The fertilizer industry is known to be cyclical, but investors have good reason to remain unsure if the current down spell is just the new reality. Cheap production from China is pouring onto the global market and keeping selling prices subdued, while recently completed industrial projects aren't helping the supply glut. These and other factors continue to subdue selling prices for nitrogen MLPs such as CVR Partners LP (UAN 0.96%) and Rentech Nitrogen Partners (NYSE: RNF). Investors are probably wondering what each company is doing to insulate itself from unfavorable market conditions. Let's dig a little deeper to find out.

Storage capacity and alternative revenue streams
Despite some minor downtime and upgrades in the first half of the year, the Coffeyville, Kansas, manufacturing facility owned by CVR Partners is firing on all cylinders. The company took advantage of downtime at its ammonia plant to install a more efficient hydrogen recovery system, which could allow the company to capture an additional 25 metric tons of hydrogen per day to boost ammonia production and sales.

Don't forget that while CVR Partners derived 80% of its first-quarter revenue from sales of urea ammonium nitrate, or UAN, it also sells ammonia and hydrogen. In fact, hydrogen accounted for $5.9 million in revenue during the period, while ammonia contributed just $2.6 million. The additional hydrogen capacity will help make the facility more efficient and boost an alternative revenue stream.

Source: CVR Partners.

In addition to hydrogen sales, CVR Partners is developing diesel emission fluid, or DEF, which sports a cost-advantage over UAN on a nitrogen basis. Management is also tackling the seasonality of the nitrogen market by increasing its storage capacity. Rather than sell production at lower prices during the fill season (April through summer), the company now has 100,000 metric tons of UAN storage capacity that can hold production for sale at higher prices during the next year's in-season (when planting takes place). These little changes could have big effects on the company's top and bottom lines going forward.

Short-term opportunities with a long-term focus
Rentech Nitrogen Partners has two facilities for producing nitrogen fertilizers, but first-quarter results were marred by manufacturing downtime and reduced selling prices. However, the company's East Dubuque, Illinois, facility took advantage of a unique and temporary problem in the natural gas markets to boost its first quarter income. After a pipeline supplying natural gas to the region encountered operational issues and drove up prices, Rentech Nitrogen Partners purchased cheaper natural gas from other locations and sold it for a profit. While this natural gas switcheroo is not a long-term growth opportunity, the gutsiness of management is quite admirable. The company sold $4.5 million in natural gas for a gross profit of $3.1 million -- not a bad turnaround.

More sustainable growth projects and alternative revenue streams are at hand for both of the company's manufacturing facilities. For instance, Rentech Nitrogen Partners also sells DEF to the trucking industry and carbon dioxide to the food and beverage industry. The majority of sales are dependent on global nitrogen prices, but it's encouraging to know that additional products offer at least some insulation from market conditions.

Foolish bottom line
Unfortunately, both CVR Partners and Rentech Nitrogen Partners sell nitrogen fertilizers, which largely puts them at the mercy of market conditions. There are, however, steps that can be taken to insulate each company's top and bottom lines from volatility and weak selling prices. Increasing alternative revenue streams, storing production for more favorable market conditions, and selling industrial byproducts into not-so-obvious markets (carbon dioxide to the food and beverage industry) are several methods being undertaken by management at both companies. They may not make a big dent when times are good, but they could make all the difference when a bad quarter rolls along.