Desperate for fertilizer to increase crop yields amid a looming global food crisis, China agreed to pay more than three times as much for potash as it did last year, launching Potash Corp. of Saskatchewan to a record stock price and within spitting distance of becoming Canada's largest publicly traded company.

The unprecedented contract with China spurred a 5.5-per-cent increase in Potash Corp. shares on the Toronto Stock Exchange, increasing the Saskatoon-based company's market capitalization to nearly $63-billion.

The rise bolstered the dominance of resource stocks on the Canadian market, pushing Potash Corp.'s worth above financial services stalwarts Royal Bank of Canada and Manulife Financial and into second place behind oil and gas giant EnCana Corp. , which boasts a market value of $63.8-billion.

“We've moved up the TSX quite quietly,” said Potash Corp. spokeswoman Rhonda Speiss.

The company's stock has gained 186 per cent in the past year on the strength of an international agriculture boom driven by increased consumption of meat in the developing world.

Demand for potash, a key component of fertilizer, has outstripped supply.

Although China is the world's largest potash buyer, consuming roughly eight million tonnes a year, it had little leverage in this year's price negotiations and was forced to swallow an increase of $400 (U.S.) a tonne.

The 2008 contract, signed with Canpotex Ltd., the marketing company owned by Canada's top potash miners, including Potash Corp., calls for China to pay $576 a tonne for potash, compared with the $176 it paid in 2007. The price does not include shipping costs.

The deal will do little to quell fears of a potential global food shortage due to skyrocketing prices for wheat, rice and other grains.

“Significantly higher potash prices and extraordinarily tight supply have become much more firmly entrenched since China's previous contract was signed 14 months ago,” Potash Corp. president and chief executive officer Bill Doyle said in a statement. “With the intense pressure on global food production and continued growth in potash demand, this is the reality for our industry for the foreseeable future.”

The rise in potash prices could see the company, which posted record profit of $1.1-billion in 2007, double that this year to above $2-billion.

Two weeks ago, Canpotex said it bumped up prices for sales to Brazil and Southeast Asia to about $750 a tonne, including shipping, marking hikes of 40 per cent for Southeast Asia and 85 per cent for the South American nation. This followed a 130-per-cent price increase to about $625 a tonne for 1.325 million tonnes, in a one-year contract with India, again including shipping.

India has typically waited for China to negotiate a contract and then followed up, said Richard Downey, a spokesman for Calgary's Agrium Inc., another Canadian potash producer and part owner of Canpotex. This time, however, the Indians moved first, pipping the Chinese at the post.

“It was probably a combination of needing the product earlier and … I think they learned it was probably in their best interests, because if they had waited until now, prices would probably have been higher,” Mr. Downey said.

The record $400 increase with China compares with a hike of just $5 a tonne last year and was much higher than analysts expected.

“This is by far the largest potash price increase for China and exceeds our most recent forecast of a $300 … increase,” analyst David Silver at JPMorgan in New York said in a note.

Mr. Silver estimated the delivered price to China at about $665 a tonne, or about $40 more a tonne than the Indian price. “This would be the first time in memory that China has paid a higher price than that paid by Indian buyers,” he said.

Potash Corp. said that because of “unprecedented demand” in other markets, Canpotex has prorated volumes destined for China and has allocated “only one million tonnes” to the Chinese buyer Sinofert Holdings Ltd. for the balance of this year. The Canadian company owns 20 per cent of Sinofert, which is China's largest fertilizer distributor, and also a producer.

Last year, Canpotex shipped 2.5 million tonnes of fertilizer to China, of which Potash Corp. accounted for 55 per cent or nearly 1.4 million tonnes, Ms. Speiss said.

China was Potash Corp.'s second-largest offshore customer in 2007, accounting for 23 per cent of its total offshore shipments, she said. Brazil was the largest, with 24 per cent.

The potash price increases come amid soaring food prices that have spawned riots and unrest around the world. Kazakhstan banned wheat exports Monday and Indonesia banned exports of rice, as prices for these vital commodities climbed again.