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Why Mosaic’s Phosphate Shipments Declined in 2Q15

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Phosphate shipments

Mosaic. Co.’s (MOS) phosphate shipments declined to 2,788 metric tons from 3,376 metric tons in 2Q14. Shipment is another key metric that affects the stock value of fertilizer companies such as Mosaic Co. (MOS), Potash Corp. (POT), Agrium Inc. (AGU), and CF Industries’ (CF).

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Phosphate segment

Mosaic’s management stated that farmers in Brazil have “put off their buying decisions.” This impacted the phosphate and potash segments, which we will see later in this series. There were delays in Brazil caused by the tougher credit environment. However, the company stated during the earnings call that the credit situation is improving.

Weakness in Brazil was offset by higher demand in North America, which had heavy rain. The downpours were negative for crop development but were positive for fertilizer demand.

On the bright side, management said that demand from India increased during the quarter for DAP (diammonium phosphate)—one of the standard products of phosphate fertilizer. Demand from India increased as much as 2.6 million tons of DAP, helping phosphate volumes during the quarter.

Forward expectations

For 3Q15, Mosaic noted that it expects the operating rate to be in “mid-80” range, compared to 85% in 3Q14. On a full year basis, the company expects the volumes to be in the range of 9.5 million–10 million tons.

The company is expecting India to import 5.5 million–6 million tons of DAP, compared to the previous 4.5 million–5 million tons of DAP in 2014. This resulted from favorable growing conditions and a monsoon in the country.

This improved outlook should also prove beneficial to Agrium and Potash Corp. All three companies supply phosphate fertilizers and comprise ~13.6% of the VanEck Vectors Agribusiness ETF’s (MOO) portfolio. MOO also holds 3.9% of CF Industries (CF).

Next, we will look at Mosaic’s (MOS) potash segment.

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