The fertilizer affordability index remained elevated last week relative to levels observed since January 2016, which essentially means that fertilizer affordability compared to levels in the last two years was lower last week.
Last week, the fertilizer affordability index level was slightly up week-over-week to 0.85 from 0.84 a week ago. The affordability index is essentially calculated using the plant nutrient price index for the numerator and the crop price index in the denominator. Last week, the plant nutrient index rose 1.4%, which was a bit faster than the crop price index, which rose by just 1.2% last week.
A fertilizer affordability index level lower than one indicates that fertilizers are relatively affordable compared to the base year in 2005 when it was indexed to one by the Mosaic Company (MOS), which issues this index. Higher affordability is positive for companies (XLB) such as Nutrien (NTR), CF Industries (CF), and Intrepid Potash (IPI).
Much of the recent increase in the fertilizer affordability index has resulted from increasing fertilizer prices, as we saw in the earlier part of this series. Increasing crop prices offset the rising fertilizer prices, and the above chart tells us that the crop prices haven’t kept pace with the rising fertilizer prices since April this year.