IFFCO seeks India govt support in latest DAP talks

14 April 2008 10:50  [Source: ICIS news]

LONDON (ICIS news)--The Indian Farmers’ Fertilizer Cooperative (IFFCO) wants government assurances of financial support as it faced buying around 235,000 tonnes of phosphate fertilizer at record prices, trader sources said on Monday.

“IFFCO is just looking over its shoulder,” said one trader, “to make sure that it if does buy at a new record price level, that the Indian Department of Fertilizer (DoF) will back its decision.”

Discussions late on 10 April apparently stopped short of an agreement below $1,300/tonne (€832/tonne) CFR (cost and freight) for diammonium phosphate (DAP) fertilizer.

This would represent a new price level, with Indian buyers last purchasing DAP around $250/tonne below this figure back in March.

“Psychologically, IFFCO does not want to be seen as the first player to establish a new price level, unless it is sure it has government backing,” said the trader

The new price would set a precedent in the market, especially as it was widely expected that India, which has already purchased more than 1.5m tonnes of DAP in 2008, still required at least 1m tonnes this year.

DAP prices have skyrocketed since the beginning of 2008 on strong demand and limited supply. The key US gulf reference price has doubled from $600/tonne FOB (free on board) to $1,230/tonne FOB.

This also comes at a time when there are great concerns over the size of the fertilizer subsidy in India, currently estimated to be around $22.5bn for 2008-2009.

As one trader put it, this figure was, “on a par with the government’s defence budget.”

IFFCO closed its tender for an unspecified quantity of DAP on 9 April. It received various offers from traders and producers at prices in the range $1,235/tonne CFR to $1,340/tonne CFR.

($1 = €0.64)

By: Mike Nash
+44 20 8652 3214

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