Last week, fertilizer affordability remained higher compared to the same period last month. However, the affordability was lower compared to the same week last year.
Fertilizer Affordability Index
In the above chart, you can see that the Fertilizer Affordability Index rose slightly to 0.67x last week from 0.66x a week ago. The index level stood at 0.7x a month ago and 0.61x a year ago.
The Fertilizer Affordability Index, issued by Mosaic (MOS), is indexed to one in the base year of 2005. A level below one indicates the relative affordability of fertilizers like nitrogen, phosphorous, and potassium compared to key crops that consume fertilizers like corn, soybeans, and wheat.
The index has remained below one since 2016, which indicates higher affordability for fertilizers compared to the base year. Since 2010, Mosaic provided the average index level at 0.71x. Compared to the current level, the index shows that the current affordability continues to remain higher compared to the recent eight years.
Higher affordability is favorable for fertilizer companies’ (NANR) demand like Nutrien (NTR), CF Industries (CF), Intrepid Potash (IPI), and Israel Chemicals (ICL). Weakness in fertilizer prices fuels higher affordability, which remains a concern for these companies’ margins.