Canpotex Ltd, the offshore selling agency for leading North American potash miners, has signed a new potash supply contract with Indian buyers at a smaller than expected discount.

The deal to supply India with the crop nutrient for the remainder of 2013 ends a long standoff by Indian buyers that dented profits for producers like Potash Corp of Saskatchewan Inc, one of the miners represented by Canpotex. The standoff caused North American supplies to pile higher than normal. Canpotex also represents Mosaic Co and Agrium Inc.

Canpotex said on Thursday it will sell about 1.1 million tonnes of the crop nutrient to Indian buyers up to January 2014 at a price of $427 per tonne, including costs and freight. The deal is similar to one announced a day earlier by Canpotex rival Belarussian Potash Co (BPC), which will sell 1 million tonnes of potash to Indian buyers at the same time.

The Canpotex-India deal comes at a price that is higher than estimates that averaged $416 per tonne in a Jan. 17 Reuters poll of North American analysts. It is however, believed to be a discount of about 13 percent from the last contract with India, signed in August 2011.

"The closure of this contract and stabilized (demand) until the end of the year is really important," said Rick McLellan, senior vice-president of commercial sales for Mosaic, in an interview. "The Brazil and North American markets are going to be big markets for us, so it's one more piece of momentum for the overall potash market."

Mosaic makes up a little over 40 percent of Canpotex's potash product.

Canpotex did not identify the buyers, but key Indian potash users include Indian Farmers Fertiliser Cooperative, Coromandel International, Tata Chemicals and Zuari Global.

The deal is positive for potash markets, said analyst Steve Hansen of Raymond James. It confirms that potash prices hit a floor with the lower-priced Canpotex deal with China at the end of December, and should help draw down producers' inventories, he said.

New supply contracts with China and India, top consumers of the crop nutrient, were initially expected by late summer. Canpotex announced a new six-month supply contract with China's
Sinofert Holdings Ltd on Dec. 31 to sell 1 million tonnes of potash at an estimated $400 per tonne. 

The deal with India gives Canpotex producers a slightly better net return per potash shipment than the China contract, McLellan said, after accounting for factors like higher transportation costs to India.

"The need to move the volume was there and this was a good price," he said. "We've established a lower price and there's probably upside from here in the spot markets."

Potash contracts with China and India typically set a floor for global prices, with spot buyers like Brazil paying a premium.