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* Potash spot market pricing slips in July
* North American potash inventories down 129,000 tonnes
* Potash Corp shares rise 0.3 percent in early trade (Adds analyst comment, share price move, by-line; all figures in U.S. dollars)
By Euan Rocha
TORONTO, Aug 18 (Reuters) - Potash Corp of Saskatchewan (POT.TO) said North American potash pricing declined in July, but the world's largest producer of the key crop nutrient also noted that manufacturers' inventories in North America fell for the first time this year.
Potash Corp said on Tuesday that North American potash inventories in July fell by 129,000 tonnes to just under 3.5 million tonnes, down from prior-month levels but still more than double the previous five-year average.
Nevertheless, this is the first indication that sales of potash have begun to move again, after a consistent inventory build through the first half of 2009.
Potash Corp shares rose 0.3 percent to $91.42 in early trade on the New York Stock Exchange, while those of its peers Mosaic Co (MOS.N) and Agrium Inc (AGU.N) (AGU.TO) rose 0.7 percent and 1.0 percent, respectively.
Potash inventories had risen steadily through the course of 2009, despite major production cuts, as farmers concerned by exorbitant pricing and hurt by the credit crunch had deferred application of the crop nutrient.
Potash buyers were also staying out of the market in anticipation of big annual import contracts signed by India and China, which typically set the tone for spot market pricing.
Last month, India signed contracts to import the bulk of its annual potash requirements at $460 a tonne, well below last year's contract price of more than $600 and the spot market price of $700 at the time.
The new Indian contract has led to a decline in potash spot market prices and brought other international buyers back into the market.
"The decline in July (inventories) is clearly a surprise as most market observers did not expect any positive momentum given that producers did not begin to ship to India until an agreement was reached in late July," said Broadpoint AmTech analyst Edlain Rodriguez, in a note to clients.
In a group of graphs posted to its website, Potash Corp also indicated that potash spot market pricing fell to $600 per tonne in July from $700 in the prior month.
"We continue to believe that near-term potash conditions are approaching a bottom, setting the stage for a strong rebound in 2010 that will lead to higher earnings and multiple expansion," said Rodriguez. ($1= $1.10 Canadian) (Reporting by Euan Rocha; Editing by Lisa Von Ahn and Gerald E. McCormick)