and we expect robust demand through 2024.”
Export prices for potassium chloride and urea have returned to 2021 levels, according to USDA data. Domestic prices have also significantly declined. Anhydrous ammonia, for example, is down nearly 47% to $870 per ton, according to Illinois market data from July 27.
Demand for fertilizer is rebounding as products become more affordable to growers. Sales volumes increased for CF Industries, Mosaic and Nutrien during the third quarter, most notably for potash, which saw strong demand in North America and Brazil. This was offset by lower ammonia sales volumes due to production outages and disruptions.
Executives say increased sales activity is a sign of improving demand, and they expect the trend to carry over into next year. Manufacturers are anticipating restrictions in supplies for products such as nitrogen, which could again boost prices — and profits.
"In the near and medium terms, we are well positioned for what we expect will be a tightening global nitrogen supply demand balance with strong margin opportunities," Tony Will, CF Industries president and CEO, said during the company's third quarter earnings call.