Plant Food for Thought
The three primary plant nutrients are not created equal, and neither are fertilizer companies.
As the world population continues its steady march higher and arable land per person declines, farmers around the globe have increasingly looked to fertilizers to boost crop yields and meet the rising demand for food. Three primary crop nutrients, nitrogen, phosphate, and potassium (commonly referred to by their chemical symbols as N, P, and K), provide the essential base that helps plants develop strong roots, retain water, transfer energy, and synthesize amino acids. While each nutrient plays a crucial role in plant growth, we don't think the commercial production of N, P, and K stands on equal ground through the lens of industry attractiveness. In our opinion, several factors give the potash (potassium) industry structural advantages not shared by phosphate and nitrogen, contributing to economic moats for a few producers. In second place, we rank phosphate, with nitrogen bringing up the rear. Although low-cost production is probably more important in assigning moats for fertilizer producers, we also consider mix of N, P, K production for the fertilizer names in our coverage universe.
Jeffrey Stafford does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.