* Potash inventories continue to build despite mine shutdowns
* North American stockpiles at producer level up 20 pct in Jan
* Inventories now stand 32 pct above 5-year average
* Shares of Potash Corp, Mosaic, Agrium slip in early trading (Adds analyst and CEO comments, background, share price moves)
By Euan Rocha
TORONTO, Feb 15 (Reuters) - North American potash inventories rose around 20 percent in January from the previous month, signaling a possible drop in prices even as top producers scramble to cut output following a sharp decline in global farm demand for the crop nutrient.
Stockpiles at the producer level rose by 510,106 tonnes to about 3 million tonnes as of Jan. 31, according to the latest monthly data released by Potash Corp, the world’s top producer of the fertilizer. After the news, shares of the region’s big producers slipped.
Inventories in North America now stand 32 percent above the five-year average as large buyers such as China, India and Brazil have stayed out of the market.
“The news is not good for potash producers,” wrote Dahlman Rose analyst Charles Neivert in a note to clients.
“The inventory represents levels nearly comparable to those seen during the worst of the downturn in demand in 2009,” he said. “We anticipate that February will also show an increase, albeit smaller, despite mine shutdowns from Potash and Mosaic.”
Late in January, Potash Corp said it was extending a shutdown at its Rocanville mine in the Canadian province of Saskatchewan by four weeks. This followed a six-week shutdown at the site from Dec. 25 through Feb. 4.
Saskatoon, Saskatchewan-based Potash Corp has also cut output from two other mines in the province. It wants to offset the impact of a seasonal but significant weakening in potash demand and keep prices from declining.
Earlier this month, smaller U.S. rival Mosaic Co outlined plans to cut potash production by 20 percent over the next four months as distributors have been drawing down existing inventories and delaying big purchases.
The price of the nutrient, which typically lags a sharp move in inventory levels, is little changed at about the $500 a tonne level, according to data posted on Potash Corp’s website.
Despite one of the biggest builds in potash inventory levels since the aftermath of the 2008-09 global economic meltdown, producers of the nutrient say they remain confident that demand will once again gather steam as the spring planting season in North America gets underway.
“We are in a little bit of a lull right at the moment with global demand during the fourth quarter, and the first quarter a little bit slower. That period is coming to an end,” Potash Corp Chief Executive Bill Doyle said in a speech in Ottawa on Tuesday. “We are going to have a very robust last nine months of this year.”
Analysts remain more cautious, however. The last slump led to an extended stalemate in potash markets as producers held off cutting prices for months even as farmers and dealers halted most purchases due to high prices.
Dahlman Rose’s Neivert expects that Agrium, the smallest of the three potash miners in Saskatchewan, may join its larger rivals in announcing output curtailments.
Shares of Potash Corp, which had risen early on Wednesday, pared gains before the morning bell. They were trading at $44.33, down 16 cents at 9.45 a.m. (1445 GMT) on the New York Stock Exchange. The company’s Toronto-listed shares were down 23 Canadian cents at C$44.22.
Shares of Mosaic, Agrium and Intrepid Potash were also all trading slightly lower on Wednesday morning.
$1=$1.00 Canadian Reporting By Euan Rocha in Toronto and Louise Egan in Ottawa; Editing by Frank McGurty and Peter Galloway