Fertilizer bulls got some bad news recently. PotashCorp (NYSE: POT), the world's largest producer of potash fertilizer, announced that it would extend shutdowns at its two largest mines, possibly until the end of March. This news came around the same time as Mosaic's (NYSE: MOS) statement that fertilizer demand for the year might fall by up to 3%, revising an earlier forecast of up to 7% growth.

I wrote a few months ago that despite worries of a slow global economy, industry leaders in agriculture were showing long-term confidence by investing in new projects. I don't believe that the moves by these potash giants contradict my thesis, and I still think that fertilizer and agriculture in general will be key places to invest for the long-term.

Nipping the problem in the bud
Potash demand had been quite strong through most of 2011, but mounting worries about the global economy had a number of bad effects on the commodity. The stronger dollar coupled with the weak economy led to lower crop prices, which in turn led to expectations that farmers would plant less and use less fertilizer on what they do plant.

The bright spot here is that potash prices have remained fairly stable in recent months. By cutting production, producers are matching supply with demand to maintain an equilibrium price. In fact, potash is the only fertilizer that hasn't fallen in price in the last few months. Phosphate and nitrogen fertilizers have both seen price declines recently. The problem is that potash producer inventories have risen markedly in the last quarter and now stand about 25% higher than the five-year average.

Homing in on the growth
Despite slowing demand for potash and falling prices for other fertilizers, prices for all three are still higher than average. For example, despite large declines in the spot price for nitrogen chemicals during the fourth quarter, CF Industries (NYSE: CF) still managed to report a blowout quarter, as selling prices for its various nitrogen chemicals rose 40% to 72% over the same quarter last year.

Gross margin in the most recent quarter was up across the board, rising 2.1 percentage points at PotashCorp, 0.5 percentage points at Mosaic, and an astounding 11.3 percentage points at CF. Those aren't numbers that portend an industry's imminent downfall.

Much of the drop in global demand is coming from China and India, which are delaying purchases due to uncertainties about the global economy. In India's case, a decline in the rupee-dollar exchange rate is also hurting demand. India and China are both major importers of fertilizer, and once uncertainties begin to settle and the rupee gets its legs under it again, buying should resume with force.

In the meantime, Intrepid Potash (NYSE: IPI) is already seeing increased interest from buyers in the U.S. as the planting season approaches. Indeed, the best reason to remain hopeful for a rebound in fertilizer fortunes is found in the U.S. plantings forecast from the USDA. It's predicting that farmers will plant 93.5 million acres of corn, the highest since World War II. Corn tends to need more fertilizer than other staple crops like soy and wheat, so a record planting season should help to bring demand back to the market.

Intrepid certainly isn't the biggest player in the global fertilizer business, with a market cap little more than half the size of Mosaic's cash balance. But it is the largest potash producer in the United States, and if demand rebounds in the U.S. while the rest of the world delays its purchases, Intrepid could stand to benefit greatly.

Terra Nitrogen (NYSE: TNH), which I've previously highlighted, is also focused on the domestic market. Terra is a subsidiary of CF, and has been one of my best-performing CAPS picks since I added it, just last summer. Because Terra is a master limited partnership whose dividends are linked to earnings, Terra is essentially the only fertilizer company with a dividend worth caring about, yielding an average of 8% over the last five years.

The Foolish bottom line
It would be a mistake to interpret the production slowdowns at major fertilizer companies as a sign of long-term weakness in the industry as a whole. This is a critical industry that can expect to see a rebound once uncertainties clear up, and may already be bouncing back in the U.S. Investors would be wise to add these companies to My Watchlist to see how things shape up.