Dec. 9 (Bloomberg) -- Potash Corp. of Saskatchewan Inc., the world’s largest crop-nutrient producer, said it will cut 2009 potash output by 2 million metric tons beginning in January.

The reduction for the year is necessary because of “a short-term” decline in demand, Saskatoon, Saskatchewan-based Potash Corp. said today on its Web site. The company produced about 10 million tons last year.

Crop prices have plunged from records in June and July as the global financial crisis curbs demand for food, animal feed and fuel, reducing farmers’ incentive to buy fertilizer to boost yields. Potash Corp.’s announcement comes less than a month after OAO Uralkali, Russia’s second-largest producer of the commodity, said it would cut output.

“Potash Corp. has long made the calculus that what it can lose on volumes it can more than make up on prices,” Raymond Goldie, an analyst at Salman Partners Inc. in Toronto, said today in a phone interview. “Potash is unique among commodities in recent months in that it has gone, or stayed, at record prices. And the folks at Potash Corp. want to ensure that.”

Global potash producers are continuing negotiations with China on prices and volumes for 2009. Potash Corp., Mosaic Co. and Agrium Inc. negotiate through Canpotex Ltd., their joint international marketing unit.

Bill Johnson, a Potash Corp. spokesman, declined to provide the company’s current potash production capacity.

Potash Corp. rose C$1.21, or 1.6 percent, to C$78.20 at 4:11 p.m. in Toronto Stock Exchange trading. The shares have dropped 46 percent this year.

Weak Demand

Potash Corp. expects demand for the commodity will be weak through the first quarter, Chief Executive Officer Bill Doyle said in the statement.

“Beyond this, we see demand accelerating through the balance of the year as farmers deplete existing stocks and work to rebuild global grain inventories from extremely low levels,” Doyle said.

Potash for delivery to Southeast Asia, including the cost of freight, has remained at more than $900 a ton since rising to a record in July, according to prices published by ICIS-LOR.

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

Last Updated: December 9, 2008 17:57 EST