Fertilizer Affordability for Week Ended August 25
Fertilizers have displayed a high level of affordability this year, which has supported the strong demand for fertilizers. That has helped companies such as PotashCorp (POT), Intrepid Potash (IPI), Agrium (AGU), and Israel Chemicals (ICL) support their margins.
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Fertilizer Affordability Index
The Fertilizer Affordability Index rose 1.6% week-over-week to 0.64x, from 0.63x a week ago. This index, issued by Mosaic (MOS), tells us the affordability of key NPK (nitrogen, phosphorous, and potassium) fertilizers in relation to key fertilizer consuming crops.
An index level below 1.0 indicates that fertilizers are more affordable than the base year of 2005 when the level was 1.0. A level above 1.0 indicates that fertilizers are less affordable than the base year.
Higher affordability of fertilizer indicates that the level of crop prices makes it affordable to purchase fertilizers so farmers can rationalize their costs. Higher affordability has also led to stability or an increase in demand for fertilizers, as we saw in 2Q17 earnings releases.
We recently published a comparative analysis of the performance of key fertilizer producers in 2Q17. You can read it at Big Fertilizer: Comparing the Major Players’ 2Q17 Results.