UPDATE 2-Potash strike set to pinch tight world supplies

(Adds details, comments from company, updates share price.)

By Roberta Rampton

WINNIPEG, Manitoba, Aug 8 (Reuters) - A lengthy strike at three potash mines owned by the world's largest fertilizer producer, Potash Corp of Saskatchewan (POT.TO), could mean shortages and spiking prices in a market that is already too tight for comfort, analysts said on Friday.

About 500 workers at the Canadian mines walked off the job on Thursday night after mediated contract talks between Potash Corp and the United Steelworkers failed. Wages have been the major issue.

"There is virtually no slack in the international potash market," said Barrie Bain, director of prominent fertilizer consultancy Fertecon Ltd, in an e-mail interview.

The three mines represent 18 percent of Canadian capacity and 6 percent of world capacity, he said. As the autumn fertilizer application season approaches, supply problems could develop if the dispute is not resolved, he added.

Prices for potash, one of three nutrients farmers apply to their soil to boost plant yields, shot to a record $1,000 a tonne last month. Miners are essentially sold out of the mineral at a time when world food shortages have pushed grain prices to new highs.

As of Friday, prices for potash had not yet been directly affected by the strike, but suppliers may be cautious about making forward sales because of the uncertainty, Bain said.

When a Russian competitor's shipments were threatened by a sinkhole last year, producers including Potash Corp stopped selling and prices shot up, even though supplies were not ultimately disrupted, noted Morningstar analyst Ben Johnson.

"So, if we do have some sort of even short-term disruption to the supply side, I wouldn't be surprised to see people opportunistically pushing spot prices higher," he said.

MAY PUSH UP CORN PRICES

The strike comes as farmers in the United States -- the world's top exporter of corn, soybeans and wheat -- have begun locking in fertilizer supplies and prices for next spring.

Grain traders at the Chicago Board of Trade said the strike could support corn prices if it dragged on for a long time.

A lengthy work stoppage could affect export shipments from Canpotex, which sells potash from Potash Corp, Mosaic Co (MOS.N) and Agrium Inc (AGU.TO) to Brazil, China, India, and other Asian markets, Fertecon's Bain said.

But a spokesman for Potash Corp said it was too soon to tell whether Canpotex exports would be affected.

Potash stock was down C$7.12, or 3.8 percent, at C$181.87 late Friday afternoon on the Toronto Stock Exchange.