Should You Invest in Organic Fertilizer Stocks?
The organic fertilizer segment continues to see growth. Can organic fertilizer stocks compete with the market as a whole? Are the stocks a good investment?
Dec. 17 2020, Published 12:24 p.m. ET
On Dec. 9, the CDFA (California Department of Food & Agriculture) put a stop use notice on one particular type of organic fertilizer. The brand is called Agro Gold WS.
Agro Gold WS has been contaminated by conventional and non-organic herbicides. As a result, the product doesn't comply with the USDA National Organic Program. While Agro Gold WS is just one type of organic fertilizer, it's a great example of what the industry is up against. Whether or not you should bite on organic fertilizer stocks depends on your time horizon, risk tolerance, and other factors.
Research suggests the organic fertilizer market is growing rapidly
A company called Meticulous Research released a study that shows that the organic fertilizers market may hit a valuation of nearly $16 billion by 2027. That isn't a massive number, but a niche market that you don't want to ignore. Overall, the industry could grow at a compound annual growth rate of 11.5 percent starting in 2020.
The Asia-Pacific region may experience the most pronounced growth due to the region's policy initiatives regarding the organic farming and cultivation industry.
Research also suggests that dry-form, broadcasting organic fertilizer suited for cereal and grain crops could be the most popular.
Organic fertilizer stocks to know about
If you want to invest in organic fertilizers, keep in mind that there's a collection of companies that lead the segment in terms of revenue and growth.
One of these companies is Tata Chemicals Limited, which goes by the ticker symbol "TATACHEM" on the NSE — an Indian Exchange. Tata crashed hard in early March. Since then, the stock has grown about 146 percent.
Coromandel International Ltd also trades on the NSE under the ticker symbol "COROMANDEL." The fluctuations are high, but long-term growth is likely. Scotts Miracle-Gro has done well in 2020. The stock weathered the market crash and came out nearly 86 percent in the green since Jan. 2.
If you're looking for a domestic stock, Scotts Miracle-Gro Co. trades under "SMG" on the NYSE.
Organic fertilizer stocks are niche, but they may help you diversify
If your portfolio needs some healthy diversification, organic fertilizer stocks could help. However, I don't recommend relying on them for serious returns. Instead, these stocks could help balance your investments by geography, stock size, and industry type.
Other organic stocks to invest in
Organic fertilizers are just one part of the organic industry. Investing capital into organic food stocks helps support the organic agricultural industry.
One option is Sprouts Farmers Market, which trades on the Nasdaq under the ticker symbol "SFM." Sprouts is rapidly expanding its grocery store chain across the nation. The stock has seen growth this year since grocery stores are part of an essential industry.
SunOpta, Inc. sells organic food and minerals. The Canadian company trade under the ticker symbol "STKL" on the Nasdaq. The U.S. company Hain Celestial Group (or "HAIN" on the Nasdaq) covers both food and personal care products from an organic lens.