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How the Retail Pricing Environment Remains a Negative for Agrium

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Retail pricing

Previously in this series, we saw that shipments for Agrium’s (AGU) Retail segment have declined. Let’s look at the pricing environment for the segment in this part. Prices for agricultural fertilizer has been declining over the past few years as a result of lower crop commodity prices.

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Average selling prices

The average selling prices for both the North American and international markets declined by as much as 8% YoY (year-over-year) from $539 per ton to $496 per ton. The average selling prices in the domestic margin declined by 7% from $556 per ton to $513 per ton in 4Q14. The average selling price in the international market declined by 10% from $475 per ton to $424 per ton.

Agrium (AGU) stated that the pricing for glyphosate was down 9% YoY. As Agrium steps into 2016, the company stated that it expects the pricing to be stable around the current levels. For 2016, the company anticipates a low pricing environment for its Crop Nutrient segment.

Major companies such as Potash Corporation (POT), the Mosaic Company (MOS), CF Industries (CF), and Intrepid Potash (IPI) are all impacted heavily due to the situation in the pricing environment. Potash and nitrogen pricing dipped significantly while phosphate prices have remained stable. These also impact Agrium’s Wholesale segment. Before we look at the wholesale segment, let us see how the Retail segment’s gross margins have performed in 4Q15.

Investors can consider a broader portfolio such as the Materials Select Sector SPDR ETF (XLB), which invests about 12% in the agricultural chemicals business.

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