Spot prices of nitrogen fertilizer along the Gulf Coast of the United States surged to a nearly decade high this week after CF, the world's largest nitrogen fertilizer plant, was forced to close its nitrogen plant in Donaldsonville, Louisiana by Hurricane Ida.

The share prices of some fertiliser producers fell on concerns that the hurricane would damage production lines. By the close of trading on Sept. 8, CF Industries was down 3.42%, while Meisheng was down 3.17% at Nutrien Ltd. Down 2.49%.

However, higher fertilizer prices have also led to a rise in the fertilizer sector. Zacks, a well-known investment and research institution in the United States, pointed out that over the past year, the performance of the chemical fertilizer sector has outperformed the overall market. The industry rose 50.3%, but the s & p 500 returned 32.5% over the same period.

Why is the price of chemical fertilizer rising?

Driven by strong demand and tight supply, the prices of most fertilisers, especially phosphates and urea, soared in 2021.

On the demand side, strong demand from major crop-growing areas around the world has been driving high fertiliser prices. Adverse climatic conditions and rising commodity prices have stimulated farmers to increase crop yields, leading to a sharp increase in demand for fertiliser, thereby boosting fertiliser prices.

On the supply side, fertiliser prices have also been boosted by rising input costs. The COVID-19 epidemic has led to the suspension of oil refineries and the limited supply of raw materials for chemical fertilizers, especially the sharp rise in the cost of sulfur and ammonia. Due to unusually cold weather, natural gas prices jumped in early 2021, leading to a rise in the cost of natural gas-based urea.

Rising logistics costs, hurricanes leading to the closure of nitrogen plants, tariffs and geopolitical tensions have also pushed up fertiliser prices.

In addition, due to the low level of investment in new capacity in recent years and concerns about an uncertain outlook, fertiliser producers remain cautious and reluctant to invest significantly to increase production, which also exacerbates the supply problem.

Looking to the future, how to go the price of chemical fertilizer?

John Baffes, a senior agricultural economist, believes that it may take some time for fertilizer producers to increase production, which provides short-term support for fertilizer prices. Fertilizer prices are expected to be more than 1/4 higher on average in 2021 than last year and fall back in 2022.

Santhosh Seshadri, an analyst at HSBC, expects several major nitrogen plants to stop production until the second half of 2021. Supply disruptions, rising raw material costs and low inventories were the catalysts that supported strong fertiliser prices in the first quarter of next year.

Although it is still unknown how long the rise in fertiliser prices will last, the increase in agricultural costs will translate into the cost of food for consumers, and the increase in consumer prices may not be "temporary".

Which investment targets are worth paying attention to?

In the context of the current soaring fertilizer prices, the following four fertilizer stocks with high growth prospects deserve the attention of investors.

• MOS.US of USA

Meisheng is the world's leading producer and distributor of high concentration phosphate and potash fertilizers, headquartered in Florida. Strong prices for phosphate and potash should boost the company's performance this year. Actions to improve the operating cost structure through a transformation plan are also expected to increase profitability.

Mei Sheng's earnings are expected to grow by 450.6% this year. Zacks's estimate of the company's earnings for the year has risen by 45.3 per cent in the past 60 days. Over the past four quarters, its average earnings have been about 43 per cent higher than Zacks estimates.

• Nutrien Ltd. (NTR.US)

Nutrien is a crop nutrition company engaged in the production and distribution of agricultural, industrial and feed customer products, headquartered in Canada. The company is expected to benefit from strong demand and higher prices for fertilisers, especially potash.

Nutrien's earnings are expected to grow by 156.1% this year. Over the past 60 days, Zacks's consensus forecast for this year's earnings has also been raised by 24.6 per cent. The company's average earnings over the past four quarters were 127.6 per cent higher than Zacks estimates.

• Intrepid Potash (IPI.US)

Intrepid Potash is engaged in the transport of potassium, magnesium, sulfur and salt. The company has benefited from strong commodity prices and rising demand and prices for potash. Demand for its specialty fertilizer Trio has also been boosted by a recovery in economic activity and strong commodity prices.

The company's earnings are expected to grow by 251.3% this year. Over the past 60 days, Zacks has raised its forecast for Intrepid Potash's earnings for the year by 147.3%. The company's average earnings over the past four quarters were 90.5 per cent higher than Zacks estimates.

• Chile Mining and Chemical Industry (SQM.US)

As a low-cost producer of potassium chloride, potassium sulfate and potassium nitrate, Chile's mining and chemical industry should benefit from strong demand for fertiliser. In addition, higher demand is expected to boost sales of its specialty plant nutrition business. Growing demand is also expected to push up the price of potassium chloride products.

The company's earnings are expected to grow by 46.7% this year. Over the past 60 days, Zacks has raised its forecast for Chilean mining and chemical earnings by 8.3 per cent. The company's long-term earnings per share growth rate is expected to be 32.5%.