By Euan Rocha
NEW YORK (Reuters) - Canadian fertilizer company Agrium Inc
Agrium recently increased capacity at its Saskatchewan mine by 300,000 tonnes to 2.05 million tonnes, and is now working on engineering studies for another 800,000 tonne expansion, Chief Executive Michael Wilson said in an interview on the sidelines of the Citi Basic Materials Symposium in New York.
Calgary, Alberta-based Agrium will need up to a year to finalize plans and costs, with an eye to boosting production in 2010 at the earliest, Wilson told the conference.
Potash prices have soared during the past year as farmers around the world try to maximize yields to capture surging grain prices caused by strong demand for food and biofuel amid depleted world grain stocks.
Wilson said he expected China, the world's largest potash consumer, to pay more for its supplies after upcoming price negotiations.
"I see potash prices continuing to strengthen. China should be paying a minimum of $100 a tonne more, maybe even more given today's situation," he told Reuters.
China paid about $100 to $150 a tonne less than other countries for the potash it imported in 2007. Some analysts have projected price increases of up to $150-$160 per tonne.
"Who knows how it will play out, the Chinese may decide to be stubborn for a while and not buy for a couple of months. But at the end of the day they need potash and they'll have to accept a price increase," Wilson said in the interview.
Agrium stock rose C$1.82 to C$62.75 on the Toronto Stock Exchange on Tuesday after earlier hitting a record C$63.38.
Agrium's shares have climbed since announcing a friendly
takeover on Monday of UAP Holding Corp
The deal will make Agrium North America's largest seller of crop fertilizer, chemicals and seed. The retail expansion will help stabilize its earnings when prices for nitrogen, phosphate and potash fertilizers cycle lower, Wilson said.
Booming potash prices will attract more players and production, despite high startup costs, he predicted.
"At these prices, people will come in and the price will fall, there's no doubt about that. But it's going to take quite a while for that to happen," he told the conference.
($1=$1.01 Canadian)
(Reporting by Euan Rocha, with additional reporting by Roberta Rampton in Winnipeg; Editing by Braden Reddall and Rob Wilson)
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