Belarus has agreed to sell potash to India at the lowest price in a decade and about a third less than last year's level as global supplies of the crop nutrient exceed demand.
One of India's biggest fertilizer importers, Indian Potash Limited (IPL), will buy 700,000 tonnes of potash at $227 per tonne on a cost and freight (CFR) basis with a credit period of 180 days, Belarusian Potash Company, Belarus's state-controlled trader of this fertilizer, said in a statement on Monday.
Belarus' contract price is likely to become the benchmark for other suppliers to India, such as Russia's Uralkali and North American trading group Canpotex Ltd, owned by Potash Corp of Saskatchewan , Mosaic Co and Agrium Inc.
Interfax news agency cited a Uralkali spokesperson as saying a price of $227 per tonne was too low and the company was not yet ready to sign a contract with India.
Shares for Mosaic and Potash were down 7 and 6 percent respectively in New York at 1640 GMT, while Agrium, which also has a large farm retail business, slipped 2 percent.
The Toronto Stock Exchange's materials group, which includes precious and base metals miners and fertilizer companies, was down 1 percent.
India and China, the world's biggest fertilizer consumers, usually sign contracts earlier in the year. This year, deals were delayed as high stocks held by farmers meant there was no rush to agree a deal.
India's deal is a rare instance of the country signing a potash supply contract with a major producer before China.
"It remains to be seen if this contract will spur better volume/prices in other global markets, though it should set floor prices for the next months in some of those markets," BMO analyst Joel Jackson said in a note.
Indian buyers confirmed the contract signing. The price is sharply down from last year's price of $332.
IPL said it would pass on part of the benefits from lower import prices to farmers by slashing the retail price of potash by 4,000 rupees per tonne ($59).
An Indian fertilizer company official, who was not authorized to speak publicly, said lower prices and favorable rainfall for crops could boost potash consumption this year.
The contract price is fair and reflects the current conditions in the global potash market, Elena Kudryavets, director general of Belarusian Potash Company, said in a statement.
"The contract reflects the interests of producers, importers and consumers of potash fertilizers," she added.