Nitrogen gross margins
Previously in this series, we looked at prices and shipments in the nitrogen segments of some of the biggest players in the agricultural fertilizer sector (MXI). With average realized prices for nitrogen having fallen ~33% during 3Q16, their nitrogen segments’ margins have also been impacted.
The median gross margin for the above producers’ nitrogen segments stood at 25% in 3Q16. This was a significant fall compared to the median of 34% in 3Q15.
In 3Q16, CF Industries’ (CF) consolidated nitrogen margins plunged almost 30 basis points from 18% in the corresponding quarter a year ago. This was primarily due to a significant decline in nitrogen fertilizer prices year-over-year along with expansion project costs. Similarly, Agrium’s (AGU) margins contracted to 27% from 44% year-over-year.
UAN suffered less
CVR Partners’ (UAN) gross margins also contracted but not as severely. Its margins contracted to 25% from 29% year-over-year. Margins for the above companies contracted as a result of falling fertilizer prices. While some producers benefited from increased shipments through their expansion projects, it wasn’t enough to offset the fall in selling prices. Until prices see positive movement, these companies will continue to see an unfavorable performance. You can track prices on our site with the latest report at Mixed Bag: Analyzing Agricultural Fertilizer Stocks Last Week.
Next, we’ll look at potash fertilizer performance in 3Q16.