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Fertilizer stocks sank Monday after the U.S. lifted sanctions on Belarussian potash producers, but experts don’t expect the decision to significantly lower input prices for U.S. farmers.
The Trump administration over the weekend agreed to lift curbs on the producers following talks between President Donald Trump’s special envoy to Belarus and Belarussian leader Alexander Lukashenko, who ordered 123 political prisoners released as part of the agreement, according to Bloomberg. Shares of U.S. fertilizer producers Nutrien and Mosaic dropped sharply in Monday’s session. State-owned Belaruskali, Russia’s Uralkali PJSC, Nutrien and Mosaic are the four largest global suppliers of potash.
Belarus will likely attempt to re-enter the U.S. market, but obstacles remain. The European Union further tightened sanctions on the country, which doesn’t have its own seaports, which means it must continue to rely on Russia’s Baltic terminals and rail exports to China, the Bloomberg report said, noting that a major trade route through Lithuania’s Klaipeda port has been closed since 2022. Belarus previously shipped 90% of its potash exports from that port.
Josh Linville, vice president of fertilizer at StoneX Group, told Bloomberg the policy shift is unlikely to result in much of a response in U.S. fertilizer markets because Belarus’s small share of the U.S. potash market was easily replaced following Russia’s 2022 invasion of Ukraine.
The report noted that the U.S. imports nearly all its potash from Canada, which Trump last week threatened to hit with tariffs.
Hedge funds jumping into physical commodity trading
Hedge funds are moving into the physical side of the commodities markets as they seek out new sources of returns, the Financial Times reported, though they lack the experience of established players.
While financial firms have long been trading contracts for power, natural gas and oil, hedge funds such as Bayasny, Jain Global and Qube, as well as trading firm Jane Street, have expanded operations to allow them to trade underlying markets, the report said. This involves buying rights to transport natural gas over a pipeline, buying crude-oil storage capacity or storing electricity in advanced batteries before offloading it during peak demand.
“It’s an information gold rush,” Michael Alfaro, chief investment officer at hedge fund allo Partners, which is focused on energy and industrials, told the FT. “When you’re trading physical commodities, you’re privy to a lot of information and you get a sense of what is actually happening from economic shifts before the actual data comes in.”
The report noted that going into physical commodities offers big hedge funds a separate return stream that, in theory, makes those funds more diversified. The potential upside from extremely volatile years – such as 2022 following Russia’s invasion of Ukraine – outweighs periods with lower returns.