April 23 (Bloomberg) -- Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, said 2009 profit will be less than it previously expected after North American sales of the crop nutrient reached “a virtual halt.”

Earnings this year will be $7 to $8 a share, Saskatoon, Saskatchewan-based Potash Corp. said today in a statement. That’s less than the $10 to $12 a share the company forecast in January and trails the $9.33 average estimate of 14 analysts surveyed by Bloomberg.

Chief Executive Officer Bill Doyle temporarily shut down some mines as demand declined, causing the company’s average potash price in North America to more than double to $639.91 a metric ton in the quarter. North American sales volumes of the form of potassium fell 86 percent from a year earlier, and shipments overseas plunged 78 percent.

“In North America, potash fertilizer sales ground to a virtual halt as farmers seemed to expect a price decline similar to those in nitrogen and phosphate fertilizers,” Potash said today in its first-quarter earnings statement.

First-quarter net income fell 46 percent to $308.3 million, or $1.02 a share, from $566 million, or $1.74, a year earlier, Potash said. Excluding a tax benefit, profit was 47 cents a share. The average estimate of analysts surveyed by Bloomberg was for profit excluding items of 82 cents. Sales dropped 51 percent to $922.5 million.

Potash Corp. fell C$2.91, or 2.9 percent, to C$97.49 at 4:16 p.m. in Toronto Stock Exchange trading. The shares have dropped 53 percent in the past year.

Farmer Demand

Prices for corn, wheat and soybeans all plummeted from record highs last year, reducing growers’ incentive to boost yields.

“The potash companies are cutting production to prop up their prices, and we’re cutting our usage to bring them down,” David Kruse, president of CommStock Investment Inc. in Royal, Iowa, and a grower of corn and soybeans on 640 acres, said before the results were released. “It’s a battle.”

While the company’s potash prices were higher in the first quarter, solid phosphates fell 48 percent to $342.75 a ton, and the average price of ammonia and other nitrogen-based products slid 40 percent to $226.69.

North American farmers are on pace to reduce fertilizer use to levels from the 1982-1983 growing season despite planting 37 million more acres of corn and soybeans, the company said.

“This scenario is unprecedented in magnitude and unpredictable in consequences,” the company said.

Profit Forecast

Doyle said reduced fertilizer use is contributing to lower crop yields in Brazil and Argentina and may lead to a “grain crisis” as the world emerges from recession.

“You could see dramatically higher grain prices going into this fall,” he said on a call with investors and analysts.

“A dangerous game is now unfolding around the world,” Doyle said.

Second-quarter profit will be $1.10 to $1.50 a share, Potash Corp. said today. The average analyst estimate was $2 a share.

The company, which produced about 8.7 million metric tons of potash last year, said in December it aims to reduce output by about 2 million tons because of a “short-term” decline in demand.

Shipment Forecast

Total potash shipments this year will be about 6 million tons, or about 30 percent less than last year. The gross-profit margin on potash will be $2.5 billion to $3 billion this year.

Bunge Ltd., the world’s largest oilseed processor, reported a $195 million net loss today, its second straight. The company’s fertilizer unit posted a $262 million loss after a $133 million profit a year earlier.

Global potash producers are positioning for negotiations with China on prices and volumes for 2009. The talks, led by Belarusian Potash Co., the world’s largest trader of the commodity, probably will be finished in the current quarter, Potash said today.

Potash, Mosaic Co. and Agrium Inc. negotiate through Canpotex Ltd., their joint international-marketing unit.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

Last Updated: April 23, 2009 16:34 EDT