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TORONTO (Reuters) - A global surge in the price of grain and other agricultural commodities is part of a long-term trend being driven by rising consumption in China and other emerging economies, Potash Corp's chief executive said on Thursday.
"I think you are looking at multiple years here of higher grain prices and higher ag commodity prices around the world," said CEO Bill Doyle, who heads the world's largest fertilizer company.
While many are blaming weather-related crop damage for the recent jump, food price inflation is primarily due to the increasing demand from Asia's fast-growing middle-class, he said in an interview with Reuters.
"You just have this rekindling of demand," said Doyle. "We are seeing wealth creation and the same dynamics that were in place before the great recession have been ignited again."
Higher grain prices have led to rising fertilizer demand, allowing Potash Corp and its peers to raise prices on nitrogen, phosphate and potash products.
Earlier on Thursday, Potash Corp said its fourth-quarter profit had more than doubled. The company also raised its 2011 earnings and sales forecast.
The United Nations food agency sounded a warning on cost of food earlier this month, saying prices jumped to record highs in December and that some grains could climb even further. The price of corn alone has more than doubled in the last six months, while wheat, soybeans and other crops have also risen sharply.
"We actually need a record crop now, every year, just to keep pace with demand," said Doyle, who has worked n the fertilizer industry for close to four decades.
Analysts say the company's growth now depends upon its ability to keep raising prices for its namesake crop nutrient, which comes from underground mines, mainly in its home province of Saskatchewan in Western Canada.
By the end of 2011 the price of potash for international spot market buyers will climb to at least $500 a tonne delivered, said Doyle, who has helped transform a loss-making state-owned entity into the world's most profitable fertilizer producer.
While prices have jumped in North America to more than $550 a tonne, pricing gains in key overseas markets have not kept pace. Prices on the international spot market price hover at about $450 a tonne, and a recent contract with Chinese buyers settled at $400 a tonne.
Doyle said the Chinese contract price is likely to rise by at least $50 to $60 a tonne in the second half of this year.
The company won't seek North American price increases until it sees prices rise in the overseas spot and contract markets, he said.
"You can't have a huge disparity between domestic and offshore prices," he added.
(Reporting by Euan Rocha; Editing by Frank McGurty)