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CF’s 4Q15 Earnings Could Benefit from Rising Nitrogen Shipments

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Shipments

Previously in this series, we looked at revenue expectations for CF Industries’ (CF) upcoming 4Q15. Revenue is a function of shipments and prices. Let’s look at what to expect from shipments.

Nitrogen fertilizers require application each planting season, unlike potash and phosphate fertilizers, which aren’t applied as frequently. For this reason, nitrogen fertilizer demand remains relatively stable compared to potash and phosphate demand.

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Shipment shows stability

The peaks and valleys in the chart above are a result of seasonality in nitrogen fertilizer demand, which is driven by weather and planting seasons. But overall, nitrogen shipments appear to be rising. Most recently, Agrium (AGU) and PotashCorp’s (POT) nitrogen fertilizer shipments increased, as they reported on their 4Q15 earnings calls. The VanEck Vectors Agribusiness (MOO) invests about 1.7% of its portfolio in CF and 7.7% in Monsanto (MON).

This rise in shipments could spell positives for CF’s upcoming 4Q15 nitrogen shipments, as it’s a pure nitrogen player. Its assets are strategically located to serve US customers, and the United States is a net importer of nitrogen fertilizers. The company also recently acquired OCI Nitrogen, one of the leading nitrogen fertilizer companies in Europe. This move increased the company’s capacity, which should help fulfill US customers’ requirements better.

Bear in mind that the OCI acquisition also granted access to OCI Nitrogen’s assets in the Netherlands, Dubai, Iowa, and Texas.

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