Market and product

India sent the phosphate fertilizer market a mixed message by agreeing long-awaited purchases at a price higher than many observers expected, but for a relatively small volume.

Two unnamed Indian buyers agreed to purchase 500,000-700,000 tonnes of diammonium phosphate, the most common form of phosphate fertilizer, at $580 a tonne including freight from PhosChem, the US marketing consortium.

The price, while well below 2011 levels, was higher than many observers had expected after diammonium phosphate prices fell below $500 a tonne in the US Gulf in March, sapped by ready Chinese export supplies, and a stronger build up in production at Saudi Arabia's Ma'aden plant than many observers had forecast.

Maxim Volkov, the chief executive of Russia-based PhosAgro, last month highlighted talk that PhosChem may achieve $550 a tonne as a "positive" development which "may lead to an upward correction in prices".

Small volume

But the volume of India's purchase, for shipments through until February 2013, was well below levels of previous deals.

Last year, the two buyers in March agreed to purchase 1m tonnes, with a further 1m-tonne deal struck in September.

However, India's farmers have since been hurt by a collapse in the rupee which has sent costs of imports, such as fertilizers, soaring while providing a relatively little compensation in terms of improved export competiveness.

The country is a significant exporter of relatively few crops, notably cotton and, this season, sugar.

'Big driver'

The PhosChem agreement came the same day as data revealed that India's economic growth had slowed to 5.3% in the first three months of 2012, from 6.1% the quarter before, and the worst performance since 2003.

Agriculture suffered a particularly large collapse, to a growth rate of 1.7%, from 7.5% in the first three months of 2011.

India's agriculture, as the top phosphate importer, "is the big driver of world phosphate imports, and it is struggling", an industry executive told Agrimoney.com.

"Until it picks up, the phosphate trade is likely to look a little slow."

Farmers to pay more

At PhosChem, which sells supplies on behalf of North American groups such as Mosaic and PotashCorp, president Gordon Mackenzie said that the deal "demonstrates our commitment to helping meet the need for phosphate fertilizers in India".

Separately, in India, Tata Chemicals warned farmers to expect higher phosphate prices "as soon as the new stock hits the market". Currently, Indian prices stand at about $530-540 a tonne, the group said.

Mosaic shares closed 0.5% lower at Can$47.68 in New York, with PotashCorp stock ending up 0.7% at $40.91 in Toronto.