A Little More On Fertilizer Producers: More Demand + Lower Cost = Higher Margin

Chart 1 World grain production and consumption is increasing. The first thing to note is the gap between production and comsumption. Fertilizer can fill the gap by increasing production. The second thing is the up trend in both production and consumption. Both trends speak to increased demand and long term increase.
Chart 2 Fertilizer sales growth chart showing steady growth over 3 to 6 years. This is an indicator of increased demand ( or it could be increased market share, not in this case however) for fertilizer world wide.
Chart 3 Lower cost really helps to increase margin. This chart shows how natural gas (a large part of production cost) prices have fallen. I hear this a lot from customers "gas prices have dropped, how come fertilizer is still high" . Two factors about that:

1. This price hike is all about increased demand, not covering increased cost.
2. Natural gas prices in North America are massive compared to the rest of the world. The nitrogen production landscape has changed, most N is now produced "offshore" where production costs are lower. Offshore production is less effected by Natural gas price fluctuations. (I guess that means they can charge big prices all the time. Oh sorry! That's just a sarcatic smart#^s comment isn't it) If you look at the margin chart in the previous Potash Corp. post, note the last price spike (fertilizer and natural gas) at the same time as the last drop in margin. That killed any excess North American N production.