If you're one of those investors who bought into potash stocks on speculation of higher potential nutrient prices following the Russia-Ukraine conflict, you may have jumped the gun.

Shares of PotashCorp (NYSE:POT) and Intrepid Potash (NYSE:IPI) have tacked on more than 7% each, while Mosaic (NYSE:MOS), which gets a third of its sales from potash, has seen its shares climb around 3% over the past couple of months, largely on speculation. But PotashCorp just ruled out the Ukraine conflict as anything major, and provided an interesting perspective to the situation that should make investors pause and rethink.

What difference can Russia make to the potash market?
The theory doing the rounds is that potash, one of the key export products for Russia, could come under the purview if any trade sanctions were to be imposed against the nation. Russia has the second-largest potash reserves in the world after Canada, and is among the top two global producers and exporters of the nutrient. The following graphs from PotashCorp should give you an idea about Russia's standing in the potash market.

The first graph shows the world potash reserves, while the second graph depicts the world potash production and demand. Note that both graphs were last updated on June 4, 2013.

Other countries total 1%. Source: PotashCorp. Data source: US Geological Service

FSU refers to Former Soviet Union. Source: PotashCorp. Data Source: Fertecon, CRU, IFA, PotashCorp

While the first graph is self explanatory, the second graph shows how major potash-consuming markets like Asia and Latin America rely heavily on imports to fulfill their nutrient requirements. The small pie chart further indicates how three-quarters of the global potash produced is traded.

Naturally, any drop in potash exports out of Russia could upset global potash supply substantially. That could boost potash prices, and hence profits for producers nearer home, including PotashCorp, Mosaic, and Intrepid Potash.

So potash investors actually had a valid reason to bet on the Ukraine conflict. But when an analyst wanted to know what the world's largest potash producer thinks about the situation during its recent earnings call, this is what President and CEO Bill Doyle had to say:

I kind of look at it as a big balloon. The market for potash globally, if you squeeze the air out of it on one side, it tends to pop up on the other. So I don't see any real big impact if tensions should escalate, God forbid in the Ukraine. Say you had the Russians or Belarusians couldn't export to the U.S. market, let's say, it'd show up someplace else. So I don't see it as a major factor.

That's interesting, because any setback at a major potash-exporting country like Russia should ideally disturb the demand-supply situation, and impact the nutrient market considerably. But PotashCorp thinks otherwise, which could mean either of the two things: Any supply gap on lower exports from Russia or Belarus can be made up by higher production elsewhere, or global demand for the nutrient wouldn't improve enough to necessitate higher production.

Now if the first situation were to pertain, PotashCorp and Mosaic should stand to benefit since they dominate a big chunk of the global potash market. In other words, if potash exports from Russia dry up and demand remains firm, PotashCorp and Mosaic should have to boost production and sales to meet demand.

But PotashCorp perhaps doesn't see that coming, which could only mean that global demand for the nutrient will likely remain soft, and hence not put much pressure on the supply side even if a major supplier were to sit back for some time. And low demand can never be good news for any company. Furthermore, pricing is a bigger factor than volumes that drives profits of potash producers, and it's unlikely that potash prices will move much in the near future.

Foolish takeaway
It's never a good idea to rush into stocks on speculation. The crisis in Ukraine may be deepening, but with PotashCorp ruling out any major impact, investors in fertilizer stocks should remain cautious.