Grains markets will tighten as the slump in fertilizer applications this season depresses crop yields, Yara International, the nitrogen giant, has warned, predicting "good margins" for farmers.

The Norwegian group said it was "hard to see" fertilizer application rates recovering to optimal levels after an 18% slump in European and US nitrogen sales so far this crop season.

This shortfall would have "negative effects on global food production" which were likely to foster a market squeeze, Jorgen Ole Haslestad, Yara's chief executive, said.

"There are few signs today of a drop in global food consumption that would match this likely grain production loss, indicating tighter grain markets going forward," the statement said.

"Current grain, fertilizer and fuel prices promise good farmer margins for major crops and regions."

Latin lesson 

The impact of falling fertilizer use had already been seen in South America, where fertilizer deliveries to Brazil fell by 9% last year and to Argentina by 28%, the group claimed.

"The US Department of Agriculture currently estimates that corn production will be down 14% in Brazil and 39% in Argentina this season," Mr Haslestad said.

Yara added that a tighter grain market would spur a revival in fertilizer sales next season.