Six months ago, we were all rocking out at Potashapalooza. Now that we're all caught in a deflationary deluge, even the fertilizer companies are feeling more than a drizzle.

Take Agrium (NYSE:AGU), for instance. It wasn't so long ago that the company was hatching a plan to plunk down for a new potash mine. That didn't make much sense at the time, when persuasive proponents like PotashCorp's (NYSE:POT) Bill Doyle were saying the economics didn't justify new mines. Now Agrium has handed out preliminary pink slips at its existing operation in Saskatchewan.

Scary thing is, potash is the best of the bunch. Prices have hardly budged, based on recently negotiated rates between the Canpotex crew (comprising PotashCorp, Agrium, and Mosaic (NYSE:MOS)) and nations like Japan and Korea. Even so, market leaders like PotashCorp and Germany's K+S have still announced production cuts in response to sagging demand.

This attempt at defending prices will face a true test in the more decisive, ongoing negotiations with China. At least the potash players have a fighting chance. Stock prices for phosphate and nitrogen-based fertilizers, on the other hand, have already fallen out of bed.

Everyone from Mosaic to Agrium to Terra Industries (NYSE:TRA) is cutting production like mad, but with such a saturated supply chain, prices are not responding. So cheer up, OPEC: You're not alone!

Speaking of OPEC, maybe phosphate players will see relief courtesy of Saudi Arabia. There's a major new source of supply looming, courtesy of Saudi state miner Ma'aden. Rio Tinto (NYSE:RTP) just backed out of a planned $10 billion-plus aluminum smelter joint venture with Ma'aden, so perhaps the phosphate plan will get pulled, too. I wouldn't get my hopes up, though -- the miner has secured billions via equity and debt financings, will share expenses with another Saudi stalwart, and expects to become the lowest-cost producer in the world.

Compared with many industries, the fertilizer players are in reasonably good shape headed into 2009. While the outlook is weak for the first quarter, several companies have spoken of a back-half recovery as farmers come back into the market for fertilizer. Because of its tight market structure, not to mention the crippling effect that this environment has had on aspiring new entrants, potash is the go-to plant power-up. PotashCorp -- which, by the way, continues to buy back boatloads of stock -- thus remains my top pick in the sector.

Interestingly, the Fool community favors Agrium, having bestowed upon it a top five-star rating in Motley Fool CAPS. You can chip in your two cents on either PotashCorp or Agrium -- and make a forecast of your own.

Fool contributor Toby Shute wields his green thumb (and his red one) under the name TMFSmashy in CAPS, but he doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.