PotashCorp has revealed it is to reopen a US nitrogen facility mothballed eight years ago, amid a squeeze on fertilizer supplies which is prompting farmers to buy nutrients already for 2012 crops.
PotashCorp said it was to spend $158m over the next 18 months restarting anhydrous ammonia production at its Geismar plant in Louisiana, which has since 2003 been restricted to production of other nitrogen fertilizers.
The ammonia facilities, with production capacity of 1,500 short tons a day, were shuttered as prices of natural gas, a key ingredient for the nutrient, soared to $12 per thousand cubic feet.
However, PotashCorp said its decision reflected a "long period of stable and low natural gas prices" since, after a number of huge gas finds, which have depressed prices to less than half 2003 levels.
Meanwhile, demand for nutrients has been whetted by farmers' desire to maximise yields, and cash in on high crop prices - which are also expected to send fertilizer prices flying.
Many US farmers are already buying nitrogen for applying in spring 2012, before this year's spring crops have been sown, OTR Global said.
"All sources said it is highly unusual for farmers to spend on next year's crop before the current year's crop is planted, but robust income and farmers' desire to avoid higher fertilizer prices later is prompting the move," the intelligence group said.
During the last crop price spike, prices of ammonia trebled to around $900 a tonne in the year from mid-2007, while those of potash quadrupled to nearly the same level, according to PotashCorp data.
Forward demand has been particularly strong for anhydrous ammonia, OTR said, forecasting that supplies would be "tight" this spring after a dry autumn deterred many farmers from making applications in the autumn.
Potash price hike
Potash prices are already on the rise, with Canpotex, the Canadian potash marketing cartel, lifting further, by $30 a tonne, prices of the nutrient to buyers in Latin America and Asia, excluding China, with which the consortium has struck a separate deal.
The price rise would mean South East Asian buyers paying around $460 a tonne and those in Latin America about $475 a tonne, said John Chu, analyst at Mackie Research Capital.
"With China, South East Asia and Latin America having reached potash price settlements, we expect India to follow suit within the next couple of weeks, similar to what happened in 2010," Mr Chu added.
PotashCorp last week said it expected world potash shipments to jump to 55.0m-60.0m tonnes this year, from 52.0m tonnes in 2010, adding that its supplies for North American customers for the first quarter of 2011 were "already fully committed".