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* Shares up sharply in early trading
* Potash fundamentals, contract settlement seen bullish
* Other fertilizer stocks also rise (Recasts, adds analyst's' comments and share prices. In U.S. dollars unless noted)
WINNIPEG, Manitoba, Jan 5 (Reuters) - Shares in several major North American potash producers jumped on Tuesday after Credit Suisse upgraded its rating on Potash Corp of Saskatchewan Inc (POT.TO) shares to "outperform".
Credit Suisse said China's recent deal to buy potash at $350 per tonne should benefit Potash Corp and other producers of the soil nutrient in the long term. It also upgraded Intrepid Potash Inc (IPI.N) to "neutral" from "underperform".
Last month, Belarussian Potash Company, or BPC, a major potash exporter based in Minsk, agreed to sell more than 1 million tonnes of potash to China at $350 a tonne in a deal that was widely expected to help restore demand for the fertilizer worldwide.
"We expect improved pricing visibility, favorable farmer economics, and the now-attractive price of potash relative to corn should drive solid demand recovery," the brokerage said in a note to clients.
Credit Suisse also said the Chinese contract settlement provided a long awaited price floor that should improve fundamentals in the sector.
Shares of Potash Corp, the world's biggest producer of the fertilizer nutrient, were up 4.8 percent to C$122.30 on the Toronto Stock Exchange and up 5 percent to $117.90 in New York.
Shares of Intrepid Potash rose more than 3 percent to $31.41 in New York.
The surge in share prices is due to the Credit Suisse upgrade of Potash to "outperform" from "neutral" and general bullishness about fundamentals, said Edlain Rodriguez, an analyst at New York-based Broadpoint Gleacher Inc.
"2010 fundamentals should improve significantly and I think that's giving people more confidence as we get into the seasonally strong spring," he said in an interview.
Other major North American potash producers also traded higher. Agrium (AGU.TO) (AGU.N) was up 3.4 per cent at C$67.77 in Toronto and 4 percent higher at $65.34 in New York, while Mosaic Co's (MOS.N) shares gained 2.5 percent to $63.26 in New York.
The rise in fertilizer stocks isn't limited to potash. Shares in Terra Industries TRA.N, a nitrogen producer, were up 3.8 percent to $34.82 in New York.
Price settlement with China, one of the world's major potash consumers, was eagerly awaited because it is seen as an industry benchmark. China has not yet agreed to terms with Canpotex, an export marketing agency for major Canadian producers.
BPC's deal with China had led Potash Corp to cut prices on Dec. 28, which pushed its shares down 2.2 percent the following day in Toronto.
$1=$1.04 Canadian Reporting by Koustav Samanta in Bangalore and Rod Nickel in Winnipeg, editing by Peter Galloway