* North American potash inventories down 54,000 tonnes
* Potash inventories still 142 pct above prior 5-yr average
TORONTO, Oct 15 (Reuters) - Potash Corp of Saskatchewan (POT.TO) said on Thursday North American potash inventories declined for a third consecutive month, but inventories at the manufacturer level continue to remain well above average.
Potash Corp, the world's largest producer of the crop nutrient, said North American producer inventories in September fell by 54,000 tonnes to just above 3 million tonnes, down from prior-month levels but still 142 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.
Buyers of the nutrient 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 was almost flat at just under $500 per tonne in September. (Reporting by Euan Rocha)