India, the world's second-biggest wheat, sugarcane and rice producer, is a critical market for fertilizer producers. It is the biggest global phosphate importer and relies completely on foreign potash supplies.
Coromandel, India's second-biggest phosphate fertilizer producer, estimates there is phosphate inventory of 6 million to 7 million tonne in the country, up sharply from usual stockpiles around 2 million tonne.
"Everybody used to stock up, right from farmers to retailers to wholesalers," said Kapil Mehan, managing director of Coromandel in an interview with Reuters on the sidelines of the BMO Farm to Market conference in New York.
Last year, farmers and farm retail suppliers cut back inventory, but there is still plenty of supply at the manufacturer and distributor levels, Mehan said.
With so much supply, India's phosphate imports look to fall to between 4 million and 5 million tonne in 2013, from last year's level around 6 million tonne, he said.
Russia's PhosAgro OAO , the world's second-largest producer of finished phosphate products, is more optimistic. Irina Evstigneeva, head of corporate finance for PhosAgro, expects India's phosphate imports to hold steady this year, as a favorable monsoon season gives farmers incentive to maximize production with fertilizer.
Mehan said India's potash imports are likely to remain flat in 2013 from last year's 3.5 million tonne. Potash Corp , one of the biggest potash producers, has said it expects India to import 4 million tonne.
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A trend toward urbanization, along with higher incomes and demand for more protein-rich food, has made India, China and Southeast Asian countries key growth markets for grains and fertilizer.
Indian demand for phosphate and potash has been restricted in recent years by cuts in government subsidies that made fertilizer more expensive. For 2013-14, the Indian government reduced subsidies again for diammonium phosphate and muriate of potash, but also decreased the maximum retail price for farmers.
The net result is a marginally lower price for farmers and a likely increase in overall consumption of phosphate and potash to help whittle down stocks, Mehan said.
"I think farmers are going to respond favorably to that."
Coromandel, which has a market capitalization of $1 billion, also runs 640 farm retail outlets.
India approved a new policy late last year to encourage investment in urea manufacturing, and Mehan said 15 companies have approached the government to set up plants, but not Coromandel. Four or five of those plants will likely get under way in the next 12 to 15 months, he said.
Under the new policy, manufacturers would get help in covering the cost of natural gas, the preferred feedstock to make urea, when high gas prices would make projects lose money.