It’s not unusual for investors to focus their attention on natural resource stocks during periods of economic uncertainty—particularly when those stocks serve as safe havens for inflationary environments.
The recent market turbulence, not surprisingly, saw participants rotate heavily into gold mining stocks as a hedge against both broad market turmoil and persistent inflation pressures.
However, another key segment of the natural resources sector that has been very much under the radar lately is even more critical than gold. In fact, it encompasses some of the most critical elements that are essential for life on this planet. I’m referring specifically to producers of the potassium-containing compounds used to fertilize food crops all over the world—particularly now that growing season is underway—which partly explains why potash stocks are outperforming right now.
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Another key reason for focusing on this often-overlooked industry is that food security has taken on an outsized significance today. Factors such as rapid population growth in many parts of the world, frequent supply chain disruptions (due to wars and other events), rapidly escalating food prices and the increased potential for food shortages are all reasons why the agriculture sector is receiving more attention from policymakers.
What’s more, some industry analysts believe the growing emphasis placed on sustainable development goals among the world’s major food crop regions is placing undue strain on areas with fragile economies, with small-scale farmers bearing much of the brunt. (For instance, in some areas of sub-Saharan Africa, forest conservation efforts have limited the expansion of farmland, adversely impacting independent growers who rely on “slash-and-burn” harvesting methods.)
Perhaps unsurprisingly, and as a consequence of the factors mentioned here, the stock prices of companies that produce vital crop nutrients are outperforming in an otherwise volatile market environment. In particular, major potash producers are reflecting a remarkable degree of relative strength, partly as a result of rising prices for the fertilizer (see chart below), and also because of other fundamental factors influencing the broader ag sector.
Aside from ever-rising global food demand, potash price increases are being driven in the near term by ongoing supply chain disruptions and uncertainty concerning the potential impact of recent tariffs. (The latter factor is particularly the case for Canada, a world-leading potash producer and exporter which supplies 85% of the United States’ potash consumption—making the nutrient a potential economic weapon for that country.)
Increasing worldwide consumption for ag commodities like wheat, corn and soybeans is another reason why potash is in high demand, since it’s necessary for virtually the entirety of the life cycle of these crops. And as has been true in recent years, persistent geopolitical tensions and sanctions are another reason for rising potash prices.
With this background in mind, let’s examine a couple of attractive potash stocks that stand to benefit from the key variables mentioned here.
2 Attractive Potash Stocks
Intrepid Potash (IPI) is the only company in the U.S. dedicated solely to potash production, focusing on muriate of potash (MOP), also known as potassium chloride. As such, Intrepid is well positioned to benefit from tariffs that are likely to keep potash prices high for an extended period. It also offers a lower-chloride, premium product which combines potassium with two other key nutrients to help boost crop productivity in nutritionally deficient soils.
For years, Intrepid’s financial position was undermined by falling fertilizer prices, but now that the trend for potash prices has turned, its outlook has turned decidedly more sanguine. Moreover, the company has lately been allocating much of its operating cash flow into enhancing potash production volumes and making infrastructural improvements. As a result, Intrepid expects higher production and lower costs in the coming years.
For 2024, the outfit’s potash production totaled nearly 300,000 tons, a 32% increase from a year ago. Looking ahead into 2025, management plans to build off the significant improvements in potash production Intrepid saw in 2024, while also maintaining focus on operational efficiencies and cost controls to further improve profit margins.
Canada-based Nutrien (NTR) is the world’s top potash producer and the third-largest nitrogen fertilizer maker, mainly in the form of anhydrous ammonia, as well as a major provider of pesticides. The company has said it expects tariffs to put upward pressure on potash prices, and while it believes the overall market impact is unclear, it said the higher costs would mostly impact downstream distributors and farmers.
At a recent investor conference, the company’s top brass further stated that it’s seeing “improved fundamentals” in the potash market as well as market-wide tightening. It also guided for top-line growth in its crop protection business and said it feels “optimistic” about its nitrogen business for 2025 in light of the spring planting season. Analysts are expecting 10% earnings growth for Nutrient this year, which will likely prove too conservative in view of the tariff backdrop.
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