Phosphate prices, which proved the worst performer among the top nutrients last year, face the worst prospects heading into 2012 too, sapped by "subdued" demand and increasing production, Rabobank said.

None of the three major fertilizers – with nitrogen and potash being the other two - look set for price increases for now given the macroeconomic headwinds and the decline in crop prices from summer highs, factors which have prompted farmers, especially in Europe, to delay orders.

"The current level of weakness across the fertilizer complex [will] persist in the near-term," Rabobank forecast.

"The uncertainty surrounding the outlook for crop process and a more cautious approach to farm decision-making could lead to reduced fertilizer purchases and applications.

"Delayed fertilizer purchases could result in further fertilizer price slides in the first quarter of 2012."

Seasonal factors

Phosphate prices look particularly vulnerable, with Rabobank attributing the nutrient a "neutral to weak" outlook, below the "neutral" ratings given to urea, one of the main nitrogen-based nutrients, and potash.

In part, this is down to seasonal demand cycles, with consumption by farmers in India, the top phosphate importer, falling after the completion last month of applications for the rabi crops, such as barley and wheat.

"Hence the focus of suppliers will shift westwards, although this demand will not be sufficient to absorb the supply surplus in the market," the bank said.

'Demand needs to re-emerge'

In Europe, phosphate demand looks more vulnerable to "cautious" farmer sentiment than nitrogen, for which demand is "relatively inelastic", meaning growers are more likely to rely on what levels of the nutrient are already in the ground.

In Brazil, phosphate inventories are sufficient to meet orders, meaning "import purchases will be lighter in the first quarter of 2012".

"Demand needs to re-emerge to support phosphate prices," the bank said, in comments days after Mosaic, the world's top phosphate group, revealed it was curtailing production to help shore up prices.

Nitrogen and potash

However, potash prices should be protected by the limited supply base, centred on cartels in North America and the former Soviet Union, despite "evidence of weakening global demand… intensifying".

"The nature of the global potash market, with limited participants on the supply side, creates a less volatile trading environment," Rabobank said.

"This tends to shield the potash market from the severe shifts in prices."

Nitrogen fertilizers have support from "firm" demand in South Asia, including Thailand, where the retreat of flood waters has encouraged nutrient applications.

On the supply side, prices will also be buoyed by high input costs for Chinese and Ukrainian factories, although the latter could see their competiveness enhanced by cheaper Russian gas.