PotashCorp said on Tuesday that inventory in January was down 84,770 tonnes, about 24% below the previous five-year average.
PotashCorp produces approximately 23% of the world's supply of potash. It is also a major producer of phosphate and nitrogen.
Current spot prices puts potash at just under $400 a ton.
Jay Taylor, editor of J. Taylor's Gold, Energy & Tech Stocks newsletter, says that major potash firms are trying to improve their positions, so they can benefit from a sector that is expected to grow.
"With stockpiles in decline, producers are expected to increase potash prices in key overseas markets such as China and India. Potash currently trades at just under US$400 a tonne, but India—a leading importer and consumer of potash expected to import more than five million tonnes of potash in 2011—is now unlikely to negotiate a price under $400 for the coming year," writes Taylor.
Despite the tightening inventories, PotashCorp was down for the week by 4% from $189 on Monday to $180 on Friday.
However, potash companies have enjoyed substantial gains in the last three months. PotashCorp is up 40% from $140 a share to $180. Mosaic Company is up 19% from $70 a share to $83.
Michael Allan McCrae wrote this story. You can contact him at email@example.com.