What Boosted Agrium’s Retail Gross Margin?

Previously in this series, we discussed how Agrium’s (AGU) Retail segment’s shipments declined in 2Q16 and how its overall realized prices were also down on a YoY (year-over-year) basis. Remember, shipments and prices are both driven by market forces—something a company has little control over—so it’s important to see how gross margins for fertilizer companies like Agrium have fared.

In 2Q16, the Retail segment’s gross margin increased to 22% from 20.5% 2Q15. The gross margin in crop nutrients increased from 17% to 20%, but gross margins in crop protection did not change much YoY at 21% in 2Q16. The company stated that favorable weather for crop protection products helped the sub-segment, which includes glyphosate products. (Monsanto’s [MON] Roundup is a well-known glyphosate product.)

Notably, the VanEck Vectors Agribusiness ETF (MOO) invests 7.7% in Monsanto, 3.8% in Agrium (AGU), 4.6% in PotashCorp (POT), and 8.9% in Syngenta (SYT).

So despite the volatility in prices and the farm environment, Agrium was able to expand its margins in 2Q16. The gross margin for its seed sub-segment also grew by 3%, which resulted from a higher sales volume of Dyna-Gro and treated seeds as well as from cotton and corn seed.

Now let’s take a closer look at Agrium’s Wholesale segment.