* Q2 EPS $0.62 vs $2.82 year-ago, analysts view $0.69/shr
* Q2 Rev down 67 pct
* Cuts FY EPS forecast to $4-$5
* Sees Q3 EPS $0.80-$1.20 vs. $1.44 estimate
July 23 (Reuters) - Potash Corp of Saskatchewan Inc (POT.TO), the world's biggest fertilizer company, posted a 78 percent drop in second-quarter profit hurt by lower sales volumes and cuts its full year profit forecast as buyers continued to be extremely cautious in the wake of the global economic downturn.
Potash posted second-quarter earnings of $187.1 million or 62 cents a share, down from $905.1 million or $2.82 per share a year ago.
Revenue for the quarter plunged 67 percent to $856 million.
Analysts on average expected the company to earn 69 Canadian cents a share, before items, on revenue of $909.8 million, according to Reuters Estimates.
"We faced the most significant deferral of demand our industry has ever seen, yet remained steadfast in our commitment to operate with a long-term view," CEO Bill Doyle said.
The company also cut its full year earnings per share forecast to a range of $4.00 to $5.00 from its prior view of $7.00 to $8.00 a share. It expects third-quarter earnings to between $0.80 per share $1.20 per share.
Analysts expect the company to earn $5.13 per share for the full year and $1.44 a share for the third quarter, according to Reuters Estimates.
The price of potash -- a key crop nutrient -- has remained stubbornly high even as demand has collapsed, as a small group of companies, which account for roughly 75 percent of global potash supply, have drastically cut production in a bid to maintain pricing.
But, farmers who have been stung by the credit crunch and lower grain prices have opted to defer potash application in the hope that prices will decline. Potash helps enhance water retention in plants, increases crop yields and builds a plants' disease resistance.
The company forecast potash gross margin for 2009 to be between $1.2 billion to $1.5 billion and potash sales volumes to be in the range of 4.5 million tonnes to 5.0 million tonnes.
Potash shares closed at C$97.50 Wednesday on the Toronto Stock Exchange. (Reporting by Chakradhar Adusumilli in Bangalore, Editing by Dinesh Nair)