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. Last Updated: 07/27/2016

Warning Issued to Fertilizer Makers

Russia could double or triple export duties on mineral fertilizers if producers do not sell to domestic farmers at an "acceptable" price, First Deputy Prime Minister Viktor Zubkov said Friday, Interfax reported.

"There is only one way out: raising export duties. If we feel that fertilizer producers are not meeting agricultural producers halfway, we will go ahead and double or triple them," Zubkov said, the news agency reported.

Zubkov's comments could signal that the fertilizer industry could be the next victim of the state's battle against inflation. Sharply raising export duties would further squeeze global supplies, threatening to push record prices even higher.

Prices for potash, a nutrient that farmers apply to the soil to boost plant yields, shot to a record $1,000 per ton last month. Miners are essentially sold out of the mineral at a time when world food shortages have pushed grain prices to new highs.

This has made it more attractive for Russian fertilizer producers such as Silvinit, which supplies 10 percent of the world's potash, and Uralkali to export the mineral instead of selling it at home.

Russia, meanwhile, is fighting an uphill battle against inflation, which is running at close to 15 percent on an annualized basis, pushed up especially by climbing food prices.

In the last two months, the government has aggressively pushed companies to lower prices for basic goods.

Prime Minister Vladimir Putin attacked coal miner Mechel in July for charging more at home than abroad, a criticism that chopped $8 billion from the firm's market value. The Federal Anti-Monopoly Service later ordered it to cut prices by 15 percent.

By lifting a 5 percent import tariff on cement this year, the government helped push prices down over 20 percent as foreign producers flooded the market, taking market share from local firms.

Russia said in March that it would set export tariffs of 8.5 percent on nitrogen fertilizers and 5 percent on potassium fertilizers, to remain in force until Apr. 30, 2009.

The tariff on fertilizers containing nitrogen, phosphorus and potassium in any combination of the three in packages not exceeding 10 kilograms was upped to 8.5 percent from 5 percent.

Since the beginning of the year, prices on compound fertilizer had risen 70 percent, Zubkov said, Interfax reported.

"That is not due to rising domestic demand for fertilizer, but other factors, mainly price gouging," he said.

Interfax also reported that an agreement between fertilizer producers and the Agriculture Ministry is to be prepared by Oct. 1, to include a formula for price settlements to 2012.