* Potash inventories fell by 422,000 tonnes in December
* Inventories currently 45 pct above prior 5-year average
TORONTO, Jan 18 (Reuters) - North American potash inventories at the manufacturer level fell in December, according to Potash Corp of Saskatchewan (POT.TO), the world's largest producer of the crop nutrient.
North American inventories fell 422,000 tonnes in December to below 3 million tonnes for the first time since 2008, according to the most recent data posted on the company's Website.
The drawdown indicates output cuts implemented by North American producers are finally helping rein in inventories, which grew steadily through the first-half of 2009, as vendors and farmers stung by high potash prices and weak grain prices drastically cut purchases.
Potash prices, since peaking at over $1,000 a tonne in 2008, have fallen sharply to around $350 to $400 a tonne, helping draw buyers back into the market.
A mild fall season in North America also allowed farmers to squeeze in some fertilizer application toward the end of 2009, despite a late harvest season across most of the continent.
However, statistics still indicate that North American potash inventories are 45 percent above the prior five-year average, although most producers and analysts forecast a sharp increase in potash demand this year, as farmers begin to replenish soil nutrient levels after a bumper harvest in 2009. (Reporting by Euan Rocha; Editing by James Dalgleish)