Fertilizers have remained fairly affordable in recent years. The high affordability of fertilizers in comparison to crop prices has helped companies like PotashCorp (POT), Agrium (AGU), CF Industries (CF), and others.
Fertilizer affordability can be tracked using Mosaic’s (MOS) Fertilizer Affordability Index. It helps determine the affordability of key NPK (nitrogen, phosphorous, and potassium) fertilizers compared to key fertilizer consuming crops like corn, soybeans, and wheat.
Last week, the Fertilizer Affordability Index fell week-over-week to 0.68x from 0.70x a week ago, which means that last week, fertilizers became more affordable compared to the base year, which was 2005 when the index was set to one. A level above one would mean that the fertilizers were less affordable than during the base year.
The high fertilizer affordability remains a strong point for fertilizer players (XLB). However, we must also consider the fact that the fertilizer prices have also fallen over the years as a result of excess capacity built up for most of the macronutrients.
To read more about macronutrients and the fertilizer industry, read our series Agricultural Fertilizer Industry: Your Comprehensive Overview.