* Says fertiliser demand has picked up strongly this autumn
* Will continue to be patient when it comes to M&A
* Sees potential targets in North America, W. Europe
* Shares up 1.6 percent, hit two-year high
(Recasts, adds CEO on acquisition prospects, analyst, shares)
By Victoria Klesty and Henrik Stolen
OSLO, Dec 7 (Reuters) - Norwegian fertiliser group Yara International (YAR.OL) raised its earnings forecasts on Tuesday on the back of strong demand for its nitrogen-based soil nutrients, helping send its shares to a near two-year high.
"Fertiliser prices have increased substantially reflecting the tight market," Chief Executive Joergen Ole Haslestad said. "Currently, all available global fertiliser capacity is utilised," he said, with the exception of some plants in China whose output has been curtailed due to energy saving and environmental factors.
Shares in Yara were up 1.6 percent at 0858 GMT, outpacing a 0.4 percent rise on Oslo's main index .OSEBX. The stock rose as high as 331.80 crowns, its highest September 2008.
Yara presented scenarios for future earnings which it said were not predictions but "what if" examples based on specific fertiliser and energy prices.
"A supply-driven market where China is the highest-cost exporter translates into an estimated EPS of 18 Norwegian crowns, a scenario which is relevant if the fertiliser market turns over-supplied," said Yara.
It said the global fertiliser market was demand-driven following a tightening in agricultural markets.
"Continued growth in food demand and the need for improved agricultural productivity increase the probability of a continued tight fertiliser market. A demand-driven scenario with $150 per tonne urea margins yields an estimated EPS of 47 Norwegian crowns."
The consensus 2011 EPS view for Yara is 27.8 crowns, according to ThomsonReuters StarMine SmartEstimate.
"They are raising their (top-end) EPS forecast to 47 from 34, and that is a rather hefty hike. Some analysts will adjust their estimates after this," said analyst Are Grongstad at brokerage Agilis.
The company also said it remains hungry for acquisitions. Haslestad said Yara sees potential targets in the mature North American and western European markets and is preparing for an expected consolidation in eastern Europe.
On the oversupplied Chinese market, Yara did not envisage acquisition opportunities for the next three to five years.
The fragmented nitrogen industry is ripe for consolidation and though Yara believes Russian potash players will consolidate among themselves, there are still strong opportunities in nitrogen.
"We can promise you that we will take part in that consolidation and make sure to take part in ammonia when that happens," Haslestad said.
The company has plans to capture 20 percent of the global nitrogen-based fertiliser market but its $4.1 billion bid for U.S. rival Terra Industries was trumped in February by CF Industries (CF.N). (Additional reporting by Wojciech Moskwa and Terje Solsvik; Editing by Dan Lalor and David Holmes)