* Q2 EPS $3.20 vs $2.35 year ago
* Q2 revenue rises 7 pct to $4.37 bln
* Sees strong ag fundamentals supporting 2nd-half demand
* Agrium, Potash Corp shares jump on surge in wheat price (Adds CEO comments, updates share price move; in U.S. dollars unless noted)
By Euan Rocha
TORONTO, Aug 4 (Reuters) - Fertilizer maker Agrium Inc (AGU.TO) said second-quarter profit rose, driven by increased demand for agricultural inputs, higher crop nutrient margins and a jump in potash sales volumes.
Agrium, the largest North American farm products retailer, also said it expects lower U.S. corn inventories and rising grain prices to support demand for all crop inputs in the second half of the year.
Quarterly profit rose to $506 million, or $3.20 a share, from $370 million, or $2.35 a share, a year earlier.
The latest results include a pretax recovery of 26 cents a share related to stock-based compensation and a pretax gain of 4 cents a share on natural gas and other hedge positions.
"The nitrogen and phosphates businesses did worse than I was expecting, but the retail business did better than expected," said Edlain Rodriguez an analyst with Gleacher & Co. "That's the power of Agrium, they have the ability to offset things because of the diversity of the business."
Net sales at the Calgary-based company rose 7 percent to $4.37 billion, driven largely by higher potash sales volumes, which soared to 529,000 tonnes from 61,000 tonnes a year earlier.
Analysts on average had expected earnings of $2.77 a share on revenue of $4.17 billion, according to Thomson Reuters I/B/E/S.
The global recession and a collapse in grain prices hurt fertilizer demand in 2009, but farmers have begun to restore their soil nutrient levels this year, benefiting Agrium and other suppliers.
Last week, Potash Corp (POT.TO), the world's largest fertilizer producer, said its second-quarter profit more than doubled as sales volumes quadrupled, offsetting lower prices for the crop nutrient. [ID:nN28198150]
"We anticipate North American crop nutrient demand to be strong in the second half at both the grower and retail level," said Agrium's Chief Executive Mike Wilson, citing firming crop prices, weather-induced constraints on nutrient application this spring, among other reasons.
Wilson, on a conference call, also noted that feedback from Agrium's extensive retail operations indicate that crop nutrient inventories at North American retailers are very low for all products and that major restocking will be required this fall.
The company said it plans to issue its outlook for the second half of the year when it releases third-quarter results.
Shares of Agrium and those of its larger rival Potash Corp were the biggest net gainers on the Toronto Stock Exchange on Wednesday, driven largely by a surge in wheat and corn futures.
Wheat futures rose to a 22-month high as a drought conditions worsened in the Black Sea region and the United Nation's food agency cut its global wheat forecast by 4 percent. [ID:nN04433899]
Shares of Agrium rose 3.6 percent to close at C$67.41 on the Toronto Stock Exchange, while those of Potash Corp rose 4 percent to close at C$113.13 on Wednesday.
Shares of U.S. rivals Mosaic (MOS.N) and CF Industries (CF.N) also rose 4.8 percent and 2.2 percent, respectively on the New York Stock Exchange. (Reporting by Euan Rocha in Toronto and Savio D'Souza in Bangalore; Editing by Gopakumar Warrier, John Wallace and Leslie Gevirtz)