* Silvinit-India contract prices well below expectations

* Expected to set tone for further key India, China deals

* Potash Corp shares down 9.2 pct, Agrium, Mosaic fall (Adds Silvinit comment, details; updates shares; in U.S. dollars unless noted)

By Euan Rocha

TORONTO, July 10 (Reuters) - Shares of Potash Corp (POT.TO: Quote, Profile, Research) and its peers fell sharply on Friday after fertilizer trade publications reported that India has settled some of its 2009 potash contract order with Russian producer Silvinit (SILV.RTS: Quote, Profile, Research) at a price sharply below market expectations.

India has agreed to buy 850,000 tonnes of potash from Silvinit at a delivered price of $460 a tonne, analysts said, citing reports in Fertecon and FMB. This is well below the $625 to $635 per tonne range that all other major producers had proposed.

"This is a large volume contract between a major seller and large buyer, we thus believe this will establish the market floor price and set the range for Chinese buyers," said UBS analyst Brian MacArthur, who has now placed his "buy" rating and $125 price target for Potash Corp under review.

The price of potash -- a key crop nutrient -- has remained stubbornly high even as demand has collapsed, as a small group of companies, which account for roughly 75 percent of global supply, has drastically cut production in a bid to maintain pricing.

However, concerns that cash-strapped Silvinit might cave on pricing arose after the price it bid in the recent Indian tender was kept confidential, while the prices bid by other major suppliers were made public.