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High fertilizer costs fuelprices of farm products
Published in The Saudi Gazette on 05 - 11 - 2011

International prices of nitrogen fertilizers such as urea are likely to be firm next year due to production cuts in China and Pakistan and steady demand from importers, HSBC said in an overview of global fertilizer markets.
The UN food agency said in its Food Outlook report that high fertilizer costs, among the main drivers of agricultural commodity prices, could dampen farm production in 2012 and lead to a reduction of stocks and new price rises.
HSBC said output cuts in China, Pakistan, Romania and Libya as well as stable import demand from India have helped drive granular urea prices up to $450-510 a ton currently, based on spot Middle East prices FOB, from $220 a ton in mid-June.
Increased sales from Qatar and Algeria are likely to cushion the impact of production cuts in China and Pakistan which, however, “will set a higher floor for international urea prices,” HSBC said in its contribution to the report by the UN Food and Agriculture Organization (FAO).
HSBC said it had raised its average 2012 urea selling price estimate to $400 a ton from a previous estimate of $350 a ton, and up from the average 2011 price of $375 a ton. Its 2013 and long-term estimate is $350 a ton.
HSBC said it expects demand to grow by 3.6 percent this year powered by India, the world's largest urea importer as well as by strongly increasing demand from Brazil, a relatively small importer.
Turning to the phosphates market, HSBC said it expected prices of di-ammonium phosphate (DAP) to fall to an average of $465 a ton for 2012 onwards from $600 a ton in 2011 due to an expected increase in supplies from Saudi Arabia and a fall in import demand from India.
Demand for another widely used fertilizer, potash, remains high in 2011 and 2012, driving prices higher, HSBC said.
European potash prices are expected to rise to $530 a ton next year from $500 a ton in 2011, while Brazilian prices are seen rising to $570 a ton from $550 and prices in south-east Asia are expected to rise to $550 a ton from $535, HSBC said citing its conservative estimates.
Importers into the US would see stable prices at $600 a ton this and next year, it said.
Meanwhile, the Saudi Arabian Fertilizer Co. said its net profits doubled in the third quarter of 2011 versus the same three month period the year before.
Safco, a subsidiary of petrochemical giant Saudi Basic Industries Corp., said recently that net income in the third quarter climbed to SR1.21 billion ($323 million) compared to S604 million in the corresponding quarter a year earlier. It attributed the increase to increasing global prices for its products.
Saudi Arabia, OPEC's top oil producer, has been working to grow its petrochemical sector and other industries to wean itself from dependence on crude.


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