North American potash inventories at the producer level, a key indicator of market sentiment, rose surprisingly in March ahead of the region's spring planting season, according to the world's top producer of the crop nutrient, Potash Corp.
Stockpiles of potassium chloride - the key crop nutrient more commonly known as potash - rose more than 9 percent to 3.29 million tonnes in March, which is usually when a seasonal demand uptick leads to a pullback in inventory levels.
Inventories of the crop nutrient at the producer level now stand 49 percent above the previous five-year average, according to data posted on Potash Corp's Web site.
Despite the surprise build, analysts remained bullish on potash demand and attributed the stockpile build-up to the timing of potash shipments to China, which have been deferred into the second quarter.
"We see the March inventory build as roughly equal to the deferred first-quarter China volume that will likely now be quickly drawn down by the significantly larger monthly shipments to China in the second quarter," said Morgan Stanley analyst Vincent Andrews in a note to clients.
Last month, Canadian and Russian potash miners signed a contract with Sinofert Holdings to supply the Chinese fertilizer maker with potash in the second quarter. The supply deal was a boost for potash miners as global potash markets have been largely stagnant for months and many large miners have scrambled to cut potash output in a bid buoy prices.
"Spot buying was almost non-existent until the Chinese contracts settled in the middle of March and orders take time to ship," wrote Credit Suisse analyst Elaine Yip in a research note.
"We anticipate robust shipments and significant inventory drawdown over the next couple of months," Yip said, adding that spot sales to Brazil and Asia have begun to pick-up.
The latest data also indicated that pricing for standard grade potash is holding relatively steady around the $500 a tonne mark.
The vast majority of the potash produced in North America is mined in the Western Canadian province of Saskatchewan, where Potash Corp is headquartered. Minnesota-based Mosaic Co and Calgary, Alberta-based Agrium Inc are the other two large potash miners in the province.