SASKATOON - Potash Corp. of Saskatchewan Inc. (TSX:POT) more than tripled its second-quarter earnings and raised its full-year profit guidance Thursday amid strong demand and pricing in a global agriculture boom.

The Saskatoon-based company said it earned $905.1 million for the three months ended June 30, up 220 per cent from $285.7 million in the second quarter of last year.

The world's biggest producer of crop nutrients said its April-June sales almost doubled over a year ago, to $2.62 billion from $1.35 billion, which "reflects rising global fertilizer demand and the impact of significantly higher prices for potash, nitrogen and phosphate products."

Earnings per share blossomed to $2.82 from 88 cents, 62 per cent above the company's previous record profit in the first quarter of this year.

PotashCorp raised its full-year net income guidance to between $12 and $13 per share, from a previous forecast of $9.50 to $10.50. Profit in the current third quarter is expected to swell to between $3.25 and $3.75 per share.

"The long-term fundamentals that underpin our success are very clear and show no signs of abating," CEO Bill Doyle said during a conference call with analysts.

"China, India and other developing countries continue to gain economic strength and their people increasingly want to buy more food and better food. For farmers to increase grain production, they must optimize their use of fertilizer. "

PotashCorp, which recently announced a $250-per-ton price increase for potash in North America, is "in a sold-out volume position and will continue to ship to North American and offshore customers on an allocation basis" for the rest of the year.

Quarterly potash gross margin was $886.4 million, up 240 per cent from $260.4 million last year on rising prices. Quarterly potash sales volumes of 2.7 million tonnes were the second-highest in the company's history, trailing only last year's second quarter.

Sam Kanes, an analyst with Scotia Capital, downgraded PotashCorp and fellow fertilizer producer Agrium Inc. (TSX:AGU) in an industry commentary Thursday, saying higher prices could erode demand.

"We are now downgrading both stocks due to rising fertilizer demand destruction risks as fertilizer prices soar and food prices recede," Kanes wrote in a note to clients.

"China urea export tariffs shrinking, narrower U.S. farmer margins, capping food for fuel programs, possible changes in futures trading regulations and a major oil price correction also negatively weigh."

But Doyle said he wasn't expecting an impact.

"Higher potash prices have not had an impact on demand, as farmers recognize they still generate significant returns on their potash investment," he said.

Some of the expanded grain output is being used to boost the food supply but much is being diverted to produce biofuels such as ethanol, especially in the United States.

The company's nitrogen segment posted a gross margin of $210 million in the quarter, up 46 per cent from the same period last year, also boosted by high prices and heavy global agricultural demand.

The phosphate division netted a record $340.9 million, 252 per cent higher than last year.

"Our cash flow and EBITDA each topped $1 billion for the quarter, giving us tremendous flexibility in preparing for the future needs for fertilizer from the world's farming community," Doyle said.

"We see the potential that this holds and believe the records we are setting today are only the beginning."

PotashCorp, which recently announced plans for major expansion of its Saskatchewan potash mining capacity, said capital spending for 2008 is expected to total $1.4 billion.

PotashCorp shares closed at $196.85, down $5.38 or almost three per cent, in a severely negative overall TSX session that saw the market drop more than 300 points on the day.

PotashCorp stock was off from last month's peak of $246.29 but up from the $77 level a year ago.

Meanwhile shares of Calgary-based Agrium fell $7.47, or 8.2 per cent, to close at $83.75.

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