Shares of Potash Corp
, the world's largest fertilizer company, surged to a record high on Monday after Goldman Sachs said prices for potash and phosphate should continue to rise.

Potash was up 5 percent or C$11.43 at C$232.20 on the Toronto Stock Exchange on Monday morning.

The stock has climbed 195 percent during the past year as world grain prices rallied to historic highs, giving farmers the ability and the incentive to apply more fertilizer.

Meanwhile, world supplies of potash and phosphate are tight, propelling fertilizer prices to new peaks, which prompted Goldman Sachs to raise its targets for Potash Corp and competitor Mosaic Co .

Mosaic shares were up 7 percent or $9.25 at $142.61 in New York on Monday.

We find the risk/reward still compelling and would be aggressive buyers of (Mosaic) and (Potash), wrote analyst Edlain Rodriguez in a report.

Rodriguez raised his price target by $50 to $285 for Potash Corp's New York-listed stock, which was up $9.42 at $226.27 on Monday, and raised his 2008 earnings estimates to $11.50 per share from $11.15.

He raised Mosaic's target by $30 to $195.

Another analyst, who declined to be named, said confidence in biofuel production was a bigger factor in the climb in fertilizer makers' shares.

Potash stock has risen more than 9 percent since Thursday, when a U.N. summit on high food prices focused on trade barriers and aid rather than on cutting the use of food crops for ethanol production.

In his report, Rodriguez said it was a matter of time before Canpotex, which exports for Potash Corp, Mosaic and Agrium Inc , raised potash prices to $1,000 per tonne, a level already being charged by Russian competitors.

Canpotex has already raised prices to Brazil and Southeast Asia to $750 per tonne, and has contracts with major consumers China and India for $650 and $625 a tonne, respectively.

In our view, once global prices reach the $1,000, prices in China and India will eventually reach that level once their contracts are up for renewals, he said.

But Rodriguez said he expects potash producers would give customers time to absorb the change before more price hikes.

($1=$1.02 Canadian) (Reporting by Roberta Rampton; editing by Rob Wilson)

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