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Update and Outlook on the Phosphate Fertilizer Price Environment

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Phosphate prices

Farmers around the world use different types of phosphate fertilizers, depending upon the type of soil and crops to be planted. The most common phosphate fertilizer utilizes MAP (monoammonium phosphate), DAP (diammonium phosphate), and TSP (triple superphosphate). According to the IPIN (International Plant Nutrition Institute), TSP is less popular due to its lower total nutrient content compared to ammonium phosphates.

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DAP prices declined

The average prices of DAP (diammonium phosphate) have been declining over the past few months, as shown in the chart above. As of January 18, 2016, the average price of DAP was at its lowest, at $314 per short ton. It fell from $328 per short ton a week ago and $443 per short ton a year ago. The downward trending situation was similar for prices in Tampa, Morocco, and CFL points.

Revenue for fertilizer companies is a function of fertilizer price and shipments. The declining prices of DAP puts pressure on companies that produce and market DAP. This particularly affects the Mosaic Company, for which the phosphate segment contributes about 55% to its operating margins.

The Mosaic Company (MOS), Potash Corporation (POT), Israel Chemicals (ICL), Yara International, Agrium (AGU) Uralkali, and Belaruskali are some of the largest producers of phosphate fertilizers. Some of these companies are also held by the VanEck Vectors Agribusiness ETF (MOO), which invests about 30% of its portfolio in agricultural chemicals.

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