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The Zacks Fertilizers industry is facing challenges due to declining fertilizer prices and reduced application rates by growers, driven by affordability issues. This situation is compounded by elevated raw material costs, significantly impacted by the Russia-Ukraine war. Key players in the industry include CF Industries Holdings, Inc., Yara International ASA, and ICL Group Ltd.
In 2022, fertilizer prices peaked due to the Ukraine conflict, but have since moderated. A decline in demand has prompted growers to limit fertilizer use, with nitrogen prices dropping since early 2023. The industry has underperformed, losing 21.8% over the past year, compared to a 24.9% gain for the S&P 500. The current EV/EBITDA ratio for the industry stands at 10.02X, below the S&P 500’s 18.97X.
Despite these short-term challenges, agricultural fundamentals remain strong, driven by increasing global food demand. This is expected to boost fertilizer demand in the coming seasons, as farmers seek to maximize crop yield amid elevated prices for grains.
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