* Potash marketing consortium inks 6-month supply contract
* India to buy fertilizer at average price of $500 a tonne (Adds details on contract, analyst comments; in U.S. dollars)
By Euan Rocha
TORONTO, Aug 3 (Reuters) - Potash marketing consortium Canpotex has signed a six-month contract to sell potash to India at an average price of $500 a tonne, the long-delayed settlement could tighten potash markets further and push the price of the crop nutrient higher in coming months.
Canpotex, jointly owned by fertilizer producers Potash Corp (POT.TO), Mosaic Co (MOS.N) and Agrium Inc (AGU.TO), has agreed to sell just under 700,000 tonnes of potash to Indian buyers, Agrium Chief Executive Mike Wilson said on Wednesday.
The new contract spans the fourth quarter of 2011 and first quarter of 2012, with volumes split equally in both periods, Wilson said.
While fourth-quarter volumes have been priced at $470 a tonne, in line with a recent settlement with Chinese buyers, the first-quarter volumes have been priced at $530 a tonne.
“The volumes from Canpotex were slightly lower than expected, but the log-jam is done and the market can move forward,” said Gleacher & Co analyst Edlain Rodriguez.
The contracts with Chinese and Indian buyers are closely followed by the market, as international spot market prices typically get pegged at a premium to these contracts.
Talks between India and Canpotex had recently stalled, as Indian buyers were unwilling to concede to a 35 percent price increase over the 2010 contract and they did not want to pay a premium to the Chinese contract price.
“This way, both sides get to save face a little bit, and at the end of the day the producers did get the price they wanted,” said Rodriguez.
The price of the crop nutrient has risen sharply this year after plummeting in the aftermath of the economic downturn.
Analysts believe the already tight potash market could get even tighter, especially since the latest data indicated that North American inventories at the producer level in June were 26 percent below the prior five-year average.
Potash emerged from obscurity a few years ago when high grain prices, tight supplies and strong demand drove prices above $1,000 a tonne from below $150.
Prices retreated after the downturn to about $350 a tonne as farmers, hit by the credit crisis and falling grain prices, reined in their use of the fertilizer.
However, the rebound in grain prices over the last year has once again stoked demand for potash and other crop nutrients.
Wilson indicated that Canpotex settled with Indian buyers ahead of a settlement with its Russian counterpart BPC.
BPC, or Belarussian Potash Co, is the export arm of potash producers Uralkali and Belaruskali. Canpotex and BPC together account for more than 60 percent of global potash exports. (Reporting by Euan Rocha; editing by Janet Guttsman and Rob Wilson)