(Potash item updated for analyst commentary and Potash stock-price movement.)

NEW YORK ( TheStreet) -- Investors bid up shares of Potash Corp. of Saskatchewan ( POT) Friday, after the company shocked the market by hiking its profit outlook for the first quarter.

Potash, which had spent the better part of 2009 issuing profit warnings and tamping down expectations as prices for its core product cratered, appeared to validate feelings among agricultural watchers that demand from farmers for potash fertilizer has started to recover in earnest.

"It's a huge positive. It just tells you that the potash market is much stronger than people expected," said Edlain Rodriguez, a fertilizer-stock analyst at Broadpoint Gleacher.

Shares of Potash Corp., North America's largest producer of the nutrient, were changing hands Friday morning at $124.50, up $7.57, or 6.5% -- which would be close to the stock's 52-week high, set in January. Potash Corp. volume was a torrid 8.5 million shares, already surpassing the stock's daily average turnover of 6.9 million.

Said Potash boss Bill Doyle in a statement, "While we know that growth does not follow a straight upward line, we believe the increase in potash sales volumes this quarter represents the beginning of a return to long-term growth in demand."

Some investors had worried that farmers would continue to hold off on buying potash fertilizers again in the 2010 planting season, and that prices for the potassium-based plant-growth booster would remain weak.

But firm corn prices -- the December 2010 corn-futures contract, the most widely watched, was approaching $4 a bushel Friday -- will likely give farmers enough fiscal confidence to replenish their potash supplies this year, Rodriguez said. Any price above $3.50 a bushel is thought to be "very constructive" for North American farmers.

Meanwhile, after a long recession-induced slide during 2009, it appears that global prices for potash have bottomed. Friday morning, as expected, the big Russian potash-marketing consortium, BPC, agreed to a contract price with India to sell potash to distributors there for $370 a ton -- $20 more than the prices agreed to with buyers in China late last year and last month.

In North America, as the spring planting season approaches, agriculture pros expect potash prices to reach more than $400 a ton.

That's still far less than the $1,000 a ton fetched by the nutrient at the peak of the boom, but analysts and investors are apparently betting that the long-awaited bounce in potash prices has arrived, which would usher in another cycle of stair-step profit-guidance revisions by potash producers. "That always gets people excited," Rodriguez said.

All the optimism comes a little more than two months after Potash spooked the market by issuing first-quarter and 2010 financial forecasts far below what Wall Street analysts had expected. But that warning, which the company included in its fourth-quarter report on Jan. 28, appeared to have a cathartic effect, resetting what some observers believed had been unrealistically bullish expectations for potash prices this year.

After Thursday's market close, Potash said it now foresees first-quarter earnings of $1.30 to $1.50 a share -- much higher than the scaled-back targets (70 cents to $1.00 a share) the company told the market to expect in January. Evidently, new evidence from its customers suggested to Potash that it had gone too pessimistic with its earlier predictions.

Potash also said it expects to take in "record" sales volumes in North America in the first quarter.

Other fertilizer companies were popping early Friday on the buoyant news out of Saskatchewan. Shares of Mosaic ( MOS), the U.S.'s biggest potash miner, jumped 6.4% in morning trading to $63.75.

Intrepid Potash ( IPI) shares were surging 8% to $30.73.

Shares of Agrium ( AGU), which also made news Thursday evening by giving up its yearlong pursuit of rival fertilizer producer CF Industries ( CF), were up 7.5% to $71.77.

-- Written by Scott Eden in New York


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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.

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