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The chief executive of Yara International ASA (YAR.OS), the world's biggest fertilizer company by sales, said Thursday that the inventory write-downs the company has had to make in recent quarters should end in the third quarter.

The company, which has a 7% to 8% share of global fertilizer markets, has been forced to write-down the value of its nitrates, phosphate and potash inventories since the fourth quarter of 2008 as it paid more for the raw materials in the fertilizer than the price gained from the finished product.

But Chief Executive Joergen Haslestad told Dow Jones Newswires in an interview Thursday that after "some third quarter write-downs, we will have completely cleared up, given today's prices."

Most recently, it wrote down inventories of third-party products by 185 million Norwegian kroner ($30.7 million) in the second quarter to reflect lower market prices, while Yara-sourced products were written down by a further NOK191 million. That was primarily in nitrogen, phosphorous and potassium, or NPK fertilizers, manufactured in earlier periods with higher potash and phosphate input prices.

Net profits for the second quarter plunged 74% to NOK1.12 billion, due to the write-downs, and falling sales.

Fertilizer prices have plunged in the past year because the global economic downturn eroded demand.

Haslestad said he expects to see acceptable demand for its products returning in the current fertilizer season, which runs from July through next June, although he ceded that there's "still a bit of a wait-and-see attitude from farmers."

The company's second-quarter global fertilizer deliveries were down 13% on the year, with NPKs down 38%, although nitrates increased 17%.

"There was more fertilizer out there (in storage) than expected. When things are going well and margins are acceptable, farmers buy a bit more and store it. That pipeline of spare volumes has emptied this year," which will help deliveries and prices to recover this season, he said.

Nitrate prices and volumes have recovered more quickly than NPKs, helped after Yara set a moderate price for June at EUR115/ton, attracting buyers back to the market. It now expects nitrate prices to track steadily upward through the season and will set fourth-quarter nitrate prices in October, which are expected to be higher than the current mid EUR120s/ton.

Weak fertilizer markets have been partially offset by falling natural gas prices. Yara is the biggest industrial gas buyer in Europe, using the fuel as a feedstock in the fertilizer production process. The company now buys 55% of its gas from Europe's spot gas markets, as it continues to switch away from less flexible long-term supply contracts.

Haslestad described current gas prices of around $4 per million British thermal units in Europe and $3/MMBtu in the U.S. as "absolutely incredible. We believe prices will stay low in the medium term," he said, which will help cushion the company from the risk of continued low demand for its products.

Company Web site: www.yara.com

-By Elizabeth Adams, Dow Jones Newswires; +44 (0) 7789 070 028; elizabeth.adams@dowjones.com