Agriculture is an industry with some undeniable economic tailwinds. There will always be a certain level of demand for food and farming, and that requires fertilizer.

One agriculture company that might fly under your radar is Terra Nitrogen (NYSE: TNH), a subsidiary of CF Industries Holdings (CF 0.91%). Terra Nitrogen is a master limited partnership engaged in nitrogen fertilizer production. It's only a $2.5 billion company by market capitalization, and its assets are primarily comprised of a single nitrogen manufacturing facility in Oklahoma.

But despite its relatively small size, Terra Nitrogen has the potential to offer you big rewards. It pays an 8.5% distribution and is in the early stages of a turnaround that could pay off in a huge way...if it materializes.

The current environment in the nitrogen industry is less than favorable, but the strong underlying economics of agriculture should result in increased demand for Terra Nitrogen's products. That's why, despite its current troubles, Terra Nitrogen is a cheap play on agriculture and could be a long-term winner.

Volatility is part of the deal
Terra Nitrogen's principal product is ammonia, a primary ingredient of nitrogen fertilizer. Nitrogen fertilizer works to boost both farm productivity and crop yields. There are many factors that influence Terra Nitrogen's sales. The company stated in its 2013 10-K filing that its realized prices and tons sold will depend on many things, such as soil and weather conditions as well as changes in regional farming practices. Fluctuations on a harvest-to-harvest basis result in volatility in the company's financial performance.

Between 2009-2013, Terra Nitrogen's revenue climbed from $507 million to $736 million, representing a 45% increase. Clearly the company has been successful when you average out that growth. In fact, Terra Nitrogen increased sales by nearly 10% compounded annually. This looks great on the surface, but when you look deeper, you see that there has been a great deal of volatility from year to year.

Terra Nitrogen's sales have actually fallen for the past two years. Ammonia prices have been in decline, which has really hurt the company. This has lasted into 2014 as well. A poor application season last fall resulted in larger inventories than normal at the start of the year, and Terra Nitrogen's average ammonia selling price fell 37% in the first quarter. Earnings per unit fell to $3.26 in the first quarter, down 35% from $4.98 per unit year over year.

Distributions are not immune
Unfortunately, since Terra Nitrogen is classified as an MLP, it's required to distribute the bulk of its earnings to investors. The downside to this is that when profits fall, there's very little wiggle room. Terra Nitrogen's most recent distribution clocked in at $3.01 per unit. That represents a 35% year-over-year reduction.

Not surprisingly, as the company's earnings and distributions fell, so did the unit price. Terra Nitrogen is down about 34% over the past year. But the prospect of a turnaround and a cheap valuation are what make Terra Nitrogen appealing.

Terra Nitrogen now trades for just 8 times trailing earnings. This is about 33% below its historical five-year average P/E of more than 12 times earnings.

In addition, while such a huge distribution cut is concerning, Terra Nitrogen still provides a hefty yield. Its annualized distribution of $12.04 per unit yields 8.6%, and that assumes it will only distribute $3.01 each quarter. It's likely that as business conditions improve, its recent distribution looks closer to the floor than the ceiling of what the company can afford to pay out.

Opportunity may be knocking
Terra Nitrogen has had a tough time over the past year as ammonia prices dropped precipitously due to an unfavorable harvest season. But the agriculture industry still has extremely positive economic underpinnings. First and foremost is that demand for fertilizer should remain solid for many years, thanks to the fact that there will always be a need for farming.

Terra Nitrogen is a well-run business. It's not immune to economic downturns sweeping through the nitrogen business, but its current valuation and attractive future distribution potential are too compelling to ignore.