Yara International, the world's biggest fertilizer maker, is to reopen one of its mothballed factories, signalling that the sector may be past the worst of its squeeze from plummeting agricultural demand.

The Norwegian group said that its Ferrera factory in Italy would resume production of urea and ammonia next month in response to "improved market conditions".

"The decision, is related to the general improvements in the international urea markets and the specific situation in Italy with increased seasonal demand," the group said.

'Lower prices'

Yara was one of a number of fertilizer groups to put production on ice last autumn after a drop in grain prices, reflecting bumper harvests and the global economic downturn, curbed farm spending.

Earlier this month, Saudi Arabian Fertilizer Company posted its first decline in quarterly profits for more than two years.

Analysts at Rabobank, the Dutch bank, forecast that prices of fertilizer and agricultural chemicals would be "significantly lower" this year than in 2008, after falling 60-75% from last summer's peak.

Yara shares stood NOK8.5, or 5.4%. higher at NOK167 in morning trade in Oslo..