The Fertilizer Affordability Index issued by the Mosaic Company (MOS) showed that fertilizers continued to be more affordable last week. This trend continued from the previous week.
The Fertilizer Affordability Index fell to 0.64x from 0.66x from a week ago. The lower the level of the index, the higher the affordability of fertilizers. Compared to the average of 0.71x since 2010, the current fertilizer affordability remains attractive. Any level below one suggests fertilizer affordability is attractive.
This index measures the affordability of fertilizer prices such as nitrogen, phosphorous, and potassium compared to fertilizer-consuming crops such as corn, wheat, and soybean. The index can be influenced by either a movement in fertilizer prices or crop prices.
In the earlier part of this series, we saw that the three fertilizers used in calculating the index had weak momentum, which may have partly contributed to the higher affordability of fertilizers last week. While higher fertilizer affordability certainly acts as a catalyst for volumes for fertilizer companies (MOO) such as Nutrien (NTR), CF Industries (CF), and Israel Chemicals (ICL), it may negatively impact revenues, as these companies have to sell higher volumes at lower prices.