Corn is a bellwether crop for many fertilizer products. When corn prices are high, farmers would be incentivized to increase their output to take advantage of the high corn prices and increase their profitability. Therefore, it is important to look at corn prices and what they may mean for the phosphate fertilizers.
Corn price outlook
The average price of corn in 2015 was about $3.80, which is far from the levels between 2010–2013. As of January 28, corn prices were $3.90 per bushel. For the full year 2016, the analysts are expecting corn prices to stabilize around $3.87 per bushel. They are forecasted to increase to $4.07 per bushel in 2017.
While the 2016 corn prices are forecasted to be at the 2015 levels, the increasing pressure of additional phosphate capacity increases the risk of having oversupply in the market. This may negatively impact the phosphate prices if producers decide to keep their production levels high to maintain their market share.
This impacts the revenues of companies such as Potash Corporation (POT), the Mosaic Company (MOS), CF Industries (CF), and Agrium (AGU). These companies are also a part of the VanEck Vectors Agribusiness ETF (MOO), which invests approximately 30% of its portfolio in the agricultural chemicals industry.