Potash inventories in North America declined by over 8.5% in August, falling 304,000 tonnes, steadying at just a shade above 3 million tonnes.

Inventory levels are still 150% above five-year averages but this is to be expected when considering the Potash boom hit only two years ago.

Pricing has declined. Back in July India signed contracts to import Potash at $460 per tonne. Potash Corp admitted that prices have dropped below $500 per tonne, which is in line with the India contract.

Many potash buyers are currently sitting on the sidelines, waiting for the large Chinese orders that are set to come within (historically) the next month.

The markets pushed up the big three Potash stocks (AGU, MOS, POT) on this news today, with share price gains of 2%+ on higher than average volume.

Do the bulls know something that the rest of us don’t?

Front month Potash option contracts were in heavy demand during the first ‘real’ trading day in over a week, Monday January 4th.

With share prices hovering around the $110 level (closed at $112.20) for most of the session investors piled into calls.

As we can see from this Yahoo! Finance screen cap, calls from 105 – 125 changed hands at breakneck speed. Right now the 110 call (which closes on January 15th) have a built in time premium of $2.25, a large percentage for a short-term timeline with no major announcements expected.

We’ll keep our eyes on the share price and update back in a week to see if the bulls were on the money.

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