(Adds details on potash demand, M&A)
By Ernest Scheyder and Rod Nickel
NEW YORK, May 14 (Reuters) - A takeover of U.S. fertilizer producer Mosaic Co is unlikely in the near term and would be affordable to only a handful of players, executives said in an interview on Tuesday.
The world's largest producer of finished phosphate products and North America's second-biggest potash producer has at times been the target of takeover chatter since it was spun off by Cargill Inc in 2004.
Corn, cotton, rice and other crops are key users of Mosaic's products and a takeover would instantly create a global giant in the fertilizer sector as demand grows for protein-rich diets in developing countries that is expected to strain farm production.
Some of Cargill's former shares, representing some 30 percent of the company, could be up for grabs starting this year, fuelling speculation about who might want control.
Chief Executive Jim Prokopanko said any takeover would be "expensive."
"If somebody wanted to replicate what Mosaic is today, it's $60 billion," Prokopanko said.
Mosaic's market value is roughly $26.4 billion.
Prokopanko declined to comment when asked whether Mosaic has been approached by interested buyers in the past year. He said the company is not seeking a buyer.
Larry Stranghoener, Mosaic's chief financial officer, said the company does not believe a takeover is likely.
"It's not a major concern of ours," Stranghoener said. "We don't think its a strong likelihood. Given our size, there's only a few players in the world that could buy us."
The company said on Monday it would defer a planned expansion to its potash operations, citing high labor costs in Saskatchewan and flat demand for potash, among other factors.
That could change, though, Stranghoener said on Tuesday, if rival BHP Billiton Ltd cancels its $14 billion Jansen mine expansion project in Saskatchewan. Construction of the BHP project is underway, but it still requires final board approval.
Mosaic expects BHP to proceed, but if it does not, Mosaic will take a new look at former plans to add another 2 million tonnes of potash capacity, Stranghoener said.
"(A BHP cancellation) would represent a significant change in our supply outlook," he added.
Demand may be flat now, but looks like it will steadily rise in coming years by 3 percent to 3.5 percent annually, Prokopanko said, as high grain prices entice farmers in countries such as India to increase potash use.
"The world can't help but get to $600 a tonne by the end of this decade," he said.
Spot potash prices were just over $400 per tonne in April, according to Potash Corp.
Prokopanko and Stranghoener prefer to focus on expansion markets, citing plans to invest up to $1 billion over four years in a joint venture to produce phosphate in Saudi Arabia with Ma'aden and Saudi Basic Industries Corp JSC (SABIC).
Attractive opportunities for bulking up through mergers or acquisitions are "limited," Stranghoener said, but Mosaic is interested in buying smaller phosphate rock producers or distribution assets in South America, especially Brazil.
Mosaic plans to have $2 billion in cash by the end of May to buy back some shares that could be sold as part of its complex spin-off from Cargill.
About 129 million shares of Mosaic held by some Cargill shareholders will automatically convert to common shares starting in late November, unless they are sold earlier.
Tax restrictions on the shares expire in late May.
Prokopanko and Stranghoener said buybacks, rather than dividends, better remunerate shareholders. Both acknowledged that many shareholders would prefer cash dividend payments.
"Right now investors want cash," Stranghoener said. "One can't run a company based on what's popular today among investors."
Executives should look at the long-term financial health of a company before deciding on buybacks or dividends, he said.
The shares of Plymouth, Minnesota-based Mosaic rose 0.6 percent to close at $61.64 on Tuesday. The stock has gained about 9 percent so far this year. (Reporting by Rod Nickel and Ernest Scheyder in New York; Editing by Gerald E. McCormick, Andrew Hay and Andre Grenon)