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Short-Term and Long-Term Outlook for Potash Prices

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Updated

Forecast

The average price of Muriate of Potash (or MOP) has declined. In the last week, prices fell below the 15-year median price of $290 per metric ton. During its 2Q15 earnings release, PotashCorp (POT) said it expects potash prices to stabilize. Mosaic (MOS) and Intrepid Potash (IPI) had a bleak outlook on potash prices.

Mosaic forecasts the average price for MOP in 1Q16 to be in the range of $200–$230 per metric ton. In recent years, more capacity additions have pushed down the price of potash fertilizers, and it looks like the trend is continuing.

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Long-term demand and supply

Total capacity for potash production is expected to reach 80 million metric tons in 2020, from 66 million metric tons in 2014. With capacity slated to increase, the gap between demand and capacity has widened. Demand in 2020 is forecast to be about 72 million tons, up from 62 million tons. In other words, there’s a gap of 4 million tons.

This supply-demand imbalance will further push down potash prices in the coming years. It will hurt companies such as PotashCorp, Mosaic, Intrepid Potash (IPI), and Agrium (AGU). To mitigate such risks or to get exposure to other agricultural chemical companies, you might consider the VanEck Vectors Agribusiness ETF (MOO), which invests about 30% of its portfolio in agricultural chemicals.

To get more updates on fertilizer companies, you can visit our Agricultural Fertilizers page.

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