UPDATE 1-CF support for Agrium bid drops, offer extended

* About 21 percent of CF shares tendered

* Agrium extends offer

NEW YORK, July 20 (Reuters) - Agrium Inc (AGU.N)(AGU.TO) said on Monday shareholder support for its hostile bid for rival fertilizer maker CF Industries Holdings Inc (CF.N) has dropped, but the company remained committed to the deal and extended its bid.

Only about 21 percent of CF Industries shares had been tendered and not withdrawn by investors as of Friday, Agrium said. That was down from around 62 percent of the CF shares that were tendered late last month, when Agrium threatened to pull its bid if it did not receive adequate support.

Although a majority of CF shareholders tendered their shares in that offer, CF has a poison pill and other defense mechanisms in place that would have prevented Agrium from being able to complete the deal.

Agrium extended the tender offer until Aug. 19.

Agrium, a Canadian company, originally proposed to take over smaller U.S. rival CF in February and has twice sweetened its offer. It missed a deadline to put a slate of directors up for election at CF's annual meeting earlier this year, a move that would have given Agrium more leverage in the deal.

It is currently offering $40 in cash and one common share for each CF share, which would currently give CF shareholders a more than 10 percent premium for their shares.

CF has repeatedly rejected Agrium's overtures, contending the offer substantially undervalues the company. CF is locked in its own hostile takeover bid for Terra Industries Inc TRA.N and has characterized Agrium's bid as an attempt to scuttle that deal.

"Agrium has shown by extending its clearly inadequate offer that it is more interested in trying to create a distraction than in making a compelling bid," CF said in a statement.

CF shares were down 11 cents at $72.87 in early afternoon trading, while Agrium's U.S. shares were up 14 cents, or 0.3 percent, at $40.78 on the New York Stock Exchange. (Reporting by Michael Erman)