Agrium forecast an accelerating recovery in potash sales, fuelled by an end to a period of farm scrimping on fertilizers which helped drive earnings down 42% in the second quarter.

The Canadian group, North America's third-ranked fertilizer producer, said that last month's potash industry supply deals with India, while priced "significantly" below 2008 levels, had cleared the way for a rise in demand.

The deals had "provided additional clarity on prices to the market", Agrium said.

"As a result, demand is expected to improve in the second half of 2009 and rebound strongly in 2010."

'Nutrient deficiencies'

The recovery would also reflect a period of "catch up" by farmers, who have slashed fertilizer applications over the last year, a reflection of lower crop price and, in some parts of North America, heavy rains which prevented machinery getting on to fields.

"The significant reduction in global fertilizer use this past year… could result in potential nutrient deficiencies for 2010-11, which could lead to higher than normal application rates starting this fall," Agrium said.

Mike Wilson, the Agrium chief executive, added: "The outlook for our businesses and products remains strong and we are starting to see signs of improving demand fundamentals."

However, the group declined to estimate second-half earnings, saying it would issue its next profits estimates with its third quarter results.

Market reaction

In the April-to-June period, earnings slid to $370m, or $2.35 a share, from $636m a year before, reflecting declines in profitability of both retail and wholesale divisions.

Nonetheless, the data beat analysts' forecasts of a $1.83-a-share result. Revenues up 5.0% at $4.14bn, helped by acquisitions, also beat expectations.