A dramatic buildup in North American potash inventories is largely due to a lack of sales to India, but the situation will not last long term, the CEO of Agrium said on Friday.

Stockpiles of potassium chloride - a key crop nutrient more commonly known as potash - climbed last month to 3 million tons, up 3.9% from April and up 4% from the five-year average, according to data released by Potash Corporation of Saskatchewan on Thursday.

"I think it's just reflecting India not pulling (potash)," Agrium CEO Mike Wilson told Reuters in an interview. "Once India starts to pull, and assuming we settle with China, everything should be fine."

Agrium, based in Calgary, Alberta, is a major producer of nitrogen and potash fertilizers, and is the largest U.S. retail seller of products like seed, chemicals and fertilizer to farmers.

India is one of the biggest consumers of potash, and a new sales contract through Canpotex - the Canadian potash export consortium owned by Potash, Mosaic and Agrium - should happen in August or September, Wilson said.

China is the world's biggest user of potash, and Canpotex's contract with Sinofert Holdings runs through the second quarter of 2012.

India and China buy Canadian potash through contracts renewed roughly annually, unlike other users, including Brazil, which buy on the spot market.

A nearly week-long rail strike by Canadian Pacific Railway, which hampered the movement of potash from mines in the Canadian province of Saskatchewan to ports, also contributed to the buildup, Wilson said.

He also said there may be two or three new potash mines built in Saskatchewan by 2020, out of a number of projects that are in the works.

"You've got two people talking, and a whole bunch of juniors who in essence don't have the financial capability or technical capability to build," Wilson said from Calgary. "New mines? Maybe two, possibly three.

"As people go along, they find out that these are not cheap."

BHP Billiton has started site work on what would be the world's biggest potash mine at Jansen, Saskatchewan, but some in the industry have speculated that the project could be delayed.

Germany's K+S, the world's fifth-largest potash producer by capacity, is scheduled to break ground next week on a new mine near Bethune, Saskatchewan.

Agrium pending purchase stokes concerns

Agrium looks to buy more than 200 Canadian farm retail outlets and a stake in the Canadian Fertilizers Limited nitrogen plant in Alberta, as Glencore International moves to take over grain handler Viterra and sell off some pieces.

Glencore's takeover of Viterra could close in July or August, Wilson said, pending the Canadian government's approval.

Canada's Competition Bureau is reviewing Agrium's purchase of Viterra assets, with some farmers saying it would control too much of Canada's nitrogen production and farm retail sales.

Given plans for expanded nitrogen capacity by competitors, including Yara International, Agrium may actually become less dominant, Wilson said.

"If anything, the competitive picture is changing so rapidly on nitrogen that our position will likely be less."

Commodities, and shares of fertilizer companies by association, have fallen sharply at times recently as investors bailed on riskier assets due to fears about the euro zone economic crisis.

But even though Agrium's shares have been volatile, its fundamentals remain strong, Wilson said.

Growing populations in China and India are moving to a better diet, driving up demand for food and fertilizer and giving farmers more money to spend.

A record-large U.S. corn crop this autumn could weigh down corn prices, but it is unlikely to deter farmers from planting plenty of corn again next year, and applying fertilizer to maximize yields, Wilson said.

The price of U.S. corn could fall sharply from its current level of more than $5 per bushel for the next harvest, and still leave farmers in good shape, he said.

"We did the math and at $3.60 with today's fertilizer prices, the farmer makes his historic average margin. It will squeeze the farmer, but they'll still use (fertilizer)."