American potash inventories dipped nearly 9 percent in August at the producer level, but were still one-third larger than the five-year average, according to the world's top producer of the crop nutrient, Potash Corporation of Saskatchewan Inc.

Stockpiles of potassium chloride, the key crop nutrient more commonly known as potash, shrank 221,000 tonnes to 2.353 million tonnes in August from the previous month, according to data posted on Potash Corp's website on Monday.

Spot potash prices hovered under $500 per tonne.

One of the reasons miners are sitting on such large stockpiles is reduced demand from India, the world's second-largest potash buyer. The weakening rupee and a reduction in fertilizer subsidies by the Indian government have made potash more expensive to farmers.

Potash Corp is whittling down its surplus supplies somewhat by shutting down its biggest mine, at Lanigan, Saskatchewan, for nearly a month starting on Sept. 15.

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.