Previously, we saw how the agricultural fertilizer companies such as CF Industries (CF), PotashCorp (POT), CVR Partners (UAN), and Terra Nitrogen (TNH) performed in the previous week ended March 11. All of these companies produce nitrogen fertilizers and are affected by the nitrogen fertilizers’ price movements in the market.
Investors can also look into the VanEck Vectors Agribusiness ETF (MOO). MOO invests about 30% of its portfolio in the agricultural chemicals industry.
For the week ended March 11, 2016, average prices for ammonia at the Tampa point remain unchanged at $310 per metric ton from the previous week. Ammonia prices appear to have hit the bottom, with the previous week being the seventh consecutive week at the $310 per metric ton price point. Year-over-year ammonia prices remain significantly depressed, down ~34% from $475 per metric ton during the same week a year ago.
Ammonia prices are impacted due to lower natural gas costs. There are positives and negatives for falling ammonia prices. Because most of the ammonia is upgraded to other fertilizers, lower prices benefit companies that don’t sell it directly to the market. However, it is the opposite for companies such as CF Industries, which sells ammonia to the market.
Why focus on ammonia prices?
Ammonia is the primary nitrogen product used to upgrade to other fertilizer products like urea, UAN (urea ammonium nitrate), and DAP/MAP (diammonium phosphate/monoammonium phosphate). Therefore, prices of ammonia have a significant impact on prices of other fertilizers as well.
Because most of the global ammonia production is converted into urea, we’ll look at urea price trends in more detail in the next part.