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Why Sales for Mosaic’s Phosphate Segment Fell 13%

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Phosphate prices

Earlier in this series, we looked at shipments for Mosaic’s (MOS) Phosphate segment, which rose 13.0% YoY (year-over-year) in 4Q16. However, the segment’s sales fell 13.0% YoY due to a fall in phosphate fertilizer prices.

It’s important to track fertilizer prices closely. Be sure to read our weekly update on prices. The latest one is How Did Fertilizer Stocks and Prices Move Last Week?

Why prices fell

Mosaic’s realized DAP (diammonium phosphate) prices fell significantly in 4Q16. They fell 22.7% YoY to $317 per metric ton compared to $410 per metric ton in 4Q15. In comparison, the company’s guided price range was $300–$330 per metric ton for the quarter.

Phosphate fertilizer prices are key to the Phosphate segment’s sales, earnings, and stock price. It should explain why Mosaic’s sales fell despite a 13.0% rise in shipments.

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

Outlook

Mosaic’s management expects DAP prices in 1Q17 to be $315–$335 per metric ton. The range, which was revised higher from 4Q16, shows that prices may likely rise. That could prove positive for phosphate producers’ performances. We’ll continue to track and publish DAP prices weekly.

In the next part of this series, let’s look at raw material costs for Mosaic and compare them with average market prices.

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