Fertilizer nutrient demand will improve in 2010.

It's been a fallow year for fertilizers and although demand is likely to remain soft through much of next year, improved phosphate demand represents green shoots in the market.

"Among the three major crop nutrients, we believe phosphate has the highest probability for further pricing improvement over the next 12 months," said RBC Capital Markets Fai Lee. She said prices likely bottomed in June and have since climbed 18%--a trend that bodes well for Mosaic ( MOS - news - people ), the largest integrated phosphate producer.

"Recent price declines, lack of demand and high producer inventory levels have reinforced buyers' perceptions that they could be further rewarded by continuing to hold off on their potash purchases," Lee said, adding that the strength of potash's recovery will also largely demand on whether China resumes its potash imports in 2010.

Longer-term, demand for both nutrients remain strong. Global population growth will require more food production, making farmers worldwide more dependent on fertilizers.

"According to the International Plant Nutrition Institute, fertilizer accounts for approximately 40% of crop yields," Lee said. "In the major agricultural regions of China, India and Brazil, potash and phosphate application rates are below scientifically recommended levels and improved fertilization practices could lead to higher yields."