Monsanto’s (MON) sales are driven by three key factors: price, volume, and currency. Sales of commodity companies such as PotashCorp (POT), Agrium (AGU), and CF Industries (CF) are also driven by price and volume.
Price relates to the selling price at which Monsanto’s products are sold in the market (MOO). Price is affected by supply and demand dynamics, as are all prices in an open market. Several competing companies offer products similar to Monsanto’s. An inflow of substitutes from competitors or a fall in demand from customers can push product prices down. The opposite can happen if the above situation reverses.
Volume relates to the amount of products sold to customers. Usually, price and volume have an inverse relationship. If prices rise, the volume may fall.
Companies that have international operations have to be careful about currency fluctuations, which could impact their sales.
Monsanto’s total volume fell 3% in 2016 compared to 2015, and its prices fell 2% compared to 2015. Currency fluctuations also negatively affected Monsanto’s net sales by 5% in 2016.
The total fall of 10% corresponds with the 10% sales fall we discussed earlier in this series.