In recent weeks, we’ve observed that the Fertilizer Affordability Index has trended downwards, indicating that fertilizers were getting more affordable than the base year. This index, which is compiled by Mosaic Company (MOS), measures the affordability of fertilizers compared to crop prices and was set to one in the base year of 2005. Any point below one means that fertilizers are more affordable compared to the base year and any point above one means the opposite.
Last week’s trend
Last week, the Fertilizer Affordability Index rose by as much as 5.7% week-over-week to 0.56x from 0.53x last week, which means that the fertilizers got less affordable compared to a week ago. The current Affordability Index remains significantly below one, meaning that fertilizers are highly affordable compared to the base year.
The higher affordability for fertilizers means that companies such as PotashCorp (POT), Mosaic (MOS), Intrepid Potash (IPI), and CF Industries (CF) may see stable to positive demand for their fertilizers. More recently, we’ve seen that the demand for all three NPK (nitrogen, phosphorous, and potassium) fertilizers has remained strong. While the selling prices remain weak, these companies (XLB) could see a higher uptake in shipments.
Read our latest earnings update for PotashCorp at PotashCorp Misses Estimates in 2Q17, Stock Unchanged.