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Phosagro Cuts Phosphate-Fertilizer Output Goal on Price Drop

30 December 2011

OAO Phosagro (PHOR), Russia’s largest producer of phosphate fertilizers, plans to cut output of the crop nutrient by 18 percent in the first quarter from a year earlier following a slump in prices.

Phosagro will reduce production of diammonium phosphate and monoammonium phosphate, also known as DAP and MAP, the company said today in a statement, without specifying volumes. It will make more of its complex fertilizers until prices for the phosphate compounds recover, it said.

Phosagro’s decision follows a similar move by the U.S.’s Mosaic Co., its largest global competitor, which said yesterday it will cut phosphate output in the first quarter by 250,000 metric tons. DAP prices at Tampa Bay, Florida, have fallen 15 percent from their 2011 high in July to $572.50 (DAPHDT) this month.

“Recent declines in MAP and DAP spot prices are speculative and do not reflect the real economic fundamentals,” Maxim Volkov, chief executive officer of Moscow-based Phosagro, said in today’s statement. Mosaic said yesterday that prices have become “disconnected” from the “underlying agricultural fundamentals” and aren’t sustainable.

Phosagro agreed to reduce prices for Indian buyers on Nov. 24 after they demanded a revision to account for the rupee’s depreciation against the dollar.

“We expect that farmer economics and agriculture fundamentals will support higher prices and higher demand for these fertilizers ahead of the spring planting season,” Volkov said in the statement.

Phosagro also said today it plans to spend 7 billion rubles ($218 million) next year to improve phosphate-processing at its main production unit, Apatit, in the Murmansk region in northwest Russia.