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Low Inventories Push Fertilizer Costs Higher

12 September 2011

GLOBAL - Low inventories have granted potash and phosphate producers plenty of reasons to hike prices, and purchasers have been bearing these increases, fearing that if they don't agree to contracts in a timely manner they may miss out on securing supplies.

Phosphate underwent the highest price hike. Phoschem, the marketing arm for Potash Corp and Mosaic, settled a deal with Indian buyers to supply 1 million tonnes of diammonium phosphate at a rate of $677 per tonne, including freight, a 10 per cent price increase over the last contract, according to Resource Investing News.

In August, Canpotex, the marketing arm of Potash Corp, Mosaic and Agrium (NYSE:AGU), agreed with Indian customers to hike potash prices to an average $500 per tonne for the last quarter of 2011 and the first three months of next year. After months of wrangling, at an average of $500 a tonne, compared with $390 a tonne that Indian customers had been holding out for early in the year.

The low-stockpile situation is not a new phenomenon. In fact, producers have been warning about a looming supply shortage for months. North American potash stocks were, as of the end of June, approximately 70,000 tonnes below average levels for the time of year, despite the fact that stocks had increased by 105,000 tonnes during the month. Potash stocks are below their five-year average, with Canpotex claiming that its North American supplies for the third-quarter are basically sold out.

New discoveries

As the demand for fertilizers sees unprecedented growth, the race is on to secure new supplies. According to a USGS study in Iraq, the country may host the second-biggest potash reserves in the world. The study found four large potash reserves, which are believed to contain 5.75 billion tonnes of phosphate, equivalent to 9 percent of the global reserves.

Four phosphate deposits â€" known as Akashat, H3, Ethna and Swab â€" are the most promising discoveries. The two biggest deposits, Akashat and Swab, are thought to hold 1.7 billion and 3.5 billion tonnes of phosphate respectively. While the grade of these deposits is slightly below the average grade of 25 percent, the volume, makes the deposits a respectable supply.

The US Geological Survey has been working with its Iraqi counterpart to map the country's non-oil mineral resources. The Iraqi government plans to turn the town of Akashat in Anbar province into a phosphate mining center. The Iraqi government aims to export the phosphate to Asian markets.

TheCropSite News Desk

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