SPDR S&P® North American Natural Res ETF

In the long term, aluminum demand looks strong globally as well as in China. Moreover, aluminum has been able to find new uses, especially in the automotive sector.

Out of the 21 analysts surveyed by Bloomberg, 36% had a “buy” rating, 50% had a “hold” rating, and only 14% had a “sell” rating on Mosaic.

CF Industries (CF) is expected to see a significant reduction in its capital expenditure (or capex) year-over-year (or YoY) in 2Q17 and for the next four quarters.

Mosaic (MOS) and PotashCorp (POT) were hit the hardest, with their respective shipments declining by 24% each to 1.5 million tons and 1.7 million tons year-over-year.

Last week, MAP prices in both the locations rose on a weekly basis.

The average price of ammonia for the week ending March 11 stood at $310 per metric ton, remaining unchanged from the previous week.

According to the Fertilizer Affordability Index, 2017 has been one of the most affordable years for fertilizers. Mosaic issues the index.

Over the past ten-year period, CF Industries has risen 186.0% and significantly outperformed the S&P 500 Index’s rise of 69.2% over the same period.

The average weekly price of MOP (muriate of potash) in Vancouver remained unchanged for the week ended May 20, 2016.

For the week ending November 25, fertilizer affordability fell to 0.65x from 0.66x week-over-week.

On average, potash prices for these five producers fell ~33% YoY in 4Q16. Excess supply and weak demand added downward pressure.

When we look at the past five quarters, we see that PotashCorp has missed all its earnings estimates.

CF Industries’ (CF) sales segment includes UAN (urea ammonia nitrate), AN (ammonia nitrate), ammonia, and granular urea.

The MAP (monoammonium phosphate) prices in Brazil saw positive momentum last week. Brazil is still a favorable market for fertilizer producers.

Last week, fertilizer affordability rose to 0.66x from 0.65x week-over-week. A ratio below one means that fertilizers are more affordable than during the base year.

In its September Market Overview report, PotashCorp (POT) stated that the gains in phosphate prices earlier this year were reversed due to excess supply and weakness in demand from India.

The Fertilizer Affordability Index has shown a downward trend since the beginning of the year. Fertilizers have become more affordable in 2017.

Last week, MAP (monoammonium phosphate) prices continued to fall and brought more pain for phosphate producers (NANR).

The average weekly price of MOP (muriate of potash) at Vancouver has been flat since the beginning of March.

For the week ending April 28, the Fertilizer Affordability Index fell slightly to 0.58x—compared to 0.59x the previous week.

The weekly average price for potash in Vancouver remained flat in the week ended June 24, 2016. Prices are below their 15-year average of $290 per metric ton.

Sociedad Química y Minera de Chile (SQM) has yet to announce its earnings, unlike most of the companies we’ve discussed so far in this series.

MAP (monoammonium phosphate) prices in Brazil have been on the rise lately from a low point of $343 per metric ton as a result of strong agricultural activity in the region.

Intrepid Potash (IPI) is nearing $1 per share, which means that only a few analysts are covering the stock.

According to Freeport-McMoRan’s agreement with Indonesia’s government, it must divest an additional 20.6% stake in its Indonesian operations to the government or its citizens.

The average weekly price of MOP (muriate of potash) in Vancouver remained unchanged for the week ended May 27, 2016.

Last week, the Fertilizer Affordability Index remained unchanged at 0.65x week-over-week. Fertilizers are more affordable than during the base year.

As of October 14, 2016, Monsanto is trading at a short interest ratio of 1.2%, which is slightly higher than 0.90% in September.

Fertilizer affordability affects sales volume for fertilizer companies (NANR) such as Mosaic (MOS), Nutrien (NTR), CF Industries (CF), and Intrepid Potash (IPI).

In the week ending April 22, 2016, ammonia prices in Tampa CFR (Cost and Freight) continued to move sideways for the 13th straight week.

Expectations for 4Q17 Earlier in this series, we saw that analysts expect Monsanto’s (MON) gross income to grow slower than its sales over the next four quarters. In this part, we’ll look at what analysts expect for the company’s operating cost structure in 4Q17. Monsanto’s earnings In 4Q17, analysts expect Monsanto’s EBITDA (earnings before interest, tax, depreciation, and amortization) […]

Potash prices in Brazil rose the most last week with a rise of 2.3% to $357 per metric ton from $349 per metric ton.

Nutrien has yet to deliver meaningful returns similar to fertilizer (NANR) companies such as the Mosaic Company (MOS) and CF Industries (CF).

We’re looking at natural gas prices in this series, primarily because they make up two-thirds of the input costs for nitrogen-based fertilizers.

Fertilizer affordability last week, which ended on August 10, was largely unchanged, as reported by Mosaic (MOS).

The potash market was no different than nitrogen and phosphate. Potash prices were depressed due to oversupply.

Last week, potash prices in the NOLA (New Orleans) region of the United States rose 1.6% week-over-week to $235 per metric ton.

Year-over-year, DAP prices remain strong with NOLA and China each experiencing a 21% gain year-over-year.

Contrary to the DAP (diammonium phosphate) prices, which remained broadly flat last week, MAP (monoammonium phosphate) prices were broadly higher in NOLA and Brazil.

Last week, potash prices were broadly flat to positive, similar to phosphate fertilizer prices.

Last week, prices for DAP (diammonium phosphate) fertilizer were broadly flat to positive except for Morocco.

In the week that ended on April 13, 2018, DAP (diammonium phosphate) prices were broadly flat to negative.

One of the positives for companies such as Mosaic (MOS), Nutrien (NTR) (POT), and CF Industries (CF) is the higher year-over-year prices that we’ve seen for fertilizers.

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.

Agrium (AGU) (NTR) saw flat margins compared to 6% in the corresponding quarter a year ago in 4Q16.

The potash fertilizer prices for both granular and standard grade were comfortably higher compared to the levels observed last year around the same week.

In the earlier part of this series, we discussed how shipments impacted CF Industries’ (CF) sales. From our analysis, it’s clear that a rise in selling prices remains the most important growth catalyst for the company.

Phosphate prices Earlier in this series, we discussed phosphate prices in 2017 and what has driven prices down recently. We saw that excess capacity pushed down phosphate fertilizer (NANR) prices during the year. In this part, we’ll look at supply and demand trends for phosphate fertilizers in 2018. Supply and demand In 2017, overall global […]

MAP (monoammonium phosphate) prices have shown strength in recent weeks, moving higher to peak at $ $403 per metric ton in Brazil.

Last week, which ended December 8, 2017, was broadly mixed for movements in DAP (diammonium phosphate) prices. Some regions saw weekly gains, and others moved sideways to negative.

On September 14, 2016, Bayer signed an agreement with Monsanto (MON) to acquire it for $66 billion, or $128 per share. The offer represented a 44% premium over Monsanto’s stock price.

Last week, the granular MOP (muriate of potash) prices in NOLA (New Orleans) in the US (NANR) rose by as much as 45 basis points week-over-week to $203 per metric ton.

On average, nitrogen fertilizer prices failed to show a meaningful growth YoY (year-over-year) in 3Q17.

In recent months, MAP prices in Brazil have been on a downward trajectory. However, MAP prices appear to have found firmness in recent weeks.

Given the growth in potash shipments and the increase in price realization, it’s natural that the margins of potash producers improved YoY in 2Q17.

Intrepid Potash’s 2Q17 price realizations for its Potash segment were significantly better compared to 2Q16.

PotashCorp’s (POT) phosphate segment contributed almost a fourth of overall sales for 2Q17. Sales were driven by shipments and price realizations.

PotashCorp (POT) had lackluster earnings growth last year. However, the company reported EPS (earnings per share) growth in 1Q17.

Mosaic (MOS) remains a painful investment for investors. The company has delivered losses of 18.7% year-to-date as of July 13.

Intrepid Potash’s (IPI) gross margin for its Potash segment swung to positive territory in 1Q17, while its Trio margins were in the negative territory.

Over the past five years, CF Industries’ (CF) gross and EBITDA (earnings before interest, tax, depreciation, and amortization) margins have contracted.

On June 9, Monsanto (MON) stock closed at $117.5 per share.

Approximately 83.0% of analysts have rated Anadarko Petroleum (APC) a “buy.” The average broker target price is $81.52.

PotashCorp’s average realized prices for phosphate fell ~15% to $423 per ton in 1Q17, as compared to $499 per ton in 1Q16.

Approximately 53% of the analysts rate Noble Energy (NBL) as a “buy” and 32.3% rate it as a “hold.” The average broker target price is $47.47.

In recent years, agricultural fertilizer companies like PotashCorp (POT), Agrium (AGU), Israel Chemicals (ICL), and CF Industries (CF) have incurred higher capital expenditures.

Urea prices have fallen by an average of 14% annually over the past five years. The consistent fall has been due to falling energy costs, leading to lower production costs across the board.

Approximately 67.0% of the analysts rate Noble Energy (NBL) as a “buy” and 33.0% rate it as a “hold.” The average broker target price is $46.88.

The average broker target price of $81.65 for Anadarko Petroleum implies a potential return of ~19.4% for the stock in the next 12 months.

Overall shipments for PotashCorp’s Phosphate segment fell 6.0% in 4Q16 to 0.72 million tons, from $0.76 million tons in 4Q15.

For 4Q16, analysts have an average earnings estimate of -$0.10 per share for Noble Energy (NBL). The low estimate stands at ~-$0.22 per share.

PotashCorp (POT), which is currently trading at an EV-t0-EBITDA multiple of 15.0x, is trading far above its low point of 6.0x a year ago.

Energy as well as freight and handling can be the two biggest costs for nitrogen fertilizer production.

Monsanto reported operating income or EBIT of $247 million, which rose from -$272 million in fiscal 1Q16.

The global soybean stock-to-use ratio for soybeans rose to ~25.1% in December 2016, as compared to 24.8% in November 2016.

For 2017, Wall Street analysts are estimating that Monsanto (MON) could report EPS of $4.70, which would translate into earnings growth of 5.3% year-over-year.

Monsanto’s (MON) forward PE valuation multiple has recently trended higher, and so has the price of its stock.

Potash’s selling price has been on the decline for the last few quarters and is key to the performances of potash producers (NANR).

Unlike corn, the global soybean stock-to-use ratio is lower compared to the global stock-to-use ratio of 26.5% last year.

Approximately 73% of the analysts rate Anadarko a “buy,” 22% rate it a “hold,” and 5% rate it a “sell.” The average broker target price is $72.52.

The Phosphate segment’s shipments rose 23% to ~2.5 million tons from ~2 million tons in 3Q15—compared to guidance of 2.4 million–2.7 million tons.

Producers in China primarily use coal as an input material to produce nitrogen, especially urea-based fertilizers. China is the world’s biggest urea exporter.

About 42% of analysts rate Hess a “buy,” and ~58% rate it a “hold.” The average target price of $64.89 implies a return of ~29% in the next 12 months.

The global stock-to-use ratio for soybeans rose 1.6% to ~23.5% in October—compared to 22% in September. Soybean’s ratio is lower than last year.

Demystifying the cost curve Earlier in this series, we saw that prices of nitrogen have fallen over the years, despite its significance in crop growth and feeding the vast population. The lower prices are due to a flatter cost curve, which we’ll explain in this part. Flat cost curve In the chart above, we compare a […]

Chinese producers primarily use coal to produce nitrogen, especially urea-based fertilizers, while producers in North America mostly rely on natural gas.

Corn prices on September 12 were 1.6% higher at $3.30 per bushel compared to $3.20 per bushel in August 2016.

Forward price-to-earnings (or PE) is a relative valuation method that considers a company’s future earnings for calculation.

The gross margin rate for Mosaic’s Phosphate segment fell significantly in 2Q16, to 10% from 21% in 2Q15.

Approximately 63% of analysts rate Noble Energy (NBL) a “buy,” and 34% rate it a “hold.” The remaining ~3% rate it a “sell.”

Approximately 65% of analysts rate EQT (EQT) a “buy,” and 30% rate it a “hold.” The remaining 5% rate it a “sell.”

Approximately 73% of analysts rate Anadarko a “buy,” whereas 22% rate it a “hold,” and 5% rate it a “sell.” The average broker target price is $66.50.

MAP (monoammonium phosphate) is the second most used phosphate fertilizer after DAP (diammonium phosphate).

In June 2016, the global soybean stock-to-use ratio stood at 20.2%, which was at its lowest point compared to the past four years.

Israel Chemicals, which shipped 0.5 million metric tons during the recent quarter, saw the largest jump in shipment growth—20% year-over-year.

Last week, average MAP prices in Brazil inched down to $352 per metric ton from $354 per metric ton the previous week.

Mosaic’s (MOS) margins declined from 25% to 16%. Intrepid Potash’s (IPI) EBITDA margins were negative because of a deficit.

The fertilizer industry moves in cycles and with most companies experiencing a decline in margins, the industry seems to be in the bottom cycle.

The agricultural fertilizer industry is experiencing sluggish momentum as a result of the weakness in crop prices that has extended well into 2016. With the earnings season for the quarter ended March 2016 behind us, let’s recap the industry’s performance and compare the companies within the industry.

Last week, nitrogen producers CF Industries (CF), CVR Partners (UAN), Terra Nitrogen (TNH), and PotashCorp (POT) ended in the red.