UPDATE 4-Potash slump drags on as competition overheats

(Adds Potash Corp CEO and investor comments)

Jan 26 (Reuters) - The deepest slump in a decade for the oversupplied potash fertilizer market may abate only slightly in 2017, major producers say, and could take years to correct due to the imminent startup of new mines.

Canada’s Potash Corp of Saskatchewan Inc , the biggest fertilizer producer, forecast a much less profitable year on Thursday than analysts expected, and reported a surprisingly big drop in quarterly profit.

Potash prices are hovering around their lowest levels since 2007, amid bloated capacity and weakening farm incomes. Adding to miners’ problems, new low-cost mines are scheduled to begin production.

Oversupplied conditions may improve between 2020 and 2022, said Agrium Chief Executive Chuck Magro at a British Columbia investor conference on Wednesday.

Agrium Inc and Potash plan to merge by mid-2017 to cut costs.

“The markets are very, very competitive right now and (the merger) is the only way that we can compete,” Magro said.

Germany’s K+S AG will ramp up production at its Western Canada mine this year, while EuroChem begins mining potash in Russia next year.

“I’ve been trying really hard to find something positive in these fertilizer nutrients,” said Diana Racanelli, portfolio manager at Manulife Asset Management. “It’s really hard to see where price improvement will come just because of all the capacity coming on.”

The merger offers hope, and more industry consolidation is likely, she said.

Potash Corp’s U.S.-listed shares closed down 3 percent at $19.26, dragging down competitors Agrium and Mosaic Co.

Potash Corp forecast earnings of 35 to 55 cents per share in 2017, including merger-related costs of 5 cents per share, and it also flagged concerns for its nitrogen and phosphate businesses. The forecast missed analysts’ average expectation of 62 cents, according to Thomson Reuters I/B/E/S.

The midpoint of Potash’s 2017 forecast, 45 cents, would be its second-lowest profit per share in 13 years.

To be sure, potash prices are weak enough to stimulate demand, and are creeping higher. A “modest recovery” is ahead this year, said Potash CEO Jochen Tilk.

Potash Corp expects 2017 potash sales to rise to between 8.7 million and 9.4 million tonnes, from 8.6 million in 2016.

“We do see signs that things are better,” Tilk said in an interview. Even so, the company will curtail potash production this year.

Potash Corp’s fourth-quarter earnings plunged to $59 million, or 7 cents per share, from $201 million or 24 cents per share a year earlier. (Reporting by Rod Nickel in Winnipeg; additional reporting by John Benny in Bengaluru; Editing by Matthew Lewis and Andrew Hay)