By Geoffrey Morgan

Agricultural and fertilizer stocks surged Monday, pushed higher by soaring crop prices as Russia’s invasion of Ukraine threatens supplies from a region known as the breadbasket of Europe.

Nutrien Ltd., the world’s largest potash producer, jumped 4.9% to a record in Toronto, while CF Industries Holdings Inc., rose 3.7% to an all-time high in New York. Competing potash producer Mosaic Co. advanced 2.5% to hit $61.34 per share -- a price last seen in June 2013.

The rally comes as rival producers in Russia and Belarus are hit with sanctions following the invasion of Ukraine, which is a major producer of wheat and corn. Even before the war started, Piper Sandler said in a report Monday that global growers were struggling to lift grain stocks despite record or near record production. The supply situation is now set to deteriorate, pushing wheat prices to all-time highs Monday. 

“Over the next 12 months, we are expecting the entire grocery store to be impacted by what’s going on in Ukraine if the conflict lasts,” said Sylvain Charlebois, director of the Agri-Food Analyst Lab at Dalhousie University.

The invasion occurred just as food supply chains were beginning to stabilize after the pandemic, Charlebois said. Food inflation is already at 8% in the U.S. and he expects it to reach similar levels in Canada.

“We’ve blown a hole in the supply chain when it was getting over its last stresses,” said Craig Basinger, chief market strategist at Purpose Investments Inc., which owns a stake in Nutrien.

It’s not just the producers that are gaining. Food processor and transporter Archer-Daniels-Midland Co. climbed as much as 6.3% Monday to hit and all-time high, before paring the gains to 1.5%. Similarly, Bunge Ltd. rose as much as 4%, briefly hitting a high last seen in June 2008.

Among other related companies, Farmland Partners Inc, a farm real-estate investment trust focused on corn and soybean land acquisition, climbed 5.7% to hit the highest since Sept. 2021. AppHarvest Inc. shares leaped 16% to reach their highest since December.

Basinger said the jump in agricultural stocks is likely to ease off, but can’t predict when that will happen given the geopolitical risks. 

“If this doesn’t come back down, then we have a real inflation problem,” he said.

© 2022 Bloomberg L.P.