Attractive grower economics and improving crop conditions have been pushing demand for crop protection products in North America. Some factors, like declining natural gas costs in North America, are benefiting fertilizer producers in the U.S. -- but other businesses in the industry are taking a big hit.

Potash and phosphate prices are exposed to volatility and significant uncertainty following a recent decision by the world's largest potash maker, Uralkali Group,  to exit the biggest potash cartel, triggering fears of an industrywide price war fear. Moreover, nitrogen fertilizers' prices are expected to drop below 2013 levels, with volumes remaining relatively flat, driven by a decline in total planted corn acreage next year.

Given these circumstances, let's see how three fertilizer producers handle the pressure.

PotashCorp: Bad pricing environment
First, we have Potash Corp. of Saskatchewan (NYSE: POT), which has mining rights to the world's largest potash reserve.

Competitive pressure and lower pricing across all three nutrients has affected the company big time. Third-quarter earnings dropped 44.8% to $356 million year over year. PotashCorp president and CEO Bill Doyle stated: "The most recent quarter can best be characterized as a predictable response to an unpredicted event" referring to Uralkali's decision and its consequences.

India is a key market for the company, and weak demand in the country has made PotashCorp cut its earnings forecast for the full year. The Indian government's decision to reduce potash subsidy levels, along with higher retail pricing and local currency devaluation, pushed demand levels to their minimum. The average realized potash price dropped 18% year over year last quarter -- a hard drop for PotashCorp to absorb.

However, more than half of the world's estimated new potash supply will come from the company's projects between now and 2015. If prices make a correction, PotashCorp will surely profit from it.

CF Industries Holdings: Focusing on nitrogen
Second, we have one of the world's largest manufacturers and distributors of nitrogenous and phosphatic fertilizers, CF Industries Holdings (NYSE: CF).

This company's performance has dropped significantly as well. Third-quarter net earnings fell 41.9% to $234.1 million year over year, driven by lower fertilizer pricing and intense competition. Nitrogen net sales decreased 20% year over year because of lower volume and prices.

Nonetheless, nitrogen products remain the leading business for the company, accounting for 83% of total sales last year. In fact, in order to strengthen its nitrogen-centric programs, CF Industries decided to dispose of its phosphate business this past October, selling its phosphate mining and manufacturing business to Mosaic for $1.4 billion in cash. This initiative could make a difference in the future.

Agrium: Retail performing well despite challenging quarter
Finally, we have Agrium (NYSE: AGU), a leading global wholesale producer of all three major agricultural nutrients.

Not surprisingly, the third quarter of 2013 was disappointing for Agrium. Net earnings dropped from $129 million to $76 million in one year, driven by delays in crop nutrient purchases produced by a late growing season in North America and uncertainty in the fertilizer market. Gross profit fell 13.2% year over year, pushed by lower pricing and production outages.

The outlook is not very positive for Agrium: Phosphate prices are expected to remain soft, and demand in India, a key market, is expected to remain weak as well. However, despite the big challenges ahead, the retail segment reported its second-strongest third quarter in history, reaching $147 million in operating earnings, versus $121 million  in the year-ago quarter.

Bottom line
The three companies are facing a scenario that could lead to big changes in the industry, with the possibility for restructurings, mergers, and/or acquisitions ahead. The market will eventually find equilibrium prices and provide greater certainty about its future. Until then, we will have to be very selective and pay close attention to how prices evolve. The opportunities should appear sooner, rather than later. 

PotashCorp is wrestling with a combination of weak demand and pricing pressures. If these variables improve, the company will likely start growing again, but don't expect that upswing anytime soon.

The pricing environment is affecting Agrium in a big way as well, and despite its good momentum in the retail segment, wholesale needs to make major improvements.

But CF Industries may have a brighter future. Its decision to withdraw from its phosphate business is a wise idea. This area was facing strong pricing pressure, and now the company will be more focused, which could lead it to better profitability in the near term.

Louie Grint has no position in any stocks mentioned. The Motley Fool owns shares of CF Industries Holdings and PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.