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Fertilizer Affordability Dips but Remains Historically High

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Fertilizer affordability

Last week, fertilizer affordability fell from the previous week on the back of a steeper increase in fertilizer prices week-over-week.

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The affordability index

The Fertilizer Affordability Index issued by the Mosaic Company (MOS) increased to 0.61x from 0.60x a week ago. The index accounts for the plant nutrient (fertilizer) prices over the crop prices week-over-week. Last week, the plant nutrient prices and the crop prices both increased week-over-week. However, the drop in affordability was due in part to a steeper increase in plant nutrient prices, which rose 4.6% compared to the 2.7% increase in crop prices.

The affordability ratio of 0.60x, which is below its initially indexed value of one in the base year of 2005, shows that fertilizers last week remained relatively affordable in recent weeks. This index also averaged 0.71x since 2010. So, the current affordability index was significantly lower compared to the past eight years.

In other words, despite the slight increase in fertilizer prices last week, they remained highly affordable, which also means that the current price levels are supportive for demand growth as well as price stability, which could benefit the bottom line of companies (XLB) such as Mosaic, Nutrien (NTR), CF Industries (CF), and Israel Chemicals (ICL).

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