TORONTO (miningweekly.com) – Potash Corporation of Saskatchewan CEO Bill Doyle admitted on Thursday he hasn't had a great record this year in predicting when farmers will return to buying and using crop nutrients, but maintained that the situation as it stands cannot go on for much longer.

The potash industry experienced strong demand and saw profits surge in the early parts of 2008, but the market just about fell off a cliff in the second half as farmers, squeezed by the economic crisis, deferred the use of fertiliser.

Doyle had said earlier in 2009 that he expected demand would return in the second half of the year.

However, demand for potash and Potash Corp's other crop nutrients remains sluggish, and the company reported on Thursday that third quarter sales dropped to $1,1-billion, from  $3,1-billion a year earlier.

“Admittedly, this trough has cut deeper and lasted longer than we initially anticipated,” Doyle said on a conference call.

Still, he asserted that it is a matter of “when” and not “if” demand will return.

For now, fertiliser dealers and farmers are waiting to see if fertiliser prices fall further and, without a compelling reason to rebuild their own stockpiles, they continue to delay purchases.

“And they see higher producer inventories, and have a perception that supply will be readily available when the spring rush begins.”

Market watchers are searching for the event or catalyst that will signal the return to more normal market conditions and Potash Corp, for one, had expected that the potash price settlement between producers and Indian buyers, in July, would prove a turning point, Doyle said.

“But that did not happen.”

However, the ongoing underapplication of fertiliser by farmers is “not agronomically sustainable”, he said, and Potash Corp is predicting that buying will return in early 2010, as farmers prepare for the northern hemisphere spring planting season.

Improving grain prices around the world will likely provide an incentive for farmers to start applying crop nutrients, while China, which is seen as a key driver for the potash market, is under pressure as crop yields are beginning to suffer, Doyle said.

For now, the company is forecasting potash demand in 2010 of 50-million tons, assuming that demand returns early in the year.

“And we think this is going to be a multiple year recovery. It won't be covered off in 2010, you're going to see recovery into 2011, 2012,” Doyle said.

“Because it takes time to get back to trend line, to start refilling that soil base that has been so severely depleted.”

Buyers around the world have also been waiting for Chinese customers to reach a price settlement with producers.

Doyle said he expects that Chinese buyers will be ready to settle potash contracts before the end of this year.

“We know they need it, they know they need it.

“It's just a matter of time, but it won't be long now.”

In an attempt to shore up prices, Potash Corp and other potash producers have curtailed production levels sharply since demand started falling.

The company said last month that nearly 20-million tons of potash production had been taken off-line in the last 12 months.

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