December 10, 2008 / 5:16 PM / in 9 years

Potash Corp, Agrium shares rise on output cuts

TORONTO, Dec 10 (Reuters) - Shares of Agrium Inc (AGU.TO) and Potash Corp of Saskatchewan (POT.TO), two of the world’s top fertilizer producers, jumped on Wednesday, a day after both Canadian companies cut production at some of their facilities.

Agrium Inc (AGU.TO) said on Tuesday it planned to curtail production at a number of its North American nitrogen operations, but said it still expected earnings per share for the second half of 2008 to be within its previously announced range.

Potash Corp of Saskatchewan (POT.TO), the world’s biggest fertilizer producer, said it will reduce 2009 potash output by 2 million tonnes, or about 20 percent, due to slackening demand as farmers feel the heat of the global financial crisis.

Nitrogen and potash are major crop nutrients.

Potash Corp’s shares were up 6.2 percent at C$82.92. Agrium shares gained 4.9 percent to C$36.59.

“The action is quite drastic and quite significant in the sense of how proactive they have become to adjust their numbers to the market conditions,” said Terry Ortslan, at TSO and Associates in Montreal.

“The key message is that they are still price driven and not volume driven.”

Agrium, the world’s third-largest nitrogen producer, blamed falling nutrient and crop prices since early November and the deferral of wholesale nutrient purchases for the moves.

It said it still expected earnings per share for the second half of 2008 to be between $3.30 and $4.00.

Agrium and Potash Corp of Saskatchewan have long expected a slower fourth quarter and early 2009 as farmers delay their fertilizing plans due to the economic slowdown.

Potash Corp said on Tuesday it will produce less potash in the first quarter of the coming year due to a short-term lag in global demand

The company produced 9.4 million tonnes of potash in 2007 and has the capacity to produce 10 million tonnes.

Fertilizer prices soared in the first half of 2008 on the back of booming demand, tight inventories and record grain prices. However, the credit crisis and the global economic slowdown have weighed on the agricultural sector and grain prices have collapsed, after having peaked around mid-year.

“If you look at where they’ve come from in a short period of time, nothing ever goes in a straight line,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario. “There’s a lot of people who believe that the agricultural complex, on a long term basis, is still a very attractive and a very desirable place to be.” ($1=$1.26 Canadian) (Reporting by Scott Anderson, additional reporting by Jennifer Kwan; editing by Peter Galloway)

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