By Leia Michele Toovey-Exclusive to Potash Investing News ^[1]

^[2]Slow demand, and high inventories have prompted potash producers to issue further output cuts. Late Tuesday, Potash Corp of Saskatchewan ^[3] ( NYSE: POT), the world's largest potash producer, said that it will reduce its potash output because of low demand; the following day, producer K+S Ag announced that it expects "further significant reductions" to its 2009 outlook. As a result, share values of potash producers tumbled.

On Thursday, some of the losses corrected themselves.  Monsanto Co ^[4] (NYSE: MON) hit $82.65, a gain of almost $1.57 after a smaller drop the day before. Monsanto is a diversified company; therefore its share values did not take as much as a hit. Potash Corp. of Saskatchewan, Inc. hit $96.43, a gain of $0.57 after falling by more than $11.00 on Wednesday. Mosaic Co. (NYSE: MOS) traded at $46.50, a gain of $0.25 after falling almost $5.00 Wednesday.  Intrepid Potash, Inc. (NYSE: IPI) traded at $27.00, up $0.67 after Wednesday's drop of more than $2.60. Agrium inc. ^[5] (NYSE: AGU) shares were down $0.88 at $41.91 on Thursday after falling by more than $3.00 Wednesday.  CF Industries Holdings, Inc. (NYSE: CF) was down only $0.18 with its shares at $74.30, and that is after shares fell by more than $4.00 on Wednesday.

Despite low demand, potash prices are anticipated to slowly increase over the coming months as energy markets rebound.  "The ag sector as a whole does seem to be a bit in recovery mode...I would expect fertilizer usage to rise a bit from recent lows and that should help support prices somewhat," said Kona Haque, commodity strategist with Macquarie Bank, adding that  credit concerns would continue to limit purchases in some major agricultural producers including Brazil. Ken Bowler, marketing manager for British fertilizer supplier GrowHow, said signs of strength in energy markets could give fertilizer prices a lift." This time last year everything was rising at a very steep rate. This year, things are looking a lot flatter but there is still upside because energy prices are rising," he added.

According to Bill Johnson, a Potash Corp. spokesman, the company decided to cut production because sales are still soft and inventory levels are high. Johnson said a number of factors are contributing to the lagging demand, including an extremely slow U.S. spring season and extended negotiations with offshore buyers. Johnson said Potash Corp. expects demand will recover as farmers who have delayed using potash-based fertilizers come back to the market. He said the company could pick up production "very quickly" to meet any increase in demand.

Potash Corp. of Saskatchewan has been trying to nail down contracts with China, but recently announced that they may resort to selling fertilizer to China on the spot market instead of negotiating a long-term contract, if the two sides can't renew a three-year supply deal that expires soon. "We are in the third and final year of our contract with the Chinese and at the Canpotex board meeting in the fall we'll decide whether or not we have another contract," claims CEO Bill Doyle.  "We may go to spot and for moral reasons more than anything else, just to take some of the speculation out of the business."  Canadian fertilizer companies such as Potash Corp., Agrium Inc. of Calgary and Mosaic Canada have long negotiated long-term deals through marketing company Canpotex Inc. with buyers in China and India.