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DAP Prices Impacted Mosaic’s Performance in 3Q16

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DAP prices

Earlier in this series, we discussed that Mosaic’s (MOS) Phosphate segment’s shipments rose 23% YoY (year-over-year) in 3Q16. However, the segment’s sales fell 9.9% due to a steep fall in fertilizer prices.

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Why did Mosaic suffer?

DAP (diammonium phosphate) prices fell significantly in 3Q16. They fell 27.7% to $326 per metric ton—compared to $451 per metric ton in 3Q15. In comparison, the company’s guided price range was $310–$340 per metric ton for the quarter.

Phosphate fertilizer prices are key to Mosaic’s (MOS) Phosphate segment’s sales, earnings, and stock price. It should explain why Mosaic’s sales fell despite a 23% increase in shipments.

In the chemical fertilizer industry, prices are largely driven by industry (MOO) supply and demand dynamics. It impacts PotashCorp (POT), Mosaic, CF Industries Holdings (CF), and Agrium (AGU).

Why prices fell

Prices fell particularly due to imbalances caused by supply and demand. Mosaic’s management expects DAP prices for 4Q16 to be $300–$330 per metric ton. The range shows that prices likely won’t rise this year. They will continue to cast a shadow on phosphate producers’ performances. We’ll continue to track and publish DAP prices weekly. Read Trick or Treat? Fertilizer Stocks Show Weakness before Earnings for the most recent coverage.

In the next part, we’ll discuss raw material costs for the company and compare them with average market prices.

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