September 17, 2009 / 4:00 AM / 10 years ago

UPDATE 1-North American potash inventories decline in August

* North American potash inventories down 304,000 tonnes

* Potash spot market pricing slips in August

* Potash inventories still 150 pct above prior 5-yr average

TORONTO, Sept 16 (Reuters) - Potash Corp of Saskatchewan POT.TO said on Wednesday North American potash inventories declined for a second consecutive month, but inventories at the manufacturer level continue to remain well above average.

Potash pricing also declined in August — the downward move in pricing was anticipated, as North American potash producers recently agreed to cut pricing on the key crop nutrient following similar moves initiated by European rivals.

Potash Corp, the world’s largest producer of the crop nutrient, said North American producer inventories in August fell by 304,000 tonnes to just above 3 million tonnes, down from prior-month levels but still 150 percent more than the previous five-year average.

Potash inventories had risen steadily through the first-half of 2009, despite major production cuts, as farmers concerned by exorbitant pricing and hurt by the credit crunch had deferred fertilizer application.

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.

In July, 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 brought some international buyers back into the market, but many buyers and distributors still remain on the sidelines and are waiting for Chinese importers to finalize their annual contract, as they believe that potash prices could fall further.

In a set of graphical data posted to its website, Potash Corp also indicated that potash spot market pricing fell to below $500 per tonne in August from $600 in the prior month. (Reporting by Euan Rocha; Editing by Kazunori Takada)

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