Earlier in this series, we discussed the impact of shipment volumes on PotashCorp’s (POT) sales over last five years. Shipments and realized prices affect sales for fertilizer companies (MOO) such as PotashCorp, Mosaic (MOS), Agrium (AGU), and CF Industries (CF). Realized prices, however, have a larger impact on sales.
Realized prices decline
The key reason fertilizer companies have struggled in recent years has been falling realized prices. The chart above makes this point clear. In 2016, PotashCorp’s net sales fell 32% YoY (year-over-year). The realized prices for its three products fell by an average of 31%. Given the overall shipment growth of 2%, it is clear that realized prices have been the key reason for PotashCorp’s 2016 dismal sales growth.
Looking at each product individually, potash fertilizer realized prices fell 40% YoY in 2016. The realized prices for phosphate fertilizers fell 19% year-over-year and realized prices for nitrogen fertilizers fell 33%. Over the past five years, potash prices have fallen 19%, phosphate prices have fallen 4%, and nitrogen prices have fallen 13%.
Outlook on prices
Fertilizer prices appear to be recovering more slowly than expected, as they remain under pressure due to demand growing slower than available capacity. All three fertilizer products continue to face pressure from the demand side as falling farm income may have resulted in a tighter budget for fertilizers. Refer to Fertilizer Stocks and Commodity Prices Were Mixed Last Week for Market Realist’s latest fertilizer price update. Next, we’ll look at PotashCorp’s gross margins by product segment.