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How Lower Potash Selling Price Has Impacted PotashCorp

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Potash’s average selling price

Previously in this series, we talked about how the Potash Corporation of Saskatchewan’s (POT), or PotashCorp’s, potash segment shipments declined in 4Q15. But both prices and shipments impact revenue, so despite the decline in shipments, an increase in average selling price can help boost revenues. Let’s look now at how the company’s selling prices fared in 4Q15 and where they are headed.

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Declining prices

North America makes up about 33% of the company’s potash segment net sales. The remaining 66% of the company’s potash segment’s net sales are offshore. Below are few key details:

  • The average selling price of potash has fallen over the years. In 4Q15, the selling price stood at $238 per metric ton—lower than 4Q14’s price of $284 per metric ton for both markets combined.
  • Potash prices were weaker in North America, falling to $271 per metric ton in 4Q15 from $358 per metric ton in 4Q14.
  • Offshore average potash selling prices fell to $226 from $246 per metric ton over the same period.
  • The average selling prices have significantly declined on a year-over-year basis, with the prices in the American market declining by 24% and offshore market prices declining by 8%.

Notably, granular potash prices declined by almost 30% in 4Q15, further hurting the segment’s sales.

Outlook for 2015

The company anticipates that the average realized price for potash in 2016 will likely “stabilize.” The price decline in 2H15 should impact average realized prices in 2016 as well. Stability in the potash pricing environment will also likely benefit companies such as the Mosaic Corporation (MOS), Agrium (AGU), Uralkali, and Intrepid Potash (IPI). Some of these companies have exposure in the VanEck Vectors Agribusiness (MOO), which invests about 30% of its portfolio in agricultural chemicals.

Now let’s turn our attention to PotashCorp’s nitrogen segment.

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