September 30, 2014 / 1:53 PM / 3 years ago

UPDATE 2-Fertilizer maker Mosaic cuts phosphate output as costs rise

(Updates with CEO interview, comments from other producers, analyst)

By Rod Nickel

Sept 30 (Reuters) - Mosaic Co, the world's largest maker of finished phosphate products, said on Tuesday it will reduce phosphate output due to rising costs, while it also moderated its sales expectations.

The U.S. fertilizer producer said the output cut, due to the high costs of raw materials sulfur and ammonia, is not expected to result in layoffs.

The reduction comes as corn and soybean prices have fallen to multiyear lows due to expectations of record U.S. production. Softening prices reduce the income farmers have to spend on fertilizer, although big crops offset the price drop somewhat.

Costs have escalated with strong demand for sulfur and due to ammonia output curtailments in Ukraine, Trinidad and elsewhere.

Mosaic is setting its phosphate production levels on a month to month basis, Chief Executive Officer Jim Prokopanko said in an interview. He declined to quantify the size of the cut but said it would be "system-wide". The company operates facilities in Florida and Louisiana.

"The timing is going to be largely dependent on how these markets react, what happens to our raw material costs," Prokopanko said.

"We don't want to take a risk of having very high-priced inventories and possibly weaker pricing."

The company last reduced phosphate output in late 2011.

Mosaic sold 11.2 million tonnes of phosphate last year. It has invested billions in boosting phosphate capacity, acquiring operations this year from CF Industries Holdings Inc and forming a joint venture in 2013 with Ma'aden and Saudi Basic Industries Corp SJSC in Saudi Arabia.

The fourth quarter is typically a slow period for phosphate sales, but Prokopanko said the curtailments could tighten supplies for the spring planting season.

Benchmark Tampa, Florida, ammonia prices recently reached the highest level since early 2013, while prices for diammonium phosphate have fallen, said Citi Research analyst P.J. Juvekar.

Potash Corp of Saskatchewan downsized its phosphate operations in December and isn't planning further cuts, spokesman Bill Johnson said.

Agrium Inc isn't as vulnerable to cost pressures because it produces its own ammonia for phosphate production, and has long-term sulfur supply contracts, spokesman Richard Downey said.

Mosaic expects third-quarter potash and phosphate sales volumes to fall to the lower end of its forecasts. The revised guidance is due to New Mexico floods and Saskatchewan lightning storms that caused outages in potash production, as well as timing problems with phosphate shipments.

The company, based in Plymouth, Minnesota, said on July 31 it expected phosphate sales to range from 3.3 million to 3.6 million tonnes in the third quarter, up from 2.7 million a year ago. It saw potash sales at 1.8 million to 2 million tonnes, up from 1.4 million tonnes.

Prices of the nutrients should remain near the midpoint of its outlook, Mosaic said.

Mosaic shares were down 2.5 percent at $44.30 on Tuesday morning. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Franklin Paul, Jeffrey Benkoe and Peter Galloway)

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