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Stand-off in EU fertilizer buying to 'end soon'qrcode

Nov. 24, 2011

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Nov. 24, 2011
European farmers will by the end of next month end the stand-off in fertilizer purchases, which has caused groups such as K+S to lower their profits guidance, and is being blamed on macroeconomic uncertainties.

ICL, the Israeli potash and phosphate group, followed other observers in flagging wholesalers' and growers' reluctance to build-up fertilizer inventories - fearful of a rerun of last financial crisis, three years ago, when a fertilizer market collapse left them with large holdings of high-priced inventory.

"The financial crisis is darkening the economic atmosphere in the Continent," ICL said.

"Farmers and fertilizer distributors are wary of commitment, and are especially anxious about holding on to stocks lest prices fall if a crisis occurs as in 2008-09."

The caution came minutes after Irish-based Origin Enterprises noted "lower volumes" of sales of agrichemicals and nutrients at its UK operations, "reflecting customer buying commitments being delayed".

'Revival ahead'

However, Origin signalled that purchases would be made "closer to the main usage period" in the first few months of 2012.

And ICL forecast a rebound beginning next month as "decent income" prospects for growers, even at lower crop prices, encourage buying.

"As the spring fertilizer season approaches in Europe, fertilizer demand is expected to resume at the end of the fourth quarter 2011 and the first quarter of 2012," the group said.

Profits jump

The comments came as ICL unveiled an 80% jump to $436.3m in earnings for the July-to-September quarter, on revenues up 36% at $1.90bn.

The rise reflected increases in both prices and volumes, with revenues rising in Asia in particular, reflecting contracts with China and India.

The group during the quarter signed a contract to sell 750,000 tonnes of potash to China during the second half of 2011, at prices $70 a tonne higher than on the 500,000 tonnes it sold to the country in the first half.

ICL shares closed down 2.5% at 39.06 shekels in Tel Aviv.
Source: Agrimoney

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