The Fertilizer Market's Hidden Challenge: Why Sulfur Supply Matters for 2026

Recent industry analysis reveals a critical juncture for the global fertilizer sector. While robust agricultural demand and improving farmer economics paint an optimistic picture, a less-discussed factor—the availability of key raw materials, particularly sulfur (S)—threatens to constrain profit margins across the industry. Understanding this dynamic is essential for investors evaluating companies like Nutrien Ltd., CF Industries Holdings, Inc., and Intrepid Potash, Inc.

Rising Global Demand Sets the Stage for Industry Growth

The fertilizer industry is experiencing a resurgence driven by fundamentals that appear increasingly resilient. Global food consumption continues to climb, spurring demand for crop nutrients essential to agricultural productivity. Phosphate, potash, and nitrogen fertilizers remain indispensable to farmers seeking to maximize yields and maintain soil fertility across major growing regions.

Favorable farm economics in North America, Brazil, and India have strengthened buyer sentiment. Strong crop prices coupled with attractive planting economics suggest sustained fertilizer demand throughout 2026. Industry participants are positioned to capitalize on this momentum, with expectations of elevated planted corn and soybean acres globally signaling further consumption growth ahead.

The shift from depressed 2023-2024 pricing to firmer levels in 2025 already reflects this improving supply-demand balance. Phosphate prices particularly have gained ground, supported by solid agricultural fundamentals in major markets and structural supply constraints stemming from reduced inventories among both producers and distributors.

The Sulfur Squeeze: How Raw Material Costs Impact Margins

A more nuanced challenge, however, underlies the positive demand narrative. The production of phosphate fertilizers—one of the industry’s three pillars—depends heavily on sulfur (S) as a critical feedstock. Recent years have witnessed elevated sulfur prices, a trend exacerbated by geopolitical disruptions and production constraints that show little sign of abating.

Supply disruptions originating from Russia’s conflict with Ukraine have significantly restricted sulfur availability in global markets. Simultaneously, ammonia—another essential input for phosphate production—remains elevated in cost. Plant maintenance shutdowns and tighter ammonia supplies have compounded the challenge, pushing production expenses higher across the sector.

Nitrogen fertilizer producers face their own input pressures. Rising natural gas prices, the primary feedstock for nitrogen production, continue to weigh on manufacturing economics. These elevated input costs translate directly into margin compression, creating a near-term headwind that counterbalances the tailwind from higher selling prices.

The interplay between rising demand and rising costs will likely determine profitability in coming quarters. While higher fertilizer prices offer some offset, producers must navigate an environment where raw material expenses—whether sulfur for phosphate or natural gas for nitrogen—remain a persistent constraint on expansion margins.

Valuation Metrics Signal Opportunity in an Underperforming Sector

From a market perspective, the fertilizer industry has lagged broader equity benchmarks despite improving fundamentals. Over the past year, the sector gained 7.5% compared to the S&P 500’s 14.9% appreciation and the broader Basic Materials sector’s 39% advance.

This relative underperformance is reflected in the industry’s valuation. On an enterprise value-to-EBITDA (EV/EBITDA) basis—a standard metric for fertilizer companies—the sector trades at 5.24X compared to 18.8X for the S&P 500 and 16.51X for Basic Materials broadly. Historically, the industry has ranged from 4.55X to 18.05X, with a median of 10.18X over the past five years.

The current discount relative to history and peer groups suggests the market may be undervaluing the industry’s near-term prospects. The Zacks Fertilizers industry carries a Zacks Industry Rank of #42, placing it in the top 17% of over 250 industry classifications—an indicator that outperformance may lie ahead for investors with proper timing.

Three Leaders Positioned to Outperform

Among the companies best-situated to navigate the current environment and capitalize on structural tailwinds stand three standouts:

Nutrien Ltd. (NTR) is Canada’s leading provider of crop inputs and services. The company benefits from strength in North America and is expanding aggressively in Brazil through targeted acquisitions. Nutrien has announced multiple initiatives aimed at reducing controllable costs and improving operational efficiency—particularly critical given input cost headwinds. The firm is also witnessing strong demand for its digital platform adoption, further supporting market share gains. Nutrien carries a Zacks Rank of #3 (Hold) with expected 2025 earnings growth of 32.9%, and its Zacks Consensus Estimate for 2025 has been revised upward by 1.5% over the past 60 days.

CF Industries Holdings, Inc. (CF) operates as a leading global nitrogen and hydrogen products manufacturer, serving fertilizer, clean energy, emissions reduction, and industrial applications. The Illinois-based company is gaining from elevated nitrogen demand in key markets including North America, Brazil, and India. CF has also benefited from increased industrial demand for nitrogen products in North America. Management remains focused on strengthening shareholder value through cash flow generation and balance sheet de-leveraging. With a current Zacks Rank of #3, CF is forecasted to deliver 32.8% earnings growth for 2025 and has beaten Zacks Consensus Estimates in each of the last four quarters, averaging a 15% beat.

Intrepid Potash, Inc. (IPI) holds a unique market position as the sole U.S. producer of muriate of potash and also manufactures Trio, a specialty fertilizer product. The Colorado-based company benefits from healthy potash demand driven by attractive farmer economics and solid crop valuations. Recovery in broad economic activity is fueling demand for Trio, and strong production execution is driving volume gains in potash. The company continues to execute on capital projects designed to expand production capacity. IPI carries a Zacks Rank of #2 (Buy), with a projected 2025 earnings growth rate of 506.7%—reflecting recovery from prior-year depressed levels. The Zacks Consensus Estimate for 2025 earnings has remained stable over the past 60 days.

The Road Ahead

The fertilizer industry stands at an inflection point. Underlying demand remains constructive, supported by global food security needs and favorable agricultural economics. Yet the challenge of managing elevated input costs—particularly for materials like sulfur (S) used in phosphate production—will test management execution and shareholder returns over the near term.

Investors evaluating the sector should weigh the attractive valuation multiples and positive long-term growth drivers against near-term margin pressures. The three companies highlighted above represent a spectrum of opportunities for those seeking exposure to agricultural fertilizer markets, from the diversified global platforms of Nutrien and CF Industries to the specialized potash strength of Intrepid Potash.