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Why Agrium’s Wholesale Shipments Increased Significantly in 4Q15

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Wholesale shipments

Agrium (AGU) earns about 37% of its revenue and 35% of its gross profit from its Wholesale business. The company sells all three primary NPK (nitrogen, phosphate, and potassium) fertilizers. Under the Wholesale segment, nitrogen fertilizers contribute about 41%, phosphate contributes about 22%, and potash contributes another 21%.

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Wholesale shipments rise

Agrium’s (AGU) wholesale shipments for its three key NPK fertilizers have increased YoY (year-over-year) from 1.2 million tons to 1.8 million tons. Most of this growth came from the company’s Phosphate segment, as can be seen in the chart above.

You may also access NPK producers through the VanEck Vectors Agribusiness (MOO) ETF, which invests in 3.8% in Agrium. MOO also has investments in Monsanto (MON), Syngenta (SYT), and Potash Corporation (POT).

Why did shipments rise?

Shipments for the Potash segment significantly increased from 0.02 tons to 0.66 million tons in 4Q14. This potash shipment increase was due to the company operating its facilities at a higher rate for Canpotex’s run. We will discuss this in more detail later in this series. Last year’s potash shipments were also lower because the company had shut down its facilities for expansions.

With its new capacity, Agrium’s management stated that the company’s Retail and Wholesale segments, “absorb a lot of that new capacity.” This would imply that the company expects a strong demand for potash in the coming quarters, which it expects to benefit potash shipments.

With respect to nitrogen, the company expects a better 2016 as it believes that the cost environment, although low, is below the prices it can realize. The company also stated that it believes that “80% of Chinese producers are losing money right now.” This should support the company’s nitrogen shipments as well.

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