The following discussion and analysis is the responsibility of management and is as of May 7, 2009. The Board of Directors carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves, pursuant to the authority delegated to it by the Board of Directors, this disclosure. The term "PCS" refers to Potash Corporation of Saskatchewan Inc. and the terms "we", "us", "our", "PotashCorp" and the "company" refer to PCS and, as applicable, PCS and its direct and indirect subsidiaries as a group. Additional information relating to the company, including our Annual Report on Form 10-K, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.

POTASHCORP AND OUR BUSINESS ENVIRONMENT

PotashCorp is an integrated producer of fertilizer, industrial and animal feed products. We are the world's largest fertilizer enterprise by capacity, producing the three primary plant nutrients: potash, phosphate and nitrogen. We sell fertilizer to North American retailers, cooperatives and distributors that provide storage and application services to farmers, the end users. Our offshore customers are government agencies and private importers who buy under contract and on the spot market; spot sales are more prevalent in North America. Fertilizers are sold primarily for spring and fall application in both Northern and Southern Hemispheres.

Transportation is an important part of the final purchase price for fertilizer so producers usually sell to the closest customers. In North America, we sell mainly on a delivered basis via rail, barge, truck and pipeline. Offshore customers purchase product either at the port where it is loaded or delivered with freight included.

Potash, phosphate and nitrogen are also used as inputs for the production of animal feed and industrial products. Most feed and industrial sales are by contract and are more evenly distributed throughout the year than fertilizer sales.

POTASHCORP VISION

Our vision is to play a key role in the global food solution while building long-term value for all our stakeholders. We strive to be the highest quality low-cost producer and sustainable gross margin leader in the products we sell and the markets we serve. Through our strategy, we attempt to minimize the natural volatility of our business. We strive for increased earnings and to outperform our sector and companies on the DAXglobal Agribusiness Index in total shareholder return, a key measure of any company's value.

We link our financial performance with areas of extended responsibility that include safety, the environment and all those who have a social or economic interest in our business. We focus on increased transparency to improve our relationships with all our stakeholders, believing this gives us a competitive advantage.

POTASHCORP STRATEGY

To provide our stakeholders with long-term value, our strategy focuses on generating growth while striving to minimize fluctuations in our upward-trending earnings line. This value proposition has given our stakeholders superior value for many years. We apply this strategy by concentrating on our highest margin products. Such analysis dictates our Potash First strategy, focusing our capital - internally and through investments - to build on our world-class potash assets and meet the rising global demand for this vital nutrient. By investing in potash capacity while producing to meet market demand, we create the opportunity for significant growth while limiting downside risk. We complement our potash operations with focused phosphate and nitrogen businesses that emphasize the production of high-margin products with stable and sustainable earnings potential.

We strive to grow PotashCorp by enhancing our position as supplier of choice to our customers, delivering the highest quality products at market prices when they are needed. We seek to be the preferred supplier to high-volume, high-margin customers with the lowest credit risk. It is critical that our customers recognize our ability to create value for them based on the price they pay for our products.

As we plan our future, we carefully weigh our choices for our cash flow. We base all investment decisions on cash flow return materially exceeding cost of capital, evaluating the best return on any investment that matches our Potash First strategy. Most of our recent capital expenditures have gone to investments in our own potash capacity, and we look to increase our existing offshore potash investments and seek other merger and acquisition opportunities in this nutrient. We also consider share repurchase and increased dividends as ways to maximize shareholder value over the long term.

KEY PERFORMANCE DRIVERS - PERFORMANCE COMPARED TO GOALS

Each year we set targets to advance our long-term goals and drive results. We have developed key performance indicators to monitor our progress and measure success. As we drill down into the organization with these metrics, we believe:

• management will focus on the most important things, which will be reinforced by having the measurable, relevant results readily accessible;

• employees will understand and be able to effectively monitor their contribution to the achievement of corporate goals; and

• we will be even more effective in meeting our targets.

Our long-term goals and 2009 targets are set out on pages 35 to 37 of our 2008 Financial Review Annual Report. A summary of our progress against selected goals and representative annual targets is set out below.

                           Representative                    Performance
        Goal             2009 Annual Target               to March 31, 2009
Achieve no harm to       Reduce total site      Total site severity injury rate was
people.                  severity injury        0.82, representing a reduction of 16
                         rate by 25 percent     percent for the first three months of
                         by the end of 2011     2009 compared to the 2008 annual
                         from 2008 levels.      level. The total site severity injury
                                                rate was not tracked in the first
                                                quarter of 2008.

Achieve no damage to     Reduce total           Reportable release rate on an
the environment.         reportable             annualized basis declined 100 percent,
                         releases, permit       annualized permit excursions were flat
                         excursions and         and annualized spills were flat during
                         spills by              the first three months of 2009
                         15 percent from        compared to 2008 annual levels.
                         2008 levels.           Compared to the first three months of
                                                2008, reportable releases were down
                                                100 percent, permit excursions were
                                                flat and spills were down 33 percent.

Maximize long-term       Exceed total           PotashCorp's total shareholder return
shareholder value.       shareholder return     was 11 percent in the first three
                         for our sector and     months of 2009 compared to the
                         companies on the       DAXglobal Agribusiness Index weighted
                         DAXglobal              average return of 3 percent and our
                         Agribusiness Index     sector weighted average return of
                         for 2009.              17 percent.

FINANCIAL OVERVIEW

This discussion and analysis is based on the company's unaudited interim condensed consolidated financial statements reported under generally accepted accounting principles in Canada ("Canadian GAAP"). These principles differ in certain significant respects from accounting principles generally accepted in the United States. These differences are described and quantified in Note 16 to the unaudited interim condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. All references to per-share amounts pertain to diluted net income per share.

For an understanding of trends, events, uncertainties and the effect of critical accounting estimates on our results and financial condition, the entire document should be read carefully together with our 2008 Financial Review Annual Report.

Earnings Guidance

The company's guidance for the first quarter of 2009 was earnings per share in the range of $0.70 to $1.00 per share, assuming a period end exchange rate of
1.15 Canadian dollars per US dollar. Included in the annual effective tax rate guidance of 27-29 percent was a tax adjustment expected during the first quarter. The final result was net income of $308.3 million, or $1.02 per share, with a period-end exchange rate of 1.2602 Canadian dollars per US dollar and an effective tax rate of -58 percent for the quarter.

Overview of Actual Results

Operations


                                                          Three Months Ended March 31

                                                                           Dollar         %
Dollars (millions) - except per-share amounts    2009         2008         Change       Change


Sales                                           $ 922.5     $ 1,890.6     $ (968.1 )        (51 )
Freight                                            37.6         102.4        (64.8 )        (63 )
Transportation and distribution                    27.0          32.3         (5.3 )        (16 )
Cost of goods sold                                628.3         899.9       (271.6 )        (30 )


Gross margin                                    $ 229.6     $   856.0     $ (626.4 )        (73 )


Operating income                                $ 218.4     $   749.0     $ (530.6 )        (71 )


Net income                                      $ 308.3     $   566.0     $ (257.7 )        (46 )


Net income per share - basic                    $  1.04     $    1.79     $  (0.75 )        (42 )


Net income per share - diluted                  $  1.02     $    1.74     $  (0.72 )        (41 )

Strong potash pricing and income tax recoveries contributed to first-quarter earnings of $1.02 per share, or $308.3 million, our second-highest first quarter ever even as volumes declined for all three nutrients and prices for nitrogen products and solid phosphate fertilizer weakened substantially. This result compares to the $1.74 per share, or $566.0 million, earned in last year's record first quarter. First-quarter gross margin of $229.6 million compared to $856.0 million in the same period last year, with almost three-quarters of the current total generated by potash.

The global economic uncertainty that began in 2008 continued into 2009 causing most customers of the three primary nutrients to continue to exercise financial caution and draw down inventories while waiting for market stability. Farmers in the Northern Hemisphere are expected to reduce fertilizer application rates during the spring 2009 planting season, replicating what occurred in the Southern Hemisphere in the fourth quarter of 2008. This deferred purchasing took hold despite favorable farm economics associated with strengthening prices for most major crops. Potash movement was extremely slow in the first quarter as all major offshore markets destocked inventories and many buyers waited for the outcomes of contract negotiations with China and India. Industrial nitrogen and phosphate demand continued to be constrained due to poor global economic conditions.

Despite higher realized potash prices in the first three months of 2009 compared to the same period in 2008, significantly lower demand for potash caused segment gross margin as a percentage of net sales to decrease from 71 percent last year to 64 percent this year. Gains in pricing were offset by lower sales volumes caused by demand deferral, poor spring planting weather in the US and high inventory levels resulting in potash gross margin of $166.6 million in the first three months of 2009 compared to $514.6 million in the same period last year, a 68 percent decrease. Weak demand in fertilizer, feed and industrial segments resulted in quarterly phosphate gross margin of $8.8 million compared to $156.0 million for the same period last year. The higher fixed-cost nature of phosphate production resulted in segment gross margin as a percentage of net sales decreasing to 3 percent from 33 percent quarter over quarter. Lower prices for nitrogen products resulted in gross margin decreasing to $54.2 million

in the quarter from $185.4 million in the first three months of 2008 and caused segment gross margin as a percentage of net sales to decrease to 18 percent from 34 percent.

Selling and administrative expenses were $3.8 million lower in the first quarter of 2009 compared to the same period of 2008 due to lower accruals for our short-term incentive plan, as a result of our financial performance being below budget and, for our medium-term incentive plan, our common share price rising less compared to the plan's target. The price of our common shares increased slightly during the first quarter of 2009 increasing the value of deferred share units, though not as significantly as the increase during the first quarter of 2008, causing selling and administrative expenses to further decrease as compared to the same period in 2008. Provincial mining and other taxes declined 67 percent quarter over quarter as a result of lower potash margins and decreased sales tonnes compared to the same period last year. The Canadian dollar weakened during the first quarter of 2009, contributing to primarily non-cash foreign exchange gains of $30.2 million, $2.5 million higher than the first quarter of 2008 that saw gains of $27.7 million. Interest expense of $23.2 million was almost three times higher than the first quarter of 2008 due to higher debt levels. Other income increased $23.1 million quarter over quarter as our investments in Arab Potash Company Ltd. ("APC") and Sociedad Quimica y Minera de Chile ("SQM") contributed an additional $14.5 million during the three months ended March 31, 2009. Other income in 2008 included a $43.1 million provision for other-than-temporary impairment of auction rate securities, which was partially offset by a $25.3 million gain on the Sinofert Holdings Limited ("Sinofert") forward share purchase contract.

Our effective tax rate for the three months ended March 31, 2009 was -58 percent (2008 -23 percent). An income tax recovery of $113.1 million resulted from a current year income tax provision of $53.7 million being offset by two recoveries that resulted from an internal restructuring, which reversed a future income tax liability, and an increase in permanent deductions in the US from prior years.

Other comprehensive income of $37.0 million for the first three months of 2009 fell $152.0 million from the same period last year due to falling natural gas prices creating unrealized losses on our natural gas hedging derivatives of $45.2 million, compared to unrealized gains of $44.1 million in the first quarter of 2008, while our combined investments in Israel Chemicals Ltd ("ICL") and Sinofert contributed $75.3 million less than last year.

Balance Sheet

Total assets were $10,495.6 million at March 31, 2009, an increase of $246.8 million or 2 percent over December 31, 2008. Total liabilities declined by $73.3 million from December 31, 2008 to $5,586.6 million at March 31, 2009, and total shareholders' equity increased by $320.1 million during the same period to $4,909.0 million.

Property, plant and equipment and investments were the largest contributors to the increase in assets during the first three months of 2009. Additions to property, plant and equipment were $366.1 million ($251.5 million, or 69 percent, related to the potash segment). Investments increased $138.5 million mainly due to the fair value of our investment in ICL increasing $167.6 million and our share of earnings in SQM and APC increasing $37.9 million, partially offset by a decrease in the fair value of our investment in Sinofert of $67.9 million during the quarter. Accounts receivable decreased $137.4 million or 12 percent compared to December 31, 2008 largely as a result of sales declining 8 percent in the month of March 2009 compared to December 2008. Our credit effectiveness index (the industry measure for assessing collection effectiveness) was 90 percent at March 31, 2009 compared to 95 percent at February 20, 2009, the date our Financial Review Annual Report was filed. During the first three months of 2009, phosphate inventories decreased $84.0 million, nitrogen inventories decreased $21.1 million and potash inventories increased $49.3 million, which resulted in a $659.1 million inventory balance at March 31, 2009 as compared to $714.9 million at December 31, 2008. Inventory quantities for potash and phosphate increased due to production outpacing demand, while nitrogen inventory quantities decreased due to reduced operating rates and reasonably strong demand for solid urea. Inventory values declined due to lower input costs.

At March 31, 2009, investments included auction rate securities carried at a fair value of $18.1 million (face value $132.5 million), as compared to $17.2 million as of December 31, 2008. All six investments continued to be illiquid at the end of the first quarter of 2009 reflecting illiquid or non-existent markets. In April 2009, the company settled an arbitration proceeding instituted against the investment firm that purchased the auction rate securities

without our approval. In exchange for transferring the securities to the investment firm, we received $132.5 million in cash plus accrued interest and $3.0 million to cover legal costs.

Liabilities decreased as a result of the $276.9 million decrease in accounts payable and accrued charges, which was primarily attributable to: (1) income taxes payable, which were down $154.3 million as a result of payments made during the first three months of 2009; (2) $82.1 million lower accrued payroll due to 2008 incentives being paid out; and (3) trade payables that were down $49.7 million due to timing of expansion projects and lower volumes and prices for natural gas purchased for use in nitrogen production. Liabilities were further reduced by a $92.3 million reduction in the future income tax liability, most of which was due to a restructuring of one of our investment holdings during the quarter. Short-term debt decreased $785.0 million compared to December 31, 2008. The term of one of our credit facilities was extended beyond one year during the first three months of 2009 and, as a result, $1,000.0 million of draws that were classified as short-term debt at December 31, 2008 were reclassified as long-term debt at March 31, 2009, contributing to the $1,085.2 million increase in long-term debt at March 31, 2009. Partially offsetting the reduction in short-term debt was an additional $214.1 million of commercial paper issued.

Share capital, contributed surplus, accumulated other comprehensive income ("AOCI") and retained earnings all increased at March 31, 2009 compared to December 31, 2008. AOCI increased $37.0 million as a result of a $73.7 million increase in unrealized gains on available-for-sale securities (primarily the company's investment in ICL which increased $167.6 million, offset in part by a future income tax liability increase of $26.8 million and a $67.9 million decrease in the company's investment in Sinofert) and a $36.6 million increase in net unrealized losses on our natural gas derivatives that qualify for hedge accounting. Net income of $308.3 million for the first three months of 2009 increased retained earnings while dividends declared of $29.6 million reduced the balance, for a net increase in retained earnings of $278.7 million at March 31, 2009 compared to December 31, 2008.

Business Segment Review

Note 8 to the unaudited interim condensed consolidated financial statements
provides information pertaining to our business segments. Management includes net sales in segment disclosures in the consolidated financial statements pursuant to Canadian GAAP, which requires segmentation based upon our internal organization and reporting of revenue and profit measures derived from internal accounting methods. Net sales (and the related per-tonne amounts) are the primary revenue measures we use and review in making decisions about operating matters on a business segment basis. These decisions include assessments about potash, phosphate and nitrogen performance and the resources to be allocated to these segments. We also use net sales (and the related per-tonne amounts) for business planning and monthly forecasting. Net sales are calculated as sales revenues less freight, transportation and distribution expenses.

Our discussion of segment operating performance is set out below and includes nutrient product and/or market performance where applicable to give further insight into these results.

Potash

Potash


                                                                                  Three Months Ended March 31

                                         Dollars (millions)                           Tonnes (thousands)                           Average per Tonne(1)

                                2009             2008       % Change           2009         2008       % Change             2009             2008       % Change


Sales                          $ 269.2          $ 796.2           (66 )
Freight                            6.7             55.3           (88 )
Transportation and
distribution                       3.6             11.4           (68 )


Net sales                      $ 258.9          $ 729.5           (65 )


Manufactured product
Net sales
North American                 $  85.4          $ 291.6           (71 )          133           967           (86 )        $ 639.91         $ 301.36           112
Offshore                         168.0            432.0           (61 )          341         1,569           (78 )        $ 493.03         $ 275.36            79


                                 253.4            723.6           (65 )          474         2,536           (81 )        $ 534.35         $ 285.28            87
Cost of goods sold                88.5            211.7           (58 )                                                   $ 186.46         $  83.43           123


Gross margin                     164.9            511.9           (68 )                                                   $ 347.89         $ 201.85            72


Other miscellaneous and
purchased product
Net sales                          5.5              5.9            (7 )
Cost of goods sold                 3.8              3.2            19


Gross margin                       1.7              2.7           (37 )


Gross Margin                   $ 166.6          $ 514.6           (68 )                                                   $ 351.48         $ 202.92            73

(1) Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

Highlights

• Gross margin down $348.0 million compared to first quarter 2008.

• Increased realized sales prices reflect price increases introduced in 2008.

• Net sales down $470.6 million due to reduced sales volumes. Sales volumes 81 percent below last year due to major markets destocking inventories.

• Inventories up 737,000 tonnes from first quarter 2008 and 565,000 tonnes from December 31, 2008 due to lower demand (partially offset by production curtailments).

• Cost of goods sold per-tonne increased $103 per tonne due to production shutdown costs, brine inflow costs being allocated over fewer manufactured tonnes and higher royalties as a result of a higher potash sales price.

Potash gross margin variance attributable to:

                                                                        Three Months Ended March 31
Dollars (millions)                                                             2009 vs. 2008
                                                                                  Change in
                                                                                 Prices/Costs
                                                        Change in
                                                          Sales                            Cost of
                                                         Volumes          Net Sales       Goods Sold         Total
Manufactured product
North American                                         $    (207.9 )     $      45.2     $        5.9       $ (156.8 )
Offshore                                                    (273.3 )            74.2              8.9         (190.2 )
Change in market mix                                           1.3              (1.3 )              -              -


Total manufactured product                             $    (479.9 )     $     118.1     $       14.8         (347.0 )
Other miscellaneous and purchased product                                                                       (1.0 )


Total                                                                                                       $ (348.0 )

Sales and Cost of Goods Sold

The most significant contributors to the $348.0 million decrease in total gross margin quarter over quarter were as follows:

• Total average realized price decreased from $625 per tonne in the fourth quarter of 2008 as a result of lower priced industrial contracts increasing to 20 percent of sales volumes from 6 percent. Although average realized potash prices in the first quarter of 2009 were down $90 per tonne from the trailing quarter, prices were up $249 per tonne compared to the first quarter in 2008 and up $385 per tonne compared to the first quarter in 2007. Due to price increases implemented throughout 2008 by Canpotex Limited ("Canpotex"), the offshore marketing company for Saskatchewan potash producers, average realized offshore prices to major markets such as China, Brazil, India and Southeast Asia increased $218 per tonne from first quarter 2008. First-quarter 2009 realized offshore prices were below those of the trailing quarter, as much of the business in the current quarter was weighted toward lower-priced contract volumes to China (fulfilling remaining 2008 contract requirements in January 2009) and India (completing a contract that expired March 31, 2009). Additionally, Canpotex's fixed transportation and distribution costs were absorbed by fewer sales tonnes. By the end of the first quarter of 2009, Brazil and Southeast Asian customers had worked through significant portions of their inventories and gradually began placing new orders at spot market prices of approximately $750 per tonne, comparable to spot prices before the financial downturn. North American realized prices increased $339 per tonne due to price increases introduced in the second and third quarters of 2008. Higher prices were realized in the North American market due, in part, to prices in offshore contracts lagging behind prices in the North . . .