Forget about Oil, Fertilizer is a better way to play the current geopolitical climate: NWO.ai predicts

Russia is a giant in the fertilizer industry. Russia dominates both the production of fertilizer and its ingredients. They are the leading exporter of fertilizer globally, accounting for 12.6% of total exported fertilizers. In addition, Russia is responsible for 66% of the global production of ammonium nitrate, which is one of the key ingredients for making fertilizer.

Last week the Russian Ministry suspended the exports of fertilizers in response to Western sanctions. This led companies like CF Industries ($CF) to outperform the market. CF Industries is a North American manufacturer and seller of agricultural fertilizers located in Deerfield, Illinois. However, as the conflict continues between Russia and Ukraine, the uncertainty in the global fertilizer market grows.

A quick search on NWO.ai for “Fertilizer” reveals our proprietary Impact Score signal that measures the saturation of conversations around this topic across social media, news, search engines, financial literature, and even TV stations. The Impact Score hit an Inflection Point at the beginning of February (denoted by the ~ symbol on the graph above). Inflection Points are points at which our system notifies you and lets you know that underlying chatter around a topic has acquired critical mass and has the potential of "breaking out."

What's even more interesting is that the “Russia Ukraine Conflict” in the context of “Fertilizer Price” has skyrocketed (above) since late January. The connection strength between the two is 100% signaling a high degree of similarity. This would indicate that as the conversation for “Russia Ukraine Conflict” has increased, so has the discussion surrounding “Fertilizer Price.”

The current situation bodes well for fertilizer companies as Russia has stopped its exports, causing a global supply shock, which we believe will, in turn, send up the price of fertilizer as supply is constrained. This is similar to what we have seen with gas prices recently. As a result, fertilizer companies located in North America such as CF Industries ($CF), The Mosaic Company ($MOS), Intrepid Potash ($IPI), and Nutrien ($NTR) have outperformed the market since the conflict started.  

NWO.ai’s signal for “Russia Ukraine Conflict” has a high correlation with the companies mentioned, correlating 99.00% with $CF and $MOS. The other firms also showed high correlations, with $IPI correlating 76.24% and $NTR of 91.87%. Our signal is also a leading indicator with an average lead time of 4.5 days across the companies. The future growth surrounding this conversation is very dependent on the current status of the War in Ukraine and Russia’s stance on exports.

What the future holds

We see this situation going one of three ways:

I) The first is an immediate diplomatic solution in Ukraine ending in a rapid ceasefire. This scenario would lower the fertilizer price in the short term as the catalyst for higher fertilizer prices no longer exists.

II) The second would be a protracted Russian engagement in Ukraine. In this scenario, we would see the fertilizer price continue to skyrocket as the conflict escalates with no end in sight.

III) The last situation would be a short- to a medium-term diplomatic solution. We believe this would still increase the fertilizer price as sanctions take time to undo and get processes back to where they were. For example, we have seen this with the global supply chain and the COVID-19 pandemic. Supply chains took time to react, but they eventually recovered. Either way, in the long term, prices will normalize, whether that be a return to trade with Russia or seeing new players step up to aid countries, such as Brazil, being hit the hardest by the gap left by Russia.

Regardless of the three possible outcomes, NWO.ai predicts that the above signals will continue to expend tremendous second-order influence on the already explosive "food prices" and "inflation" narratives.

We will continue to monitor the conversation surrounding fertilizer and keep our readers updated.

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Disclosure: NWO.ai does not have a position in any equities, commodities, or cryptocurrencies mentioned. Nothing contained in this website should be construed as financial advice.