In the week that ended on April 13, 2018, the Fertilizer Affordability Index drifted lower, continuing its two-week streak. The index, which is issued by the Mosaic Company (MOS), shows the relation between three NPK (nitrogen, phosphorous, and potassium) fertilizers and the key fertilizer-consuming crops corn, wheat, and soybean.
A lower relative level in the index indicates higher fertilizer affordability. In our case, fertilizer affordability improved week-over-week, with the index level reaching 0.63 last week compared to 0.64 a week earlier.
Earlier in this series, we discussed how NPK fertilizer prices, especially urea and phosphate, fell week-over-week. This may have driven higher affordability this week, which is positive for demand at companies (MOO) such as Nutrien (NTR), CF Industries (CF), and Israel Chemicals (ICL).
Interpreting the index
The Fertilizer Affordability Index was indexed to 1 in the base year of 2005. A level of below 1 indicates higher affordability compared to the base year, and a level of above 1 indicates lower affordability.
The index level has remained well below 1 in the last year. In the same week a year ago, the index level stood at 0.61. Moreover, since 2010, the index has averaged 0.71, indicating a fairly affordable environment in the last seven years compared to the year when it was first indexed.