Macquarie cut its forecasts for potash prices, disputing widespread expectations that Chinese buyers will agree in key negotiations to pay more for the fertilizer, and seeing values drop to $250 a tonne by 2018.
While Uralkali, the world's biggest potash miner, has asked Chinese customers, the top importers, to pay $340 a tonne for the nutrient, with talk of some other suppliers targeting $350 a tonne, historical evidence suggests a far lower price, Macquarie said.
Spot prices of potash in South East Asia have over the past five years "provided clear direction" to contract price agreed by Chinese buyers, which have paid on average $31 a tonne, or 7%, less.
Given that the South East Asian potash price has remained reasonably stable since the start of October, at about $325 a tonne, that signals that Chinese buyers could potentially pay less in their next contract, likely to be agreed early in 2015, than the $305 a tonne settled in the last one.
"We are extremely cautious of wider expectations that Chinese buyers would be happy to pay above the current prevailing spot price," Macquarie said.
"Across all commodity markets we cover, we cannot think of a single instance where this has taken place – Chinese buyers are extremely market-savvy."
The bank disputed ideas that the mine accident at Uralkali, in cutting production potential, would prompt Chinese buyers to pay up.
"The recent accident at Uralkali's Solikamsk-2 mine… is unlikely to provide the company with higher degree of influence and power when negotiating with China."
Nor does Brazil, where prices have risen by some $60 a tonne, provide the pressure that some believe for Chinese values, with the South American country's potash imports falling below year-ago levels over the past two months, potentially signalling that "buyers are not happy with the current high potash price".
Macquarie forecast that "taking all things into account, we think a $5-10-a-tonne drop in Chinese contract price is more realistic than the 10% increase targeted by Uralkali and other suppliers".
Chinese buyers could end up paying below $300 a tonne for potash for the first time in seven years.
And such prices may set a trend, as farmers, facing low crop prices, cut back on spending on the likes of fertilizer, perhaps by switching away from nutrient-intensive crops such as corn, or simply through lower applications of potash.
The bank, citing a "negative margin environment" for growers, said that "we would expect to see farmers spending less on seeds, chemicals, machinery and fertilisers – indeed, machinery spend has already fallen.
"The next thing in line for the US farmer in particular is potash, and as a result we have lowered our previous estimates for potash demand next year," seeing a 1% drop in consumption, and fuelling a rise in stocks of the nutrient which will weigh on prices.
Indeed, "sluggish seaborne market activity next year" will see potash export prices in Vancouver fall by $15 a tonne in 2015, from the average of $295 a tonne this year.
"By 2018, we expect the price to reach $250 a tonne FOB, with suppliers reticent to cut capacity meaningfully."
Some other commentators, including potash companies themselves, foresee a brighter outlook for potash prices, saying that lower prices since the break-up of the Belaruskali cartel in July last year have encouraged demand.
Chemical consultancy SCI International this week said that Chinese buyers were prepared to pay $325-330 a tonne for potash, which would be in line with South East Asian prices.